International Trade Law News

Last Thursday, a Federal grand jury in Philadelphia indicted Nexus Technologies Inc. and four employees of the company on one count of conspiracy to bribe Vietnamese public officials in violation of the Foreign Corrupt Practices Act (FCPA) and four substantive counts of violating the FCPA by paying bribes to various Vietnamese government officials in exchange for contracts to supply equipment and technology to Vietnamese government agencies. The four employees were arrested the following day.

This appears to be the first FCPA case involving Vietnam.

According to the Justice Department, the indictment alleged that:

Nexus Technologies Inc. was a Delaware company with offices in Philadelphia, New Jersey and Vietnam that purchased a wide variety of equipment and technology, including underwater mapping equipment, bomb containment equipment, helicopter parts, chemical detectors, satellite communication parts and air tracking systems, for export to agencies of the government of Vietnam. The indictment alleges that from approximately 1999 through 2008, the defendants engaged in a conspiracy to pay Vietnamese government officials bribes in order to secure lucrative contracts for Nexus Technologies Inc. Over the course of the scheme, the defendants are alleged to have paid at least $150,000 in bribes to foreign officials in Vietnam. The defendants' customers in Vietnam are alleged to have included multiple Vietnamese government agencies, including the commercial branches of Vietnam's Ministries of Transport, Industry and Public Safety.

Labels: FCPA, Vietnam

The U.S. Department of Justice (DOJ) announced yesterday that a former Pacific Consolidated Industries LP (PCI) executive pleaded guilty today to charges related to the bribery of a U.K. Ministry of Defence (UK-MOD) official in order to obtain lucrative equipment contracts with the U.K. Royal Air Force, in violation of the Foreign Corrupt Practices Act (FCPA)

According to the DOJ, Martin Eric Self, 51, of Orange, Calif., pleaded guilty today before Judge Andrew J. Guilford in U.S. District Court in Santa Ana, California to a two-count information charging him with violating the FCPA in connection with the illicit payment of more than $70,000 in bribes for the benefit of a UK-MOD official in exchange for obtaining and retaining lucrative contracts for PCI.

Self was a partial owner and the president of PCI at the time the crimes were committed. PCI was a private company headquartered in Santa Ana that manufactured Air Separation Units (ASUs) and other equipment for defense departments throughout the world. ASUs generate oxygen in remote, extreme and confined locations for aircraft support and military hospitals. PCI was subsequently acquired by a group of investors and re-named Pacific Consolidated Industries, LLC (PCI, LLC). PCI, LLC referred this matter to DOJ and fully cooperated in the government’s investigation.

According to the plea agreement, in or about October 1999, Self and Leo Winston Smith, PCI’s then-executive vice president and director of sales and marketing, caused PCI to enter into a marketing agreement with a person Self understood to be a relative of the UK-MOD official. The official, as a result of his position within the UK-MOD, was able to influence the awarding of UK-MOD contracts for services and equipment. As part of the plea agreement, Self admitted that he was not aware of any genuine services provided by the official’s relative, and believed there was a high probability that the payments were being made to the official’s relative in order to benefit the official in exchange for obtaining and retaining the ASU contracts. Despite these beliefs, Self initiated several of the improper wire transfers to the relative and deliberately avoided learning the true facts relating to the nature and purpose of the payment.

Self is scheduled to be sentenced on September 29, 2008. At sentencing, Self faces a statutory maximum sentence of five years in prison per count. However, the plea agreement contemplates a prison term of eight months.

Mr. Smith was indicted in April 2007 for his role in the scheme and is scheduled to stand trial in July 2008. The UK-MOD official was investigated by U.K. authorities and has pleaded guilty in the United Kingdom to accepting bribes from PCI and was sentenced to two years in prison.

Labels: FCPA

The National Council on International Trade Development's (www.ncitd.org) December 13, 2007 meeting in Washington, DC will feature the following speakers:

• Ms. Hillary Hess, Director, Regulatory Policy Division, Bureau of Industry and Security, U.S. Department of Commerce.
  

• Mr. William Jacobson, Assistant Chief, Fraud Section, Criminal Division, U.S. Department of Justice and Ms. Stacy Luck, Attorney, Fraud Section, Criminal Division, U.S. Department of Justice.
  

