Yesterday we posted our 2011 FCPA enforcement index. Today we look at corporate enforcement for all the years from 2006.
Entries in Aibel (3)
Mergers and acquisitions are back. Seeking Alpha just said: "Over the past few weeks, there has been a resurgence in acquisition activity, fueling an already strong market rally. This news has spanned all regions of the economy ranging from the transportation sector (Burlington Northern being taken over by Berkshire Hathaway) to pharmaceuticals (Schering Plough being acquired by Merck). Most recently, in the consumer sector, Kraft announced its intention to take over confectionery giant Cadbury while Hewlett Packard announced plans to buy 3com."
When M&A numbers climb, so do Foreign Corrupt Practices Act enforcement actions. That's because all acquisitions involve due diligence, either before or after the deal is done. Due diligence is one way potential FCPA offenses are discovered. And once discovered, most are now self-reported to the Justice Department or the Securities and Exchange Commission. Directors protect themselves through disclosure. Beyond that, buyers in friendly M&A deals commonly insist that the target's compliance problems be reported and resolved before the closing.
In the past, M&A activity has led to some well-known FCPA enforcement actions. Cardinal Health's 2003 acquisition of Syncor produced FCPA precedents concerning an acquirer's pre-merger due diligence obligations and successor liability. Titan Corporation's FCPA violations were discovered after a Lockheed tender offer. Lockheed aborted the offer and in 2005 Titan paid a record $28.5 million for its FCPA settlement. More recently, M&A activity resulted in enforcement actions involving Delta Pine, Aibel, and Latin Node, among others. In May, Sun Microsystems self-disclosed an internal investigation into possible FCPA violations discovered during due diligence for Oracle's takeover bid. And last year, Halliburton's clumsy attempt to buy British firm Expro through a hostile takeover produced the most intrusive Justice Department FCPA Opinion Procedure Release on record.
The current M&A wave, combined with the DOJ's already sharpening focus on the FCPA, means there's lots more enforcement action on the way.
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Where do FCPA cases come from? In remarks yesterday to the National Forum on the Foreign Corrupt Practices Act, Assistant Attorney General Lanny Breuer said this: "Although many of these cases come to us through voluntary disclosures, which we certainly encourage and will appropriately reward, I want to be clear: the majority of our cases do not come from voluntary disclosures. They are the result of pro-active investigations, whistleblower tips, newspaper stories, referrals from our law enforcement counterparts in foreign countries, and our Embassy personnel abroad, among other sources. I have personally traveled abroad and spoken with Embassy personnel about this issue."
A copy of Lanny Breuer's November 17, 2009 remarks can be downloaded here.
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Presidential Proclamation 7750 allows the State Department to deny visas to foreign kleptocrats and their families. It was signed into law in 2004 and by 2006 it was being called a key tool in America's anti-corruption arsenal. (The FCPA reaches bribe payers but not bribe takers.) Yet we could say without exaggeration in a post last week that the U.S. press had completely ignored Proclamation 7750.
But that's now changed.
Harper's Magazine published an article by Ken Silverstein on November 16 about the son of Equatorial Guinea's ruler, Teodoro Nguema Obiang Mangue. The article began:
In 2004, George W. Bush issued Presidential Proclamation 7750, which barred corrupt foreign officials from entering the United States and ordered the State Department to compile a list of banned individuals. Three years later Congress approved a complementary measure that said the State Department should take special heed to bar officials when there was “credible evidence” to believe they were involved in the theft of natural resources revenues. Last July, the State Department issued a report noting that corruption eroded “confidence in democratic institutions” and that fighting it was a central tenet of American foreign policy. The report also stated that the Obama administration would “vigorously” enforce 7750, better known as the Anti-Kleptocracy Intiative, and give particularly close scrutiny to visa requests from individuals involved in corruption involving natural resources.
And somewhat improbably, the New York Times carried its own story on the same day by Ian Urbina about Teodoro Nguema Obiang that also featured the hitherto invisible Proclamation 7750.
After five years, what a difference a week makes.
Aibel Group Ltd. of the United Kingdom pleaded guilty yesterday to violating the antibribery provisions of the Foreign Corrupt Practices Act and failing to comply with the terms of its prior deferred prosecution agreement. It admitted making previously undisclosed illegal payments to Nigerian customs officials through its freight forwarder in return for preferential treatment.
From 2002 to 2005, Aibel arranged at least 378 corrupt payments to Nigerian officials totaling about $2.1 million. The payments were coordinated largely through an affiliate's office in Houston and were paid through a freight forwarding company. Aibel's work in Nigeria involved a deepwater oil drilling operation known as the Bonga Project, for which the company provided engineering, procurement and subsea construction equipment.
At a hearing yesterday in the Southern District of Texas, Aibel pleaded guilty to single conspiracy and substantive counts of violating the FCPA. Aibel also admitted that it had not complied with a deferred prosecution agreement it had entered into with the Justice Department in February 2007 regarding the same underlying conduct. As part of the plea agreement, it will pay a $4.2 million criminal fine and serve two years on organizational probation. Among other things, it is required to report periodically its progress in implementing antibribery compliance measures.
Aibel is owned by Herkules Private Equity Fund and Ferd Capital, both of Norway. They acquired the company in June 2007 from a private equity group led by Candover, 3i and JPMorgan Partners, which bought Vetco Gray UK Ltd. and its affiliate Aibel in July 2004 from ABB Oil & Gas. When its current Norwegian owners acquired Aibel, it was already subject to the January 2007 deferred prosecution agreement. The new owners were required by the DOJ to ensure the company's compliance with the terms of the deferred prosecution agreement after the acquisition.
The Justice Department's release didn't name the "major international freight forwarding and customs clearance company" Aibel used to make the illegal payments. But it explained that this is the third time since July 2004 that entities affiliated with Aibel have pleaded guilty to violating the FCPA. On July 6, 2004, Vetco Gray UK Ltd. pleaded guilty to violating the FCPA's antibribery provisions by paying more than $1 million in bribes to officials of the National Petroleum Investment Management Services, a Nigerian government agency. And in February 2007, three wholly-owned subsidiaries of Vetco pleaded guilty to violating the antibribery provisions of the FCPA. As part of the February 2007 plea, the Vetco companies agreed to pay a combined $26 million criminal fine. Although Aibel, which was then also wholly-owned by Vetco, was not fined, it was required to enter into a deferred prosecution agreement whereby it accepted responsibility for similar conduct by its employees. It admtted Friday that it was not in compliance with the deferred prosecution agreement.
The DOJ said in February 2007 that Vetco's bribes in Nigeria were paid to customs officials through a "major international freight forwarding and customs clearance company," the same description used in the DOJ's release yesterday. Since February 2007, about a dozen leading oil and gas-related companies have received letters from the DOJ and SEC asking for details about their relationship with Swiss logistics giant, Panalpina. Companies that have said they received requests include Shell, Schlumberger, Tidewater, Nabors Industries, Transocean, GlobalSantaFe Corp., Noble Corp., Pride International and Global Industries.
Panalpina said in its 2008 half-yearly report (available here) that it would divest its domestic operations in Nigeria to a local investment group and retain no ownership or operating interest. It completed the transaction earlier this month. It also said it was cooperating with an investigation by the DOJ and SEC and that its U.S. subsidiary had been instructed to produce documents and other information about services to certain customers in Nigeria, Kazakhstan and Saudi Arabia.
Regarding yesterday's plea, the DOJ said Aibel self-disclosed the current FCPA violations as well as those in February 2007 and agreed to take significant remedial steps.
View the DOJ's November 21, 2008 release here.