SEC Division of Enforcement Director Gurbir Grewal and several high-ranking officials from the U.S. Attorney’s Offices for the Southern and Eastern Districts of New York and the FBI spoke on November 29, 2022 at a conference sponsored by Sandpiper Partners LLC concerning hot topics in SEC and DOJ enforcement. The panelists all made clear that the views they expressed were their own, but those views are worth hearing.
Prosecutors in the District of Connecticut have appealed a district court’s ruling that conspiracy and aiding and abetting charges cannot be used to extend the FCPA’s jurisdictional reach.
The Department of Justice yesterday upped the ante in its efforts to encourage companies to self-report potential Foreign Corrupt Practices Act (“FCPA”) violations when it unveiled a one-year pilot program that includes carrots for companies who take the self-reporting route and sticks for those that don’t. This announcement follows the Department’s recent emphasis on prosecuting individuals in white collar cases, the addition of new resources to combat corruption that includes ten new FCPA prosecutors and three new squads of FBI agents dedicated to investigating corruption, and enhanced cooperation between U.S. law enforcement and their international counterparts. Assistant Attorney General of the Criminal Division Leslie Caldwell said that the objective of the pilot program is to provide greater transparency into the Department’s charging decisions and to provide an incentive for companies to self-disclose FCPA misconduct so that the Department can prosecute “individuals whose criminal wrongdoing might otherwise never be uncovered by or disclosed to law enforcement.”
On July 17, 2015, Louis Berger International, Inc., a New Jersey-based construction management company, entered into a deferred prosecution agreement (DPA) with the Department of Justice under which it agreed to pay a $17.1 million penalty for violating the Foreign Corrupt Practices Act (FCPA). In addition to the hefty penalty paid, the company agreed to implement rigorous internal controls, continue to cooperate fully with the department, and retain a compliance monitor for at least three years.
According to the DPA, from 1998 through 2010, the company paid approximately $3.9 million in bribes to officials in India, Indonesia, Vietnam, and Kuwait to win construction management contracts. The company concealed the crimes by recording them as “commitment fees,” “counterpart per diems,” “marketing fees,” and “field operation expenses.” Company employees and agents also submitted inflated and fictitious invoices to generate cash that was then later used for the payment of bribes through intermediaries. Two former executives of the company also pleaded guilty to conspiracy and FCPA charges in connection with the scheme.
Last week, the DOJ announced its first corporate enforcement action under the Foreign Corrupt Practice Act (“FCPA”) for 2015. IAP World Services, Inc., a Florida-based defense and government contractor, agreed to pay $7.1 million in a non-prosecution agreement (NPA) for conspiring to bribe Kuwaiti officials in exchange for a contract to build a large-scale homeland surveillance system in Kuwait. The primary employee involved, James Rama, pleaded guilty to one count of conspiracy to violate the FCPA. (see here for criminal information and here for plea agreement). Fresh off the heels of the announcement that the DOJ has declined to prosecute Petro Tiger (only the second publicly-acknowledged declination of its kind), the IAP settlement is the first significant case from the DOJ in a year where FCPA enforcement has thus far been dominated by the SEC.
According to the NPA, Kuwait’s Ministry of the Interior started a homeland security project in 2004, which was divided into two phases. Rama and others allegedly created a shell company, Ramaco, which bid on and won the Phase I contract. Rama and IAP allegedly designated half of the approximately $4 million Ramaco received from the Phase I contract to bribe Kuwaiti officials through a consultant to assist IAP in gaining the lucrative Phase II contract.
Last week, the Texas Supreme Court joined the majority of jurisdictions in holding that a company enjoys an absolute privilege when providing the Department of Justice (DOJ) with an internal investigation report containing statements later alleged by an employee to be defamatory. The decision in Shell Oil Co. v. Writt, __S.W.3d__ (Tex. 2015) should provide Texas companies comfort that cooperating with regulatory and law enforcement agencies will not expose them to liability for defamation.
The Writt case arose from an FCPA investigation of Panalpina, a contractor Shell employed to provide freighting and customs-clearing services for a deep-water drilling project off the coast of Nigeria. At DOJ’s request, Shell conducted an internal investigation and provided the DOJ with its confidential findings.
Following recent trends, the U.S. Securities and Exchange Commission brought an administrative proceeding against a U.S. issuer for the alleged corrupt activities of its foreign subsidiaries. Earlier this week, Goodyear Tire & Rubber Company agreed to pay the SEC over $16 million to settle charges alleging that it violated the accounting provisions of the Foreign Corrupt Practices Act by failing to prevent or detect over $3 million in bribes paid by its Angolan and Kenyan subsidiaries. Goodyear also must report its compliance remediation efforts to the SEC annually for the next three years.
The SEC’s Charges
According to the SEC’s cease and desist order, between 2007 and 2011, Goodyear’s downstream subsidiaries in Kenya and Angola bribed employees of both private and government-owned companies to obtain business. The subsidiaries also bribed police, tax authorities and other local officials, though the SEC’s order did not allege the purposes of those payments. The bribes “were falsely recorded as legitimate business expenses in the books and records of the subsidiaries, which were consolidated into Goodyear’s books and records.”
Last week, the Department of Justice announced the first Foreign Corrupt Practices Act enforcement action of 2015, against Dmitrij Harder, the former owner and president of the Chestnut Consulting Group. The allegations are premised, in part, on a seldom-used section of the FCPA: the statutory provision that prohibits bribing officials of public international organizations.
According to the indictment, Harder operated the Chestnut Consulting Group entities, which provided consulting services to companies seeking financing from multilateral development banks. Harder and the Chestnut Consulting Group assisted two oil and gas companies obtain several hundred million dollars and euros in financing for development projects from the European Bank for Reconstruction and Development (“EBRD”). The Chestnut Consulting Group’s services were retained “despite its relatively small size, distant location from the EBRD, and unproven track record as a financial advisor.”