• Mr. Matthew Tanzer, Vice President and Chief Compliance Counsel, Tyco International (US) Inc.
  

Mr. Jacobson, Ms. Luck and Mr. Tanzer will be speaking on the U.S. Foreign Corrupt Practices Act.

Labels: BIS, FCPA

The Justice Department recently announced that two former executives of ITXC Corporation, a provider of Voice over Internet Protocol services, recently pleaded guilty to conspiring to violate the Foreign Corrupt Practices Act (FCPA) and the Travel Act. The defendants face up to five years in prison and a $250,000 fine when they are sentenced in October.

In their guilty pleas, both defendants admitted they conspired with each other and other former ITXC employees and officers to make corrupt payments to employees of foreign state-owned and foreign-owned telecommunications carriers in Nigeria, Rwanda and Senegal to obtain and retain contracts for ITXC.

In a related case, a former regional manager of ITXC was sentenced to 18 months in prison and required to pay a $7,500 fine for conspiring to violate the anti-bribery provisions of the FCPA and to violate the Travel Act stemming from corrupt payments to foreign officials in order to retain business for ITXC in Africa.

The Securities and Exchange Commission (SEC) also brought parallel civil enforcement actions against these individuals and is seeking injunctions, disgorgement of all ill-gotten gains derived from the alleged misconduct and civil penalties for the alleged FCPA violations.

ITXC was acquired by Teleglobe in 2004. Teleglobe was acquired by VSNL Ltd. in 2006.

Labels: FCPA, SEC

Yet another U.S. company has been fined under the Foreign Corrupt Practices Act (FCPA) for payments made by a foreign subsidiary. This time, the Securities and Exchange Commission (SEC) announced yesterday that it has imposed a $300,000 civil penalty on Delta & Pine Land Company (Delta & Pine), a Mississippi-based company engaged in the production and marketing of cottonseed, and its Turkish subsidiary, Turk Deltapine, Inc., for violating the FCPA.

The SEC found that Delta & Pine violated the books-and-records and internal controls provisions of the FCPA and that Turk Deltapine violated the anti-bribery provisions of the FCPA. Specifically, the FCPA charged that, from 2001 through 2006, Turk Deltapine made payments of approximately $43,000 to multiple officials of the Turkish Ministry of Agricultural and Rural Affairs in order to obtain governmental reports and certifications that were necessary for Turk Deltapine to obtain, retain and operate its business in Turkey. According to the SEC, the payments included cash and payment of travel and hotel expenses, air conditioners, computers, office furniture and refrigerators.

In addition, in connection with these improper payments, the SEC found that Delta & Pine failed to keep accurate books and records and failed to have effective internal controls. In addition, the SEC found that Delta & Pine officers in the U.S. learned of these payments in 2004, but did not receive all facts concerning those payments from Turk Deltapine employees. Instead of halting the payments, the payments continued to be made via a company that supplied chemicals to Turk Deltapine.

Turk Deltapine’s payments to MOA officials did not cease until 2006, when the payments came to light in connection with due diligence being performed by a potential acquirer of Delta & Pine. Delta & Pine was subsequently acquired by Monsanto on June 1, 2007.

In its administrative order, the SEC ordered the SEC ordered Deltapine and Turk Deltapine to cease and desist from such violations and required Delta & Pine to retain an independent consultant to review and make recommendations concerning the company's FCPA compliance policies and procedures.

Labels: FCPA

Dow Jones Newswires reported tonight that the U.S. Department of Justice (DOJ) is conducting a criminal inquiry of nearly a dozen oil and oil-services companies, focusing on potentially illegal payments to customs agents who provided freight forwarding and other services, including in Nigeria. The article states that the Securities and Exchange Commission is also conducting a civil investigation. The article states that:

Labels: FCPA, Nigeria

Last week a federal grand jury in Houston indicted Jason Edward Steph, a former executive of a subsidiary of Houston-based Willbros Group Inc., on charges of conspiring to make payments to Nigerian officials in violation of the Foreign Corrupt Practices Act (FCPA). Willbros is a publicly-traded company that provides construction, engineering and other services to the oil and gas industry.

The Grand Jury alleged that Mr. Steph conspired to make over $6 million in bribe payments to Nigerian officials in order to obtain and retain gas pipeline construction business from a joint venture controlled by the Nigerian state oil company. Mr. Steph was also charged with money laundering and conspiracy to commit money laundering based upon the international transfer of some of the bribe money. The indictment alleges that most of the payments were allegedly laundered through consultants, who typically received three percent of Willbros' contract revenue by wire transfer from Houston to a foreign bank. The consultants subsequently transferred some or all of the funds to Nigerian officials.

The maximum sentence for a charge of conspiring to violate the FCPA is five years in prison and a fine of up to $250,000, or twice the gross gain or loss. Each of the money laundering charges carries a maximum sentence of 20 years in prison and a fine of up to $500,000 or twice the value of the funds involved in the transfer, whichever is greater.

This is the second FCPA prosecution of a Willbros executive arising from Willbros' overseas operations. In September 2006, Jim Bob Brown, who is named as a co-conspirator in the Steph indictment, pled guilty to violating the FCPA by conspiring with others to bribe Nigerian and Ecuadorian officials. Mr. Brown also settled civil charges brought by the Securities and Exchange Commission. Mr. Brown has not yet been sentenced.

A copy of the indictment can be found at the following link.

Labels: FCPA

Last week was an unusually busy one for news relating to Foreign Corrupt Practices Act (FCPA) investigations, guilty pleas and arrests:

• As was widely reported, BAE Systems PLC announced last Monday that it was notified by the U.S. Department of Justice that the agency has commenced a formal investigation relating to the company's compliance with the FCPA, including the company's business with the Kingdom of Saudi Arabia.

• GlobalSantaFe Corp., an offshore oil and gas drilling contractor, announced that it is conducting an internal investigation of its Nigerian operations, focusing on agents who handled customs matters with respect to a Nigerian affiliate of the Company and whether those agents have fully complied with the FCPA and local laws.
  

• Global Industries, Ltd., a Louisiana-based company that provides offshore construction, engineering, project management and support services to the oil and gas industry, announced that it is conducting an internal investigation of its West Africa operations, focusing on the legality under the FCPA and local laws, of one of its subsidiary's reimbursement of certain expenses incurred by a customs agent in connection with shipments of materials and the temporary importation of its vessels into Nigeria.
  

• Si Chan Wooh, a former executive vice president and head of SSI International, Inc., a wholly-owned subsidiary of Schnitzer Steel Industries Inc., pleaded guilty to conspiracy to violate the FCPA. Wooh also agreed to pay about $40,000 in disgorged bonuses, interest and penalties to settle civil charges brought by the U.S. Securities and Exchange Commission. The SEC alleged that from 1999 to 2004, Wooh paid more than $200,000 and other gifts to managers of government-owned steel mills in China to induce them to purchase scrap metal from Schnitzer. Wooh has agreed to cooperate with the Justice Department in its long-running criminal investigation of Schnitzer Steel and its management. In 2006 Schnitzer Steel agreed to a deferred prosecution agreement with the DOJ and a cease and desist order with the SEC against future violations of the FCPA, and agreed to disgorge profits of $6,279,095 and prejudgment interest of US $1,446,106. Schnitzer Steel also agreed that its Korean subsidiary would plead guilty to violating the FCPA and pay a penalty of US $7,500,000.

• Leo Smith, a former executive of Pacific Consolidated Industries LP (PCI) was recently arrested for allegedly violating the Foreign Corrupt Practices Act (FCPA) as part of a conspiracy to bribe a U.K. Ministry of Defence (U.K. MOD) official in order to obtain contracts with the U.K. Royal Air Force. California-based PCI manufactures portable air separation units for the defense, petroleum and medical markets. The indictment alleged that Smith conspired to make over $300,000 in bribe payments for the benefit of a U.K. MOD official in order to obtain equipment contracts for PCI valued at over $11 million. In addition to the FCPA violations, the indictment also charges Smith with money laundering and tax offenses. Smith's conduct was discovered after PCI was acquired by a private equity company in late 2003. The private equity company ultimately referred this matter to the Justice Department. The U.K. official that received the payments was sentenced in April to two-years in prison.

