Another Sentencing Delay For KBR's Ex Boss

KBR's former CEO, Albert "Jack" Stanley, left, who presided over a $180 million oversees bribery scheme, won't be sentenced until at least March 30.

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UK Court Won't Block Telser Extradition

The London lawyer accused by American authorities of helping KBR and its partners bribe Nigerian officials lost his battle against extradition yesterday.

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Report: Chodan Extradition Coming Soon

Britain is sending Wojciech Chodan to the U.S. to stand trial in Houston on FCPA charges. The Guardian newspaper wants to know why.

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Jack Stanley Free Until 2011

Former KBR boss Albert "Jack" Stanley will remain free on #100,000 until at least January 19, 2011.

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When Money Talks, Do Individuals Walk?

Corporations can't be jailed for violating the FCPA. Their main punishment is financial -- criminal fines and, for issuers, civil penalties and disgorgement of profits.

Under the federal sentencing guidelines, corporate punishment depends in part on how much money was involved in the crime. For the FCPA, that means how much was paid in bribes and how much revenue and profit were generated by the bribes.

For example, the DOJ's Lanny Breuer has said Siemens got off cheap. Its $450 million criminal fine was "a far cry from the advisory range of $1.35 billion to $2.7 billion called for in the Sentencing Guidelines." Siemens, he said, received a penalty that was 67 to 84 percent less than what it otherwise could have faced had it not cooperated and taken dramatic corrective action.

Siemens also agreed to pay $350 million to the SEC in disgorgement. So the U.S. portion of its financial penalty was $800 million, still the largest FCPA settlement on record.

With so much money at stake, you'd expect FCPA units at the DOJ and SEC to be growing, and they are. Our question, though, is whether those agencies still want to prosecute individuals who violate the FCPA when they can instead deal with cooperating companies?

The DOJ says individuals are still a target. It cites the shot-show prosecutions -- 22 individuals indicted for FCPA violations -- and last year's mass FCPA indictment of eight CCI executives, six at one time.

But no one from Siemens, which Mr. Breuer himself called "arguably the most egregious example of systemic foreign corruption ever prosecuted" by the DOJ, has been indicted in the U.S. Even if that's because of jurisdictional problems, the Siemens executives walked on the FCPA violations. It's the same with the brass from U.K.-based BAE. The company paid $400 million to settle an FCPA case last year. But no one from BAE has faced U.S. charges. Again, Daimler AG paid $185 million in penalties this year, and so far no one from that company has been charged here.

The pattern is broken, but only slightly, by the biggest enforcement action of them all. From the four companies that made up the TSKJ consortium -- Technip, Saipem, KBR, and JGC -- just one U.S. executive and two Britons have been charged. Meanwhile, three of the four TSKJ companies have paid $1.28 billon to settle with the DOJ and SEC.

None of this proves that FCPA-related mega settlements are replacing individual prosecutions. But the pattern that's emerging suggests it.

Coming up: A look at individual and corporate enforcement numbers and the story they tell.

A Web Of Corruption

Responding to our post The Billion Dollar Man, a reader sent this intriguing comment:

Dear FCPA Blog,

There’s another important fact not mentioned in today’s post. In addition to the revenue generated from TSKJ (which is 3/4ths complete), there may be yet more to come.

You’ll recall that Jack Stanley apparently received at least $10.8 million in kickbacks for his efforts to win work for KBR. This $10.8 million is now officially part of his “restitution” with the DOJ. What is interesting to note is the apparent breakdown of the $10.8 million.

Stanley allegedly received $1.95 million for Bonny Island Trains 1 and 2, $4.75 million from a Lebanese Consulting Company controlled by Jeffrey Tesler for the Malaysia Dua LNG project, and $4.1 million from a BVI Consulting Company controlled by Tesler for the Malaysia Tiga LNG project.

This speaks of corruption not just in the TSKJ consortium, but of a sophisticated web of corruption in other consortia as well.

So while he may already be worth a billion plus dollars to U.S. enforcement agencies, based on the origin of the $10.8 million, the overall penalties may be just getting started.

The citation for the above is Paragraph 22, Sections M, N, and O of Stanley's September 3, 2008 plea agreement.

The Billion Dollar Man

Jack Stanley: The most important cooperating witness in FCPA history. There's never been a cooperating witness in FCPA history quite like him. A former corporate top gun, a global player, a captain of industry who once led the dark side and now sits with the prosecution, helping nail industry giants and along the way putting more than a billion dollars -- a billion dollars -- into the U.S. Treasury.

Make that $1.28 billion and counting. That's how much the DOJ and SEC have recovered in penalties and disgorgement so far from the TSKJ consortium members: $579 million from KBR / Halliburton, $365 million from Snamprogetti / ENI, and $338 million from Technip, with more to come from the final JV partner, JGC.

The man who helped make it all possible is Albert "Jack" Stanley. He was chairman and CEO of KBR and headed the TSKJ consortium. For ten years starting in 1995, he organized about $180 million in bribes to Nigerian leaders in return for $6 billion in contracts.

But in 2008 his life came crashing down. After pleading guilty to conspiring to violate the FCPA, he was sentenced to seven years in prison. That sentence, however, is subject to court review based on his cooperation in related prosecutions. Is he cooperating? Big time.

He knows dates, places, times, amounts, and names. He knows offshore companies and bank accounts, circuitous money flows, and black-bag exchanges. He's free on bail and he's talking. As each TSKJ member falls before the DOJ and SEC, the details of what they did pile up, and Stanley's shadow is always there.

So how much of his seven-year sentence will the 66-year-old Stanley serve? Our guess is not much. He is, after all, the billion dollar man. 

Snamprogetti, ENI In $365 Million Settlement

Snamprogetti Netherlands B.V. and its parent company ENI S.p.A of Italy will pay $365 million to resolve FCPA-related charges for Snamprogetti's role in the TSKJ-Nigeria joint venture.

Dutch-based Snamprogetti was charged by the DOJ in a criminal information with one count of conspiracy and one count of aiding and abetting violations of the FCPA. It will pay a $240 million criminal penalty.

Snamprogetti and ENI also entered into a two-year deferred prosecution agreement with the DOJ. The agreement doesn't require appointment of a compliance monitor.

To resolve the SEC's charges that Snamprogetti and ENI violated the anti-bribery and recordkeeping and internal controls provisions in Sections 30A and 13(b)(5) of the Securities Exchange Act of 1934 and Rule 13b2-1, the companies are jointly and severally liable to pay $125 million in disgorgement.

Snamprogetti, Kellogg Brown & Root Inc. (KBR), Technip S.A., and JGC of Japan were part of a four-company joint venture called TSKJ. It won four contracts from Nigeria LNG Ltd. between 1995 and 2004 to build LNG facilities on Bonny Island. The contracts were worth more than $6 billion.

Snamprogetti authorized the joint venture to hire two agents, London-lawyer Jeffrey Tesler and a Japanese trading company, to pay bribes to Nigerian government officials, including "top-level executive branch officials," to help win the Bonny Island contracts. The DOJ charged that TSKJ paid about $132 million to a Gibraltar corporation controlled by Tesler and more than $50 million to the Japanese trading company. Some of the money, prosecutors alleged, was intended to be used as bribes.

Ten days ago, Paris-based Technip resolved FCPA-related charges with the DOJ and SEC for $338 million --  a $240 million criminal penalty and $98 million in disgorgement.

In February 2009, KBR and its former parent Halliburton paid $579 million to settle FCPA-related charges, including a $402 million criminal penalty and $177 million in disgorgement.

KBR's former boss Jack Stanley pleaded guilty in September 2008 to conspiring to violate the FCPA. He was sentenced to seven years in prison. His sentence is subject to court review based on his cooperation in the related prosecutions.

Jeffrey Tesler and Wojciech Chodan, both U.K. citizens, were indicted in February 2009 by a federal grand jury in Houston. They were charged with helping KBR and its partners arrange the bribes to the Nigerian officials. Earlier this year, judges in London ruled that both should be extradited to the U.S. to face trial. Their appeals could take up to a year.

In March this year, ENI disclosed a provision for €250 million, "reflecting the estimated cost of resolution" with U.S. prosecutors for the Nigeria bribe case.

With today's settlement, the DOJ and SEC said $1.28 billion has been assessed in penalties for the TSKJ bribery.

View the DOJ's July 7, 2010 release here.

Download the July 7, 2010 criminal information in U.S. v. Snamprogetti Netherlands B.V. here.

Download Snamprogetti's July 7, 2010 deferred prosecution agreement here.

View SEC Litigation Release No. 21588 and Accounting and Auditing Enforcement Release No. 3149 (both dated July 7, 2010) in Securities and Exchange Commission v. ENI, S.p.A. and Snamprogetti Netherlands, B.V., Case No. 4:10-cv-02424, S.D. Tex (Houston) here.

Enforcement Report For Q2 '10

The first quarter of 2010 was the busiest ever for FCPA-related enforcement. This past quarter was one of the quietest for new enforcement actions, with just one from the DOJ and three from the SEC.

There were some sentencings -- including the longest prison term ever for an FCPA-related offense -- a few sentencing delays, a guilty plea, and some odds and ends. But during most of the quarter the DOJ was MIA and the SEC barely popped its head out.

Here's what happened:

DOJ / SEC Enforcement Actions

Bobby J. Elkin, Jr., Baxter J. Myers, Thomas G. Reynolds, and Tommy L. Williams (April 29) The SEC brought a civil enforcement action against the former employees of Dimon, Inc., now Alliance One International, Inc. Defendants Myers and Reynolds agreed to pay civil penalties of $40,000 each. All four defendants also consented to the entry of final judgments permanently enjoining them from violating the anti-bribery provisions of the FCPA (Section 30A of the Securities Exchange Act of 1934) and aiding and abetting violations of Sections 13(b)(2)(A) and 13(b)(2)(B).

Technip S.A. (June 28) The Paris-based engineering and construction firm resolved FCPA-related charges resulting from bribes to Nigerian officials through the KBR-related TSKJ joint venture. It agreed to pay the DOJ a $240 million criminal penalty. It also settled a civil complaint filed by the SEC by disgorging $98 million in profits. It was charged in a two-count criminal information with one count of conspiracy and one count of violating the FCPA. Its two-year deferred prosecution agreement with the DOJ requires Technip to retain an independent compliance monitor and cooperate in ongoing investigations.

Veraz Networks, Inc. (June 29) paid $300,000 to settle charges brought by the SEC that it violated the books and records and internal controls provisions of the Foreign Corrupt Practices Act (FCPA) by making illegal payments to foreign officials in China and Vietnam.

Sentenced

Charles Paul Edward Jumet (April 19), 53, was sentenced to 87 months in prison and fined $15,000. Prosecutors said it's the longest sentence ever in an FCPA-related case. He pleaded guilty in November 2009 to being part of a decade-long bribery conspiracy in Panama. A two-count criminal information charged him with conspiring to violate the FCPA and giving a false statement to the FBI about how he paid some of the bribe money.

Robert Antoine (June 2), 62, of Miami and Haiti, a former employee of Haiti’s state-owned national telecommunications company, was sentenced to 48 months in prison for being part of a bribery and money-laundering scheme. He pleaded guilty in March this year to conspiracy to commit money laundering. He was also ordered by a federal judge in Miami to pay $1,852,209 in restitution and to forfeit $1,580,771, and serve three years of supervised release following his prison term.

John Webster Warwick (June 25), 64, was sentenced to 37 months in prison for his role in a conspiracy to pay bribes to former Panamanian government officials to secure maritime contracts. He also received two years of supervised release following his prison term and forfeited $331,000 in proceeds of the crime. The DOJ did not explain why his sentence was five years shorter than his co-defendant, Charles Jumet (see above).

Guilty Plea

Ousama M. Naaman (June 25), 61, a dual citizen of Canada and Lebanon, pleaded guilty to conspiracy and to violating the Foreign Corrupt Practices Act. Innospec's former agent in Iraq was charged in a June 24, 2010 superseding information with engaging in an eight-year conspiracy to defraud the United Nations oil-for-food program and bribing Iraqi officials. No sentencing date was set.

Extradition

Wojciech Chodan (April 21), 71, a U.K. citizen, was ordered extradited from Britain to the U.S. by a London court. He was indicted in February 2009 by a federal grand jury in Houston for helping KBR and its partners bribe Nigerian officials. His fellow countryman Jeffery Tesler, a London lawyer indicted at the same time, also lost his extradition hearing in March this year. With appeals, their extraditions may not be final for at least a year.

Sentencing Delays

Gerald and Patricia Green (April 29 and June 7) Their sentencing was delayed and then removed from the court's calendar. The judge in Los Angeles federal court is examining evidence about Mr. Green's medical condition and sentences in similar cases.

Albert "Jack" Stanley (mid June), 66, had final sentencing delayed until at least September 23, 2010. The former chairman and CEO of KBR pleaded guilty in September 2008 to a two-count criminal information charging him with conspiracy to violate the Foreign Corrupt Practices Act and to commit mail and wire fraud. He's free on unsecured bail of $100,000 pending final sentencing, which has been rescheduled a half dozen times. He was sentenced to 84 months in prison and a restitution payment of $10.8 million. The jail term is subject to review based on his cooperation with the government in related prosecutions (see Chodan and Tesler above).

Intervention

Sojitz (May 27) The DOJ intervened in the second civil suit brought by Aluminium Bahrain BSC -- known as Alba -- against a raw material supplier and broker. It asked for a stay in Alba's suit against Japanese trading company Sojitz Corp. More than two years ago, the Justice Department obtained a stay in Alba's civil suit against Alcoa, Inc. The DOJ said discovery in the cases could interfere with the government's own investigation into potential criminal wrongdoing including possible violations of the Foreign Corrupt Practices Act by Alcoa, Sojitz and other parties.

