TSKJ: The FCPA's Whale

In April this year, the final TSKJ partner, Japan's JGC, paid $218.8 million in a plea deal with the DOJ. It was the biggest FCPA case in 2011 (so far) and landed sixth on our all-time top ten list.

The TSKJ settlements now make up four of the six biggest FCPA cases of all time. Together, they're twice the size of Siemens' $800 million settlement, still the biggest single-company FCPA enforcement action.

In March, Jeffrey Tesler, an agent who delivered TSKJ's bribes to Nigerian officials, pleaded guilty to an FCPA conspiracy and a substantive count. As part of his plea, Tesler paid $149 million, the biggest FCPA forfeiture by an individual.

The TSKJ enforcement action started in September 2008. Jack Stanley, KBR's former CEO, pleaded guilty in Houston to a two-count criminal information charging him with conspiracy to violate the Foreign Corrupt Practices Act and to commit mail and wire fraud.

Stanley cooperated with prosecutors. Over the next three years, four companies and two more individuals pleaded guilty, eventually paying $1.65 billion in criminal and civil penalties and forfeited assets.

Stanley and KBR had led the TSKJ joint venture. Between 1995 and 2004, it paid $182 million in bribes to Nigerian government officials, winning four contracts to build liquefied natural gas facilities on Bonny Island, Nigeria worth more than $6 billion.

After Stanley's guilty plea, KBR and its one-time parent Halliburton paid $579 million in 2009 to resolve criminal and civil FCPA charges. In 2010, Italy's Snamprogetti paid $365 million to U.S. enforcement agencies, and France's Technip paid $338 million. Then in 2011, JGC paid $218.8 million.

Stanley, 66, received a preliminary sentence of 84 months in prison and was ordered to make a restitution payment of $10.8 million. His jail term hasn't started yet and is subject to review based on his cooperation. Final sentencing is set for February 3. The feds' $1.65 billion payday is sure to help him.

The agent Tesler, 62, is scheduled to be sentenced on February 2.

Wojciech Chodan, 72, a former KBR manager in the U.K. who pleaded guilty in December 2010 to one count of conspiracy to violate the FCPA, is also set to be sentenced on February 2.

Do DOJ Opinions Harm American Companies?

Earlier this month, the DOJ's Lanny Breuer said his agency expects to release detailed new guidance on FCPA enforcement sometime in 2012. Breuer said he hopes it will be 'a useful and transparent aid.'

So do many other people.

Former U.S. Attorney General Michael Mukasey, for example, told Congress in June that federal guidance and advisory opinions for the FCPA are inadequate and little used.

Right on both counts.

Since 1993, the DOJ has issued only 34 FCPA opinions (called Releases), an average of about 1.8 per year.

Why so few? The advisory opinion process, as we've said, is just too public. The DOJ can't or won't render private advice or opinions about FCPA enforcement. So merely asking for help can damage the requesting company.

The worst example was Release 08-02 from June 2008. Halliburton (by then no stranger to FCPA problems) wanted to buy British firm Expro through a hostile takeover. A competing group from the U.K. called Umbrellastream was also in the hunt.

Halliburton couldn't do any real due diligence during the hostile bid. To protect itself, it asked the DOJ for an advisory opinion. It wanted assurance that Halliburton itself wouldn't be prosecuted for buying a potentially bribe-tainted foreign company. In return, Halliburton promised to investigate Expro after the acquisition and blow the whistle on any corruption it found there. Halliburton also promised to help the DOJ prosecute anyone at Expro who might have been involved in potential FCPA offenses before the acquisition.

Those gory details were made public in Release 08-02. Predictably, when Expro saw  the Release, it ran from its American suitor into the arms of the local Umbrellastream.

The rest of the business world learned then that American companies with their FCPA baggage can be dangerous  suitors.

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The Opinion Procedure Regulations appear in 28 CFR Part 80. They say, among other things, that a request must come from an issuer or domestic concern, must be in writing, and must contain all details of the transaction. A DOJ opinion, the law stipulates, creates "a rebuttable presumption" that the conduct in question complies with the FCPA and with the DOJ's current enforcement practices. 15 U.S.C. § 78dd-1(e) [Section 30A of the Securities & Exchange Act of 1934] and § 78dd-2(f).

All Opinion Procedure Releases from 1993 to 2008 in PDF are linked below. (Years that don't appear had no Releases.) Earlier Releases from 1980 to 1992, then known as Review Procedure Releases, can all be found here.

2011	11-01
2010	10-01	10-02	10-03
2009	09-01
2008	08-01	08-02	08-03
2007	07-01	07-02	07-03
2006	06-01	06-02
2004	04-01	04-02	04-03	04-04
2003	03-01
2001	01-01	01-02	01-03
2000	00-01
1998	98-01	98-02
1997	97-01	97-02
1996	96-01	96-02
1995	95-01	95-02	95-03
1994	94-01
1993	93-01	93-02

Corporate Investigations On The Rise?

A good friend of the FCPA Blog who contributes the Corporate Investigations List sent the following message a couple of days ago, logos included:

Dear FCPA Blog,

It’s barely a month into the new quarter and already five new companies are under or potentially under FCPA investigation (that I am aware of). Perhaps the pace is quickening.

They are:
 
  Brazil-based with potential issues in “three countries” (see our post).

 
  U.S.-based with potential issue in Angola (see our post).

 
  China-based with potential issue in China.

 
  Japan-based with potential issue in the U.K. (see our post).

 
  U.S.-based with potential issues in Algeria, Egypt, India, Morocco, Nigeria, and Saudi Arabia (see our post).

___________

Halliburton Investigating Angola Operations

Houston-based oil and gas services giant Halliburton on Friday disclosed an internal investigation into possible Foreign Corrupt Practices Act violations in Angola.

It said in an SEC filing that an anonymous email it received in December 2010 alleged FCPA violations 'principally through the use of an Angolan vendor.'

Halliburton said it self-reported the investigation to the DOJ and, during the third quarter of this year, 'met with the DOJ and the SEC to brief them on the status of our investigation and provided them documents.'

In February 2009, Halliburton and its former subsidiary KBR settled FCPA violations for $579 million, the second biggest FCPA-related settlement of all time.

In that case, KBR pleaded guilty to a five-count criminal information, with one conspiracy count and four substantive counts of violating the FCPA. KBR agreed to a $402 million criminal fine. It admitted paying Nigerian officials at least $182 million in bribes on behalf of itself and the other TSKJ consortium members for contracts awarded between 1995 and 2004 to build liquefied natural gas facilities on Bonny Island, Nigeria.

In the same settlement, Halliburton Company -- KBR's parent when the offenses occurred -- settled civil FCPA charges with the Securities and Exchange Commission. It agreed to be jointly liable to pay $177 million in disgorgement, the second biggest FCPA disgorgement of all time. The SEC's complaint alleged that Halliburton's internal controls failed to detect or prevent the bribery, and that its records were falsified to cover up the illegal payments.

The SEC's final order permanently enjoined Halliburton from violating the FCPA's record-keeping and internal control provisions and required an independent consultant to review the company's FCPA-related policies and procedures.

Halliburton is one of the world’s biggest oil and gas services companies. It has 60,000 employees in 80 countries. Last year it reported revenue of about $18 billion. According to its website, its services include locating oil and gas, managing geological data, drilling and formation evaluation, well construction and completion, