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Tuesday
Jun162015

PetroTiger joins Morgan Stanley with rare DOJ public declination

For only the second time in FCPA history, the DOJ Monday made a public announcement that it wouldn't prosecute a company that cooperated in building a case against a former officer.

After Joseph Sigelman, PetroTiger's co-founder and former chief, pleaded guilty to one count of conspiracy to violate the FCPA, the DOJ issued a statement.

The statement included this,

The case was brought to the attention of the department through a voluntary disclosure by PetroTiger, which fully cooperated with the department’s investigation. Based on PetroTiger’s voluntary disclosure, cooperation, and remediation, among other factors, the department declined to prosecute PetroTiger.

The DOJ hadn't issued a public declination in an FCPA case since April 2012. Garth Peterson, Morgan Stanley's former managing director and real estate chief in China, had just pleaded guilty to evading the company's internal controls.

The DOJ said in its statement about Peterson's plea:

After considering all the available facts and circumstances, including that Morgan Stanley constructed and maintained a system of internal controls, which provided reasonable assurances that its employees were not bribing government officials, the Department of Justice declined to bring any enforcement action against Morgan Stanley related to Peterson’s conduct. The company voluntarily disclosed this matter and has cooperated throughout the department’s investigation.

That was the first time the DOJ publicly announced a declination in an FCPA case. Monday was the second time.

The DOJ's public statements then and now recognized the companies' voluntary disclosures and cooperation. In Peterson's case, the DOJ also recognized Morgan Stanley's existing compliance program. And with PetroTiger, the DOJ mentioned the company's remediation.

Sigelman was sentenced Tuesday to probation and no jail time. The DOJ wanted him to serve a year in prison. In court, he said he deeply regretted not putting in place a compliance program.

Morgan Stanley's Garth Peterson was sentenced in August 2012 to nine months in federal prison. He also agreed to pay about $250,000 in disgorgement and forfeit Shanghai real estate worth $3.4 million to settle civil FCPA charges filed by the SEC.

Before the Morgan Stanley declination, the DOJ had publicly mentioned strong compliance programs in connection with a couple of sentencing decisions. But the feds hadn't publicly said they weren't prosecuting a company because of compliance, voluntary disclosures, cooperation, or remediation.

In the PetroTiger case, Sigelman became the third defendant to plead guilty.

Gregory Weisman, the company's former general counsel, pleaded guilty in November 2013 to one count of conspiracy to violate the FCPA and to commit wire fraud.

And Knut Hammarskjold, the other co-founder of PetroTiger, also pleaded guilty to the same charges.

They haven't been sentenced.

The three defendants allegedly made at least four payments in 2010 from PetroTiger’s bank account in the United States to an account in Colombia held by David Duran, an employee of state-owned Ecopetrol, worth a total of about $333,500.

Duran was among six arrested in Colombia in March. He no longer works for Ecopetrol. His wife, Johanna Navarro, was also arrested. The DOJ said the bribes to Duran were paid through a phony consulting contract between PetroTiger and Navarro.

In its public statement Monday, the DOJ also said it "received significant assistance from Ecopetrol, the National Hydrocarbons Agency, the Office of the Secretary of Transparency of the Republic of Colombia, the Office of the Attorney General of the Republic of Colombia, and other agencies within the Colombian government."

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.