Labels: FCPA

While most news reports discussing the indictment of Congressman William J. Jefferson (D-LA) focused on the cash found in his refrigerator, a little notice fact is that the indictment represents the first time that a U.S. official has been indicted under the Foreign Corrupt Practices Act (FCPA).

The Justice Department's indictment alleges that Jefferson violated the FCPA by "allegedly offering, promising and making payments to a foreign official to advance the various business endeavors in which he and his family had financial interest." Jefferson was allegedly responsible for negotiating, offering and delivering payments of bribes to a Nigerian official in an effort to "induce him to use his position to assist in obtaining commitments from NITEL, the government-controlled main telecommunications service provider in Nigeria."

Jefferson pleaded not guilty to the charges on Friday.

Labels: FCPA

Baker Hughes and its affiliate, Baker Hughes Services International Inc. (BHSI), have agreed to pay civil and criminal penalties totaling $44 million for alleged violations of the U.S. Foreign Corrupt Practices Act (FCPA). The $44 million penalty against Baker Hughes is the largest FCPA monetary penalty to date.

In the criminal proceeding, BHSI agreed to plead guilty to one count of violating the anti-bribery provisions of the FCPA, one count of aiding and abetting the falsification of the books and records of Baker Hughes and one count of conspiracy to violate the FCPA. In its guilty plea BHSI admitted that it violated the FCPA by paying approximately $4.1 million in bribes over approximately a two-year period to an intermediary whom the company understood and believed would transfer all or part of the corrupt payments to an official of Kazakhoil, the state-owned oil company. These corrupt payments were allegedly paid through a consulting firm retained as an agent for Baker Hughes in connection with a major oil field services contract.

BHSI agreed to pay a criminal fine of $11 million. DOJ also entered into an agreement with Baker Hughes to defer prosecution for two years on charges of violating the anti-bribery and books and records provisions of the FCPA. Under the agreement, Baker Hughes must retain a compliance monitor for three years that will be responsible for reviewing and assessing the company's compliance program and to monitor Baker Hughes' implementation and and compliance with new internal policies and procedures.

In the civil proceeding, the Securities and Exchange Commission (SEC) filed a settled enforcement action in the United States District Court for the Southern District of Texas alleging that Baker Hughes paid approximately $5.2 million to two agents while knowing that some or all of the money was intended to bribe government officials in Kazakhstan. In addition, the SEC also alleged violations of the books and records and internal controls provisions of the FCPA in Nigeria, Angola, Indonesia, Russia, Uzbekistan and Kazakhstan.

Under the settlement agreement, Baker Hughes agreed to pay more than $23 million in disgorgement and prejudgment interest for the FCPA violations and to pay a civil penalty of $10 million for violating a 2001 Commission cease-and-desist Order prohibiting violations of the books and records and internal controls provisions of the FCPA. In the same complaint, the SEC also charged Roy Fearnley, a former business development manager for Baker Hughes, with violating and aiding and abetting violations of the FCPA. Fearnley has not reached any settlement with the SEC regarding these charges.

The SEC's complaint can be found here (pdf).

Labels: FCPA

The Houston Chronicle has published an interesting interview with Alexandra Wrage, president of Transparent Agents and Contracting Entities (TRACE International ) on the difficulties U.S. companies face in complying with the Foreign Corrupt Practices Act (FCPA). TRACE International is a non-profit association that specializes in anti-bribery due diligence reviews and compliance training for international commercial intermediaries.

On a related note, the TRACE Institute — the research and publication arm of TRACE International — is holding its 2007 essay contest on the topic of “Why Bribe?”. Entries must not exceed 2,500 words and must be original, unpublished work, submitted by May 1, 2007. First and second prizes of $10,000 and $5,000 respectively will be awarded and a collection of the best essays will be published in 2007.

According to TRACE, the essay should respond to the following: “Can bribes be avoided? Extortion resisted? Do businessmen try? Do companies care?” and the "language should be simple and direct. Anecdotes are welcome. The judges admire the prose style of The Economist and Foreign Policy magazine and the stylistic advice of William Strunk." Entries are to be submitted to Essay@TRACEinternational.org.

Labels: FCPA