New Charging Document

Shot-show prosecution (April 19) The government filed a superseding indictment in the prosecution of the 22 shot-show defendants, charging them under a consolidated grand jury indictment with 44 counts, including conspiracy to violate the FCPA, substantive FCPA offenses, conspiracy to commit money laundering, and aiding and abetting.

In the Pipeline

Panalpina (April 29) The Swiss logistics giant said it expects settlement "in the near future" with the DOJ and SEC of FCPA-related charges. The case dates back to at least early February 2007. The DOJ noted then in connection with Vetco's FCPA settlement that bribes in Nigeria "were paid through a major international freight forwarding and customs clearance company to employees of the Nigerian Customs Service . . .”

Civil Suit  Private parties have no right of action under the FCPA. Only the DOJ and SEC can enforce it. Plaintiffs bring FCPA-related claims under RICO (18 U.S.C. § 1962(c)), conspiracy to violate RICO (18 U.S.C. § 1962(d)), fraud, civil conspiracy, breach of fiduciary duties, and others.

Parker Drilling's directors (early June) were sued in a derivative action in Harris County, Texas after the company's detailed disclosure about a DOJ / SEC investigation of compliance problems in Nigeria and Kazakhstan.

Technip in $338 Million KBR - Related Settlement

Paris-based Technip S.A., an engineering and construction firm that's part of the oil and gas services industry, has resolved FCPA-related charges with the DOJ. It agreed to pay a $240 million criminal penalty and enter into a deferred prosecution agreement. It also settled a civil complaint filed by the SEC by paying $98 million in disgorgement of profits.

Technip, Kellogg Brown & Root (KBR), ENI of Italy, and JGC of Japan were equal partners in the TSKJ joint venture. The JV operated through three special purpose corporations formed and based in Madeira, Portugal. Between 1995 and 2004, the joint venture won contracts worth $6 billion to build massive LNG facilities on Nigeria's Bonny Island.

The DOJ said Technip authorized the joint venture to hire two agents -- London lawyer Jeffrey Tesler and a Japanese trading company -- to pay bribes to a range of Nigerian government officials. A senior executive of Technip, with KBR’s former CEO Albert "Jack" Stanley and others, met with top-level Nigerian officials "in the executive branch" to work out the logistics of the bribery. The joint venture, according to the U.S. agencies,  paid about "$132 million to a Gibraltar corporation controlled by Tesler and more than $50 million to the Japanese trading company.

Technip was charged in a two-count criminal information with one count of conspiracy and one count of violating the FCPA. The case was filed in the U.S. District Court for the Southern District of Texas.

The two-year deferred prosecution agreement requires Technip to retain an independent compliance monitor and cooperate in ongoing investigations.

In February 2009, Houston-based global engineering firm KBR pleaded guilty to a five-count criminal information, with one conspiracy count and four substantive counts of violating the Foreign Corrupt Practices Act, for its role in the TSKJ joint venture. And with its former parent, Halliburton, it settled civil charges with the SEC. KBR's criminal fine was $402 million and with Halliburton it agreed to pay the SEC $177 million in disgorgement.

KBR's former boss Jack Stanley pleaded guilty in September 2008 to conspiring to violate the FCPA. He was sentenced to seven years in prison. His sentence is subject to court review based on his cooperation in the related prosecutions.

Jeffrey Tesler and Wojciech Chodan, both U.K. citizens, were indicted in February 2009 by a federal grand jury in Houston. They were charged with helping KBR and its partners arrange the bribes to the Nigerian officials. Earlier this year, judges in London ruled that both should be extradited to the U.S. to face trial. Their appeals could take up to a year.

Technip said in February this year it had reserved €245 million for an exceptional charge related to a potential settlement of Foreign Corrupt Practices Act offenses with the Justice Department and Securities and Exchange Commission for its role in the TSKJ joint venture. A month later, Italy's ENI disclosed a provision for €250 million, "reflecting the estimated cost of resolution" with U.S. prosecutors for the Nigeria bribe case. ENI's settlement is still pending.

Technip’s American Depository Shares traded on the New York Stock Exchange from 2001 until 2007.

The DOJ said that with Technip's settlement, "a total of $917 million in criminal and civil penalties have been obtained to date as a result of the ongoing Department of Justice and SEC investigations of the scheme to bribe Nigerian government officials in order to win" the Bonny Island contracts.

View the DOJ's June 28, 2010 release here.

View the SEC's Litigation Release No. 21578 and Accounting and Auditing Enforcement Release No. 3147 (both dated June 28, 2010) in Securities and Exchange Commission v. Technip, Case No. 4:10-cv-02289, S.D. Tex. (Houston) here.

Download a copy of the SEC's civil complaint against Technip here.