Dyncorp Reports Payments, Removes Compliance Officer

Virginia-based DynCorp International said payments by its subcontractors to speed up visas and permits may have caused the company to violate the Foreign Corrupt Practices Act. In its November 12, 2009 quarterly report (Form 10-Q here), it said it found about $300,000 in payments by subcontractors to "expedite the issuance of a limited number of visas and licenses from foreign government agencies." The company didn't include any details about the project involved or the subcontractors referred to in the disclosure. It said it had self-reported the payments to the Justice Department and Securities and Exchange Commission a week earlier and hired outside counsel to conduct an investigation.

On November 23, 2009, the company said in a further filing (Form 8-K here) that "Curtis L. Schehr’s employment as Senior Vice President, Chief Compliance Officer and Executive Counsel of DynCorp International LLC, DynCorp International Inc.’s wholly-owned subsidiary, was terminated without cause."

Schehr, 50, had been in the job since May 2009. Before that he was Dyncorp's Senior Vice President & General Counsel from October 2006.

The Foreign Corrupt Practices Act prohibits both direct and indirect corrupt payments to foreign officials to obtain or retain business. Indirect payments typically pass through the hands of an overseas partner, agent, or subcontractor, then end up with the foreign official for an unlawful purpose.

But the FCPA includes an exception for payments for “routine governmental action . . . which is ordinarily and commonly performed by a foreign official." See 15 U.S.C. §§78dd-1 (b) and (f) (3) [Section 30A of the Securities & Exchange Act of 1934]. Examples in the statute of so-called facilitating payments include those for "obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country" and "processing governmental papers, such as visas and work orders."

Aren't those the payments Dyncorp disclosed? Maybe not. As we've said before, the facilitating payments exception won't apply if there was no legitimate routine governmental action pending for which a bribe was paid. Action obtained or sought to be obtained by subornation of the official’s duty is not an action ordinarily and commonly performed by a foreign official. So if the visas and licenses mentioned in Dyncorp's disclosure weren't already pending or set to be issued, payments "to expedite" them could be outside the exception. And while the FCPA doesn't limit the size of facilitating payments, the $300,000 disclosed by Dyncorp suggests a quid pro quo for something more than routine governmental action.

DynCorp International Inc. has about 14,000 employees worldwide and reported revenue last year of $3.21 billion. According to its website, the company has "recruited, trained, and deployed more than 6,000 highly-qualified civilian peacekeepers and police trainers to 11 countries, including Haiti, Bosnia, Afghanistan, and Iraq, for the [U.S.] Department of State." It provides "logistics and contingency support to the United States military around the world, including major contract task orders in Afghanistan and Kuwait to augment U.S. Army logistics capabilities, as well as support for Africa Union peacekeepers in Somalia."

After the Iraqi government refused to renew Blackwater's license to operate there, Dyncorp replaced it in a contact to supply helicopters for U.S. diplomats in Baghdad. The Wall Street Journal reported that the contract has been delayed "well into next year as DynCorp's aircraft weren't suited to the job."

DynCorp International Inc. trades on the New York Stock Exchange under the symbol DCP.