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Richard L. Cassin Publisher and Editor

Andy Spalding Senior Editor

Jessica Tillipman Senior Editor

Elizabeth K. Spahn Editor Emeritus

Cody Worthington Contributing Editor

Julie DiMauro Contributing Editor

Thomas Fox Contributing Editor

Marc Alain Bohn Contributing Editor

Bill Waite Contributing Editor

Shruti J. Shah Contributing Editor

Russell A. Stamets Contributing Editor

Richard Bistrong Contributing Editor 

Eric Carlson Contributing Editor

Bill Steinman Contributing Editor

Aarti Maharaj Contributing Editor


FCPA Blog Daily News

Saturday
Oct062007

Saved By The Bell In Germany?

Siemens' blitzkrieg settlement of corruption charges with German prosecutors happened without public proceedings and, so far, with very little disclosure. Apart from Siemens' statement that its tax adjustment involved "questionable payments of approximately €420 million," not much is known about the settlement and what it covers. Now, with German enforcement actions against Siemens apparently closed, some may view the moves by the Munich Office of Public Prosecution as opaque and premature.

The U.S. Department of Justice and the Securities and Exchange Commission are unlikely to consider settling Foreign Corrupt Practices Act allegations until they know the full scope of Siemens' potentially illegal conduct. The next challenge for Siemens, then, will be to convince U.S. prosecutors that the company's internal investigation, when it is finished, is accurate and complete. That might be difficult. An earlier report by the Wall Street Journal said some Siemens' managers are not cooperating with the internal investigation, and a second Journal report said Siemens' American law firm thinks the questionable payments might amount to €1.6 billion instead of the €420 million cited in the German settlement.

While U.S. prosecutors ponder their next steps, the abrupt end of the German prosecutions may cause other governments in Europe and elsewhere to wonder if they should demand full public disclosure of Siemens' questionable conduct and perhaps impose sanctions of their own.

Friday
Oct052007

Siemens Settles Corruption And Tax Cases With German Prosecutors

Siemens AG said it will pay a €201 million fine in connection with global corruption allegations that will end the investigation by the Munich Office of Public Prosecution. In an October 4, 2007 press release, Siemens said it will also take a charge for taxes of €179 million for questionable payments of approximately €420 million that were improperly deducted.

The engineering and electronics giant based in Germany said its internal investigation into global corrupt practices is ongoing. It said it has already taken remedial measures to avoid sensitive payments and strengthen internal controls. On October 1, 2007, it announced the reorganization of corporate-wide legal and compliance responsibilities.

Siemens can now concentrate on reaching a resolution with U.S. prosecutors of potential U.S. Foreign Corrupt Practices Act violations.

Siemens AG's ADRs trade on the New York Stock Exchange under the symbol SI.

View Siemens' October 4, 2007 Press Release Here and its October 1, 2007 Press Release Here.

Thursday
Oct042007

Tidewater's Compliance Review Goes Global

The Importance of Being Cooperative; Are Facilitating Payments Causing More Problems?

Tidewater Inc. is now investigating its compliance with the U.S. Foreign Corrupt Practices Act worldwide, the company said in an October 4, 2007 press release. In April this year, Tidewater announced an internal investigation of practices in Nigeria. The Nigeria investigation -- which grew out of the Department of Justice's review of Panalpina's operations there -- uncovered potential compliance problems in several countries.

Tidewater's 454-vessel fleet is the largest in the offshore energy industry. It says it is looking at immigration and customs practices, and its use of agents for obtaining business. It doesn't mention which other countries are involved, but Panalpina -- a global logistics and freight forwarding firm -- has said the DOJ asked for information about customs clearance, among other things, in Saudi Arabia and Kazakhstan as well as Nigeria.

The dozen or so oil and gas-related companies implicated so far in the investigation of Panalpina may be working to keep their internal investigations a step or two ahead of the Department of Justice and the Securities and Exchange Commission. They will want to be viewed by the DOJ and SEC as cooperative when it comes time to resolve any FCPA problems that are found.

The current crop of oil and gas-related investigations into customs clearance and immigration practices should eventually help clarify the permitted uses of facilitating payments, a favorite topic of The FCPA Blog.

Tidewater Inc. trades on the New York Stock Exchange under the symbol TDW.

View Tidewater's Press Release Here.

Wednesday
Oct032007

The "I Didn't Know" Defense

As defenses against the U.S. Foreign Corrupt Practices Act go, "I didn't know" is among the most popular. I didn't know it was against the law. I didn't know our agent would give money to foreign officials. I didn't know our partner's brother-in-law works for the prime minister. Often the defense has no visible means of support and is only a handy excuse. Other times, though, the defense is sincere and looks strong. But even then it probably won't work, as David H. Mead discovered the hard way back in 1998.

Mead, the former president of Saybolt Inc., was charged with violating and conspiring to violate the FCPA's anti-bribery provisions by making a $50,000 corrupt payment to government officials in Panama. Mead pleaded not guilty and went to trial. His defense rested in part on evidence that Saybolt's former outside counsel had advised that the $50,000 payment might not violate the FCPA if it came from Saybolt's Dutch affiliate. That advice was wrong, and Saybolt and Mead were indicted. Saybolt -- which later sued its former lawyer for legal malpractice -- pleaded guilty and paid a $1.5 million fine.

At Mead's trial, prosecutors had the burden of proving Mead acted with "knowledge" that the $50,000 payment was illegal under U.S. law. In his instructions to the jury, the judge explained the concept of legal "knowledge" and how the jury could determine what Mead knew:
_____________

Ladies and Gentlemen of the Jury:

The element of knowledge may be satisfied by inferences you may draw if you find that the defendant deliberately closed his eyes to what otherwise would have been obvious to him. When knowledge of the existence of a particular fact is an element of the offense, such knowledge may be established if a person is aware of a high probability of its existence and then fails to take action to determine whether it is true or not.

If the evidence shows you that the defendant actually believed that the transaction was legal, he cannot be convicted. Nor can he be convicted for being stupid or negligent or mistaken; more is required than that. But a defendant’s knowledge of a fact may be inferred from willful blindness to the knowledge or information indicating that there was a high probability that there was something forbidden or illegal about the contemplated transaction and payment. It is the jury’s function to determine whether or not the defendant deliberately closed his eyes to the inferences and the conclusions to be drawn from the evidence here.
_____________

The jury, for some reason, didn't believe that Mead believed the payment was legal. Nor did the jury believe he had been stupid or negligent or mistaken. Had he been willfully blind? That would mean he knew more than Saybolt's own lawyer. Unfortunately for Mead, in the face of the evidence the jury somehow found that he had "knowledge" the payment would violate the law. He was convicted and sentenced to four months in prison, home detention and probation, and a $20,000 fine. The best explanation is that the New Jersey jury simply didn't want a $50,000 bribe to a government official in Panama to go unpunished.

If the "I didn't know" defense didn't work back then for David H. Mead -- who violated the FCPA on the advice of counsel -- then it's unlikely to work now in most other cases.

See U.S. v. David H. Mead and Frerik Pluimers (Cr. No. 98-240-01), D.N.J., 1998. See also Stichting Ter Behartiging Van De Belangen Van Oudaandeelhouders In Het Kapitaal Van Saybolt International B.V. (Foundation of the Former Shareholders of Saybolt International B.V.) v. Philippe S.E. Schreiber and Walter, Conston, Alexander & Green P.C. (S.D.N.Y.) (99 Civ. 114411, Memorandum Order, Filed June 13, 2001) and U.S. v. Saybolt North America Inc. (Cr. No. 98CR10266WGY), D. Mass., Aug. 18, 1998.

Tuesday
Oct022007

A Reader Writes About Compliance

 

Dear Sirs,

 

This is more of a general comment . . . .

I would (also) like to add my appreciation to the individuals behind this useful and interesting site. It is a great resource for further experience and knowledge in an area where the expertise is limited.

Through the company I work for, I have been directly involved with several findings of illegal payments and FCPA violations, including the start of a Swiss company's operation under questionable procedures in Nigeria and Angola. And, as part of these years of Compliance and FCPA experience in the oil & gas business (specifically directed to oil & gas), it has become clear that the legal community does neither have the operational skills or experience and knowledge to fully support, implement and follow through on a process as required by the DoJ. To cover the interpretation and advice, yes, but to fully support in implementing a successful program which proactively address and prevents future compliance incidents the operational understanding is lacking.

From experience the legal community does not have the required understanding within logistics, suppliers, cultural differences, internal employees etc.

The industry must understand that compliance (FCPA/integrity/ethics) is not a project which may be outsourced for a short period of time. One reason being the 3rd party legal advisors do not have the necessary knowledge of how to successfully implement such a comprehensive culture change in an industry as oil & gas. But mainly because the internal resources must be educated, starting with the top management clearly address the seriousness of the issue.

We have pursued different alternatives in my company, but none has been more successful when using the internal knowledge and operational experience, along with the advice from legal resources.

My proposal to the acknowledged Compliance / FCPA law firms, would be to include individuals with experience within the oil & gas industry to fully support in educating and cleaning up the industry.

Merely a suggestion based on experience under the watch of the DoJ.

[Name Withheld]

 

 

Monday
Oct012007

York International Pays $22 Million To Resolve Global Corruption Case

Internal Investigation into Oil-For-Food Abuses Uncovered Widespread Bribery

York International Corporation has reached a settlement with U.S. prosecutors of numerous violations of the U.S. Foreign Corrupt Practices Act -- relating to bribes paid under the United Nations oil-for-food program and kickbacks for other government contract work in Bahrain, Egypt, India, Turkey, the United Arab Emirates and China. York -- a subsidiary of Johnson Controls, Inc. since 2005 -- provides heating, ventilation, air conditioning, and refrigeration products and services worldwide.

Under York's three-year deferred prosecution agreement with the U.S. Department of Justice, it will pay a $10 million criminal penalty, cooperate with the DOJ’s related investigations and appoint an independent compliance monitor. York also consented to the Securities and Exchange Commission’s filing of a complaint for FCPA violations and agreed to disgorge about $10 million and pay $2 million in civil penalties.

From 2001 through 2006, York paid over $7.5 million in bribes through subsidiaries and agents to obtain work on commercial and government projects throughout the world. York referred to the payments internally as "consultancy payments" but no bona fide services were involved. It made 854 improper consultancy payments on more than 770 contracts -- 302 projects involved government end-users, such as government-owned companies, public hospitals, or schools.

The payments violated the anti-bribery provisions of the FCPA, and York failed to devise and maintain an effective system of internal controls to prevent or detect the bribes. It also failed to accurately record in its books and records the kickbacks to Iraq, bribes in the UAE, and the bogus consultancy payments made in various countries. York consented to the entry of a final judgment with the SEC permanently enjoining it from future violations of Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934. The DOJ’s three-count criminal Information charged York with conspiracy to commit wire fraud and to falsify books and records in violation of 15 U.S.C. §§ 78m(b)(2)(A), 78m(b)(5) and 78ff(a).

York self-reported the violations and worked with the DOJ and the SEC to investigate the illegal conduct. The criminal Information also mentions "Employee A" and “Employee B,” citizens of the United Kingdom and Syria respectively, who were involved in the bribery, as well as "Company X," a consulting company based in Jordan that acted as a sales agent for York in the Middle East. They have not yet been charged with FCPA violations.

Among the details mentioned by prosecutors, York’s Danish subsidiary, which sells refrigeration equipment to ship builders and ship yards owned by the Chinese government, made illegal payments from 2004 through 2006 to agents and to Chinese officials connected with the shipyards. “Hundreds of thousands of dollars for nebulous and undocumented services” were processed through York’s Danish subsidiary, which also provided Chinese ship yard employees with lap top computers and other electronics.

York's parent company, Johnson Controls, Inc. (NYSE: JCI) will not be prosecuted on the facts admitted by York.

View the DOJ’s October 1, 2007 News Release Here.

View the October 1, 2007 Deferred Prosecution Agreement and Criminal Information Here.

View the SEC’s Litigation Release No. 20319 / October 1, 2007 Here.

View the SEC’s Complaint Here.

Monday
Oct012007

Oscar Wyatt, Founder Of Coastal Corporation, Pleads Guilty To Iraq Bribes

Guilty Plea Follows El Paso's Settlement of FCPA Violations Earlier This Year

Oscar Wyatt Jr., 83, pleaded guilty on October 1, 2007 to one count of conspiracy to commit wire fraud in connection with the U.N. oil-for-food program. The U.S. Government accused him of paying millions in illegal surcharges directly to Iraqi officials in return for oil allocations from 2000 to 2002. He faces 18 to 24 months in prison under a plea agreement and will forfeit $11 million. He founded and ran Coastal Corporation, which he sold to El Paso Corporation in 2001.

In February this year, El Paso settled violations of the U.S. Foreign Corrupt Practices Act related to illegal surcharges it paid to Iraqi officials under the oil-for-food program. It disgorged $5,482,363 in profits and paid a civil penalty of $2,250,000. It also entered into a non-prosecution agreement with the U.S. Attorney’s Office for the Southern District of New York and cooperated in providing evidence relating to Wyatt's role. Violations under the anti-bribery provisions of the FCPA carry potential prison sentences of 5 years, while under the oil-for-food program, which ran from 1996 to 2003, Wyatt could have faced 20 years for his role.

The Securities and Exchange Commission's February 7, 2007 litigation release said, “El Paso failed to maintain an adequate system of internal controls to detect and prevent the illegal payments. Although El Paso inserted a provision in some contracts requiring the third party to represent that it had not paid surcharges, El Paso failed to conduct due diligence to ensure that surcharges were not paid. Recorded conversations reveal El Paso’s knowledge that the provision was entirely ineffective. In one conversation, a third party that indicated he was willing to pay illegal surcharges to Iraq indicated that he would be equally willing to sign a false certification denying the payment. El Paso’s accounting for its Oil for Food transactions failed properly to record the nature of the company’s payments. In at least fifteen transactions, a portion of the company’s price for oil constituted kickbacks to Iraq. The company failed to so designate those payments, characterizing them instead simply as part of the cost of goods sold.”

During Wyatt's trial, which ended mid-way with his guilty plea, prosecutors played tapes for the jury of conversations between him and Saddam Hussein.

El Paso Corporation trades on the New York Stock Exchange under the symbol EP.

View the SEC's Litigation Release No. 19991 / February 7, 2007 Here.

View the SEC's Complaint Against El Paso Corporation Here.

View the DOJ's 2005 Press Release About Wyatt's Indictment Here.

Monday
Oct012007

Syncor's Founder Settles FCPA Charges With The SEC

Cardinal Health's 2003 Acquisition of Syncor Established Important FCPA Precedents Concerning Pre-Merger Due Diligence and Successor Liability

Monty Fu, the founder of Syncor International Corp., agreed with the Securities and Exchange Commission on September 27, 2007 to resolve U.S. Foreign Corrupt Practices Act charges by consenting to a permanent injunction against FCPA books-and-records violations and agreeing to pay a $75,000 civil penalty. Fu was Syncor's CEO from 1985 to 1989 and board chairman from 1985 to November 6, 2002, when he went on paid leave until he resigned in December 2002.

Over a 17-year period ending in 2002, Syncor's Taiwan subsidiary made corrupt payments to doctors at government-owned and managed hospitals. In January 2003, Cardinal Health Inc. acquired Syncor, whose common stock before the acquisition had been registered with the SEC and listed on NASDAQ's National Market.

In December 2002, the SEC settled civil and administrative proceedings against Syncor, which paid a $500,000 civil penalty and agreed to a cease-and-desist order. See SEC v. Syncor International Corp., C.A. No. 1:02CV02421 (EGS) (D.D.C.) (filed Dec. 10, 2002), Litigation Release No. 17887 (Dec. 10, 2002). The DOJ at the same time settled criminal FCPA charges against Syncor Taiwan, which paid a $2 million fine. See U.S. v. Syncor Taiwan, Inc., No. 02-CR-1244-ALL (C.D. Cal.) (filed Dec. 4, 2002). The SEC did not explain why Fu's case took so long to resolve.

The 2002 cases and the circumstances of Cardinal Health's subsequent acquisition of Syncor were legally significant. They established or helped clarify the application of successor liability for FCPA violations and an acquirers' duty to discover, disclose and remedy potential FCPA violations of its target.

Cardinal Health (NYSE: CAH) is commonly believed to be the "Requestor" in DOJ Opinion Procedure Release 2003-01 (January 15, 2003) . The Release noted that:

"The Requestor is a U.S. issuer. Requestor intends to purchase the stock of Company A, another U.S. company which has both U.S. and foreign subsidiaries, and thereafter operate it as a subsidiary. During its due diligence efforts, Requestor learned that officers of a foreign subsidiary, including officers located within the United States, authorized and made payments to individuals employed by foreign state-owned entities to obtain or retain business. Requestor notified Company A of its findings, and both companies commenced parallel investigations of Company A's operations throughout the world. The companies then disclosed the results of their investigations to the Department of Justice and the staff of the U.S. Securities and Exchange Commission (the "SEC")."

The Release then said that "[w]ith Requestor's encouragement and approval, Company A [Syncor] has taken certain remedial actions, including making appropriate disclosures to the investing public, issuing instructions to each of its foreign subsidiaries to cease all payments to foreign officials, and suspending the most senior officers and employees implicated in the payments pending the conclusion of its investigation."

"Both Requestor and Company A wish to proceed with the acquisition," the Release continued. "Requestor, however, is concerned that by acquiring Company A it is also acquiring potential criminal and civil liability under the FCPA for the past acts of Company A's employees." In light of the Requestor's concerns, it "undertakes to do the following once the transaction closes and it becomes the owner of Company A:

1. Requestor will continue to cooperate with the Department and the SEC in their respective investigations of the past payments and will similarly cooperate with foreign law enforcement authorities;

2. Requestor will ensure that any employees or officers of Company A found to have made or authorized unlawful payments to foreign officials are appropriately disciplined;

3. Requestor will disclose to the Department any additional pre-acquisition payments to foreign officials made by Company A or its subsidiaries that it discovers after the acquisition;

4. Requestor will extend to Company A its existing compliance program. Such compliance program will, if necessary, be modified to insure that it is reasonably designed to detect and deter, through training and reporting, violations of the FCPA and foreign bribery laws; and

5. Requestor will ensure that Company A implements a system of internal controls and makes and keeps accurate books and records."

The DOJ concluded by saying it would not hold the Requestor responsible for the pre-acquisition conduct "of companies that will be wholly-owned subsidiaries following the acquisition. This statement of intent does not, of course, apply to any payments made after the date of acquisition, nor does it apply to individuals involved in making or authorizing the payments." The Release was understood to mean that acquirers who do less than the Requestor / Cardinal Health did or promised to do may face successor civil and criminal liability for FCPA violations committed by target companies before the acquisition.

The principles established and discussed in the Cardinal Health - Syncor Release were echoed in Opinion Procedure Release 04-02 (July 12, 2004), requested by JPMorgan Partners Global Fund and others trying to acquire upstream oil, gas and petrochemical businesses from ABB Ltd.

View the SEC's September 28, 2007 Litigation Release No. 20310 Here.

View the SEC's Complaint Against Monty Fu Here.

View Opinion Procedure Release 2003-01 Here.

View Opinion Procedure Release 2004-02 Here.

Friday
Sep282007

Did Siemens Pay More Than $2 Billion In Bribes?

The Wall Street Journal reports on September 27, 2007 that Siemens' bribery problem may involve corrupt payments of about €1.6 billion ($2.3 billion). That's four times the amount Siemens last disclosed, and its internal investigation is not yet complete. As mentioned in an earlier post Here, this will be the biggest international corruption story around when it comes to the surface. That may happen soon. The U.S. Department of Justice and the Securities and Exchange Commission are actively pursuing the case, perhaps in a cooperative effort with German prosecutors and others.

View the Wall Street Journal's Report Here.

Wednesday
Sep262007

Bristow Resolves Corrupt Nigeria Tax Payments

Houston-based Bristow Group Inc. (formerly Offshore Logistics Inc.) settled U.S. Foreign Corrupt Practices Act charges related to improper payments in Nigeria in 2002 and 2003 to lower expatriate employment taxes there. The payments to Nigerian state government officials violated the anti-bribery provisions of the FCPA and Bristow's under-reporting of its tax liabilities violated the books and records provisions. It consented to a September 26, 2007 administrative cease-and-desist order from the Securities and Exchange Commission. Bristow, which provides helicopter services worldwide to the offshore oil and gas industry, did not pay any financial penalties.

Bristow's internal investigation started in late 2004 when its newly-appointed CEO heard remarks suggesting that an affiliate, Pan African Airlines Nigeria Ltd., had engaged in bribery to reduce certain tax assessments. He reported it immediately to the audit committee and contacted outside counsel. The subsequent internal investigation showed corrupt payments totaling $443,300 and resulting tax savings of $873,940. Bristow self-reported the results to the SEC, which also found that the company had mischaracterized the payments in its books and records as legitimate payroll expenses and lacked sufficient internal controls. Bristow cooperated with the SEC and has taken remedial steps. The SEC's decision not to impose any financial penalties is an endorsement of Bristow's handling of the matter.

Bristow first reported the bribery problems in its 2005 annual report. The SEC's order requires it to cease and desist from violating Sections 30A, 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities and Exchange Act of 1934 and Rules 12b-20, 13a-1 and 13a-13.

Bribes to reduce taxes were the basis of the FCPA charges upheld in U.S. v. David Kay and Douglas Murphy (February 4, 2004), discussed in another post Here.

Bristow Group Inc. trades on the New York Stock Exchange under the symbol BRS.

View the SEC's Press Release Here.

View the SEC's September 26, 2007 Administrative Proceeding No. 34-56533 (Accounting and Auditing Enforcement Release No. 2727 and Administrative Proceeding File No. 3-12833) Here.

Wednesday
Sep262007

A.T. Kearney's Former India President Violated The FCPA

The U.S. Securities and Exchange Commission announced on September 25, 2007 two settled enforcement actions based on violations of the books and records provisions of the Foreign Corrupt Practices Act. The actions involved the founder and former president of A.T. Kearney Ltd's India business, Chandramowli Srinivasan, and Kearney's former parent company, Electronic Data Systems Corp.

Between 2001 and 2003, Srinivasan made corrupt payments of over $720,000 in the form of cash transfers, gifts and services to employees of two private energy companies partly owned by the Indian government in order to retain their buisness. To fund the bribes, Srinivasan and a Kearney-India contract accountant fabricated invoices that Srinivasan subsequently signed to authorize payment. This caused EDS to record the payments incorrectly in its accounting books and records. EDS recognized over $7.5 million in revenues from the Indian companies' contracts after Kearney-India began paying the bribes.

For violating Sections 13(b)(5) and 30A of the Securities Exchange Act of 1934, Srinivasan paid a civil penalty of $70,000. EDS paid $358,800 in disgorgement and $132,102 in prejudgment interest for violating Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Exchange Act Rules 12b-20 and 13a-13, and Regulation FD in connection with a separate offense.

Kearney, which EDS owned from 1995 to 2006, is now "an independent, privately owned management consultancy, with 100 percent of the equity owned by officers in the firm." Srinivasan, whom EDS terminated in 2004, resides in Delhi, India. Kearney's change in ownership, Srinivasan's departure from Kearney / EDS and his foreign residency are all reasons why the Department of Justice may decide not to bring criminal prosecutions for the FCPA violations.

Electronic Data Systems Corp. trades on the New York Stock Exchange under the symbol EDS.

View the SEC's September 25, 2007 Litigation Release No. 20296 and Accounting and Auditing Enforcement Release No. 2726 Here.

View the SEC's Complaint Against Srinivasan Here.

View the SEC's Administrative Proceeding Order Against EDS Here.

Monday
Sep242007

Paradigm's Pre-IPO Due Diligence Reveals FCPA Violations

Paradigm B.V., a Houston-based oil and gas services provider, entered into a non-prosecution agreement with the U.S. Department of Justice to resolve payments that violated the Foreign Corrupt Practices Act. Paradigm made prohibited payments to foreign officials in China, Indonesia, Kazakhstan, Mexico and Nigeria. It will "pay a $1 million penalty, implement rigorous internal controls, retain outside compliance counsel, and cooperate fully with the Department of Justice," according to the DOJ's September 24, 2007 announcement.

Paradigm's parent company, Paradigm Ltd., which is controlled by private equity fund Fox Paine, discovered the corrupt payments during due diligence for its planned NASDAQ IPO and self-disclosed them to prosecutors. The conduct at issue did not involve current senior management, according to the company. The DOJ said, “Paradigm’s actions in this matter, including voluntary disclosure and remedial efforts, are consistent with our view of responsible corporate conduct when FCPA violations are uncovered. Accordingly, the Department has resolved this case to permit the company to move forward on sound footing, governed by ethical business practices.”

The corrupt payments involved $22,250 deposited into the Latvian bank account of a British West Indies company recommended as a consultant by an official of KazMunaiGas, Kazakhstan’s national oil company, to secure a tender for geological software. The DOJ said Paradigm performed no due diligence, did not enter into any written agreement and apparently received no services.

In China, Paradigm used an agent to make commission payments to representatives of a subsidiary of the China National Offshore Oil Company in connection with the sale of software to the CNOOC subsidiary. Paradigm also directly retained and paid employees of Chinese national oil companies or state-owned entities as "internal consultants" to evaluate Paradigm’s software and to influence their employers’ procurement divisions to purchase Paradigm’s products. Employees of CNOOC and other state-owned enterprises in China are "foreign officials" for purposes of the FCPA.

Paradigm said it also made corrupt payments in Mexico, Indonesia and Nigeria. In Nigeria, it used intermediaries to pay between $100,000 and $200,000 to politicians to obtain a contract to perform services and processing work for a subsidiary of the Nigerian National Petroleum Corporation. In Mexico, it hired the brother of a Pemex decision maker, and paid for the decision-maker's $12,000 trip to Napa Valley, California and $10,000 to entertain him. In Indonesia, its agent paid employees of Pertamina through a New York bank account.

In a sign that the DOJ is encouraging more voluntary disclosure and self-directed remedial action -- which means implementing an "effective compliance program" -- Paradigm's non-prosecution agreement expires after just 18 months instead of the usual three-year period, and requires appointment of outside compliance counsel instead of an independent monitor. In addition to Paradigm's self disclosure and remedial actions, another major influence on the DOJ's handling of the case must have been the fact that the company's current senior management was not involved in the unlawful conduct.

View the Department of Justice's News Release Here.

View Paradigm's Non-Prosecution Agreement Here.