In recent SEC filings, French oil giant Total said it rejected 'out-of-court settlement solutions' with the DOJ and SEC that would end their longstanding FCPA investigations. And while Total said it is still talking with the agencies, it also said it's free not to settle, 'in which case it would be exposed to the risk of prosecution in the United States.'
No issuer has fought FCPA charges in court since Harris Corp did it in 1990. Harris allegedly used an agent to pay about $23,000 to a member of Colombia's legislature for a telecommunications contract. At trial, after the U.S. government gave its evidence, the judge granted Harris' motion for acquittal. That's the last time an issuer fought the FCPA inside a courtroom.
Total, which trades on the NYSE under the symbol TOT, has been under investigation since 2003. It started talking to the DOJ and SEC about settlement in 2010, it said.
The U.S. investigation, according to Total, is about an agreement 'with a consultant concerning a gas field in Iran and . . . whether certain payments made under this agreement would have benefited Iranian officials in violation of the Foreign Corrupt Practices Act (FCPA) and the Company's accounting obligations.'
Why have issuers (public companies) avoided FCPA court battles since 1990? The daily headlines would be awful. And if the trial ended in a criminal conviction, the company would be badly wounded or maybe dead (remember Arthur Andersen?). But settling is relatively easy -- the DOJ has offered a deferred or non-prosecution agreement to just about every company that cooperated since 1990.
Not settling, on the other hand, can ruin daily life for the company's executives. Before BAE decided to cooperate, the DOJ detained and searched its CEO and a director at U.S. airports. After that, BAE stopped stonewalling and settled with the DOJ for $400 million.
Finally, fighting is futile. The doctrine of respondeat superior means corporations can't defeat federal criminal charges if an employee or agent has already been found guilty. Their guilt is automatically imputed to the company.
Are there reasons for Total to fight? It might believe the facts and law are on its side. It could be encouraged by the DOJ's recent string of FCPA trial losses. It may also be resisting the DOJ's terms of settlement, which usually force defendant companies to help prosecute their own culpable people. That's not easy to swallow.
What will happen now?
A court battle would bring a deluge of scrutiny from the press and regulators around the world. At a minimum, that would imperil Total's stock price and lead to years of litigation by aggrieved shareholders, customers, lenders, and other stakeholders. So settlement seems likely.
Here's Total's full FCPA disclosure from its Form 6-K (Report of Foreign Private Issuer) filed May 9, 2012:
In 2003, the United States Securities and Exchange Commission (SEC) followed by the Department of Justice (DoJ) issued a formal order directing an investigation in connection with the pursuit of business in Iran, by certain oil companies including, among others, TOTAL. The inquiry concerns an agreement concluded by the Company with a consultant concerning a gas field in Iran and aims to verify whether certain payments made under this agreement would have benefited Iranian officials in violation of the Foreign Corrupt Practices Act (FCPA) and the Company's accounting obligations. Investigations are still pending and the Company is cooperating with the SEC and the DoJ. In 2010, the Company opened talks with U.S. authorities, without any acknowledgement of facts, to consider an out-of-court settlement as it is often the case in this kind of proceeding. Late in 2011, the SEC and the DoJ proposed to TOTAL out-of-court settlements that would close their inquiries, in exchange for TOTAL's committing to a number of obligations and paying fines. As TOTAL was unable to agree to several substantial elements of the proposal, the Company is continuing discussions with the U.S. authorities. The Company is free not to accept an out-of-court settlement solution, in which case it would be exposed to the risk of prosecution in the United States.
Research courtesy of ethiXbase.com.