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FCPA Blog Daily News

Entries in Facilitating Payments (66)

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.

Sunday
Sep232007

FCPA Defenses That Don't Work

The text of the Foreign Corrupt Practices Act sets out three types of payments to foreign officials that are lawful -- facilitating payments, promotional expenses and payments permitted under the written laws of the host country. In addition to these three defenses, there are others that are repeated often -- but are bogus. They originate not from judges or jurisprudence but from the wishful thinking of companies and people in need of a defense, and fast. Knowing which defenses are real and which are counterfeit is crucial, however, and learning the differences too late can have dire consequences.

Here, then, are some of the most popular FCPA defenses that do not work:

Everyone pays bribes in this country.

Don't look at me. The / joint venture partner / agent / foreign subsidiary / did it.

Only big companies get into FCPA trouble. No one cares about a little fish like us.

My supervisor approved it.

We had no choice -- either pay up or lose the deal. That's extortion, not bribery.

We can't control what our agent does on his own time with his own money.

A hundred tiny bribes do not add up to one big bribe.

We have to pay bribes to do business here. The U.S. Government doesn't really expect us to leave, does it?

I was outside the U.S. and only used foreign bank accounts.

It's not fair. . . . .

________________________

More information is available from Cassin Law LLC.

Thursday
Sep202007

Panalpina Suspends Services For Oil and Gas-Related Customers in Nigeria

Panalpina's cooperation with the U.S. Department of Justice appears to be in full swing. For starters, it is exiting the Nigeria logistics and freight forwarding market for all oil and gas services customers, at least a dozen of which have been contacted by the DOJ about Panalpina's customs clearance practices in Nigeria and other countries.

Panalpina confirmed that its U.S. subsidiary has been instructed to "produce documents and other information related to its business, its services to certain customers and its services in Nigeria, Kazakhstan and Saudi Arabia." It also said its internal investigation into corrupt payments in those countries is continuing. Presumably it is sharing the results with the DOJ on a real-time basis.

Apparently echoing the U.S. Government's position on Nigeria's persistent corruption problem, Panalpina blamed the suspension of services on the "unclear and uncertain regulatory framework," which means the corrupt practices embedded in the Nigerian bureaucracy.

This turns the heat up further on Nigeria. It is facing a choice to clean up public-sector corruption or do without the services of oil and gas-related companies and others subject to the jurisdiction of the Foreign Corrupt Practices Act. In August this year, Noble Corporation said it could not obtain or renew permits for five of its seven drilling rigs operating in Nigeria, presumably because it stopped authorizing potentially corrupt payments, and may need to exit the market entirely.

View Panalpina's Announcement Here.

View Other Posts About Panalpina Here.

Tuesday
Sep112007

Another Look At Facilitating Payments

As the lone exception written into the U.S. Foreign Corrupt Practices Act, facilitating payments have a reputation for being safe and practical. In truth, grease payments are often dangerous and potentially damaging.

The facilitating payments exception allows bribes to be paid 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]. But claiming that a bribe is really a facilitating payment risks intense scrutiny from the U.S. Department of Justice and, for issuers, the Securities and Exchange Commission. Prosecutors say that anyone relying on the exception should be prepared to defend it -- that is, the burden of proof is always on the one asserting the exception as a defense to an FCPA violation. They warn that dollar thresholds alone aren't reliable, which means bribes aren't facilitating payments just because they are small. And, they say, an issuer’s books and records must accurately reflect facilitating payments, so that the actual purpose for the bribes is clear to an outside observer. That amounts to a signed confession, creating a further risk of prosecution in foreign countries where there may be violations of local anti-corruption laws.

More often than not, bribes first identified as permitted grease payments do not fall within the exception after all. Sometimes it is the purpose of the payments that makes them unsuitable, or the recipient's identity or role, or even the timing or size of the payments. In other words, a lot can go wrong. And then there is the requirement for issuers to disclose grease payments through their SEC filings. Corrupt dealings overseas, no matter how petty, aren't something investors will cheer about.

The facilitating payments exception is a lot trickier than often assumed. No wonder, then, that so many companies are deciding to ban the use of facilitating payments entirely.

See, for example, SEC Today, Volume 2006-57, Friday, March 24, 2006 (“DC Bar Panelists Discuss Developments in Foreign Corrupt Practices Act Cases”), beginning at page 1.

Thursday
Aug162007

Panalpina's Practices Fall Under the FCPA Spotlight

February 6, 2007 -- The DOJ reports Vetco’s admission that payments to Nigerian Customs Officials violated the FCPA. The DOJ says, “These corrupt payments were paid through a major international freight forwarding and customs clearance company to employees of the Nigerian Customs Service, and coordinated largely through Vetco Gray Controls Inc.'s offices in Houston. . . . From at least September 2002 to at least April 2005, . . . [Vetco] authorized that agent to make at least 378 corrupt payments totaling approximately $2.1 million to Nigerian Customs Service officials to induce those officials to provide the defendants with preferential treatment during the customs process.”

April 26, 2007 -- Tidewater Inc. announces an internal investigation of its Nigerian operations. “The Audit Committee commissioned the internal investigation in late February 2007 after management brought to its attention a settlement earlier that month of well-publicized criminal FCPA proceedings (the second in recent years) involving Vetco Gray Controls, a Houston-based oil service company with substantial operations in Nigeria. Tidewater's management and the Audit Committee were concerned that the Company's Nigerian affiliate used the same third-party agent for its temporary importations in Nigeria that was thought to be significantly implicated in the 2007 Vetco Gray proceedings.”

July 24, 2007 -- Panalpina says some customers of its U.S. subsidiary have “been requested by U.S. authorities to produce documents related to the provision of its services to Nigeria for a specific customer and its contractor. This request was triggered by the plea agreement of such customer with the U.S. authorities for allegedly making improper payments to Nigerian officials to secure preferential customs treatment. . . . U.S. authorities have extended the scope of their review to Panalpina’s documents related to services into Nigeria, Kazakhstan and Saudi Arabia for a limited number of customers.”

July 25, 2007 -- rigzone.com carries a Dow Jones Commodities News story, reporting that the DOJ sent letters on July 2, 2007 to eleven oil and oil-service companies, “asking them to detail their relationship with Panalpina . . . The Justice Department letter, which was read to Dow Jones, cited concerns about payments that may violate the U.S. Foreign Corrupt Practices Act. The oil and oil-service firms were asked to list the countries where Panalpina provided it with services in the past five years, and to specify what it paid for those services. Each firm also was asked to meet separately with federal prosecutors in Washington, D.C. A Justice Department spokesman didn't respond to requests for comment.”

(emphasis added)

__________________

As mentioned in an earlier post, similar internal investigations into Nigerian operations have now been announced by Tidewater, Nabors Industries, Transocean, GlobalSantaFe Corp., Noble Corp. and Global Industries.

View the DOJ News Release Here.

View the Tidewater News Release Here.

View the Panalpina News Release Here.

View the rigzone.com Story Here.

Monday
Aug132007

The Facilitating Payments Exception is a Narrow Gate

There are strict requirements for Facilitating Payments -- the one exception written into the FCPA. Among other things, the payment must be 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].

The clear implication is that the exception will not apply if there was no legitimate routine governmental action pending and for which the payment or any part of it was made. A governmental action obtained or sought to be obtained by subornation of the official’s duty probably is not an action “ordinarily and commonly performed by a foreign official” and therefore is outside the scope of the exception.

For example, paying a customs clerk to schedule an inspection of goods already in the customs queue may be permissible. But paying a customs clerk to jump the queue, or paying for positive inspection results, may be outside the exception.

The question is whether the payment relates purely to “routine governmental action . . . which is ordinarily and commonly performed by a foreign official."

Any time an official is asked to do something more – something beyond the scope of his or her normal discretion, the Facilitating Payments exception is unlikely to apply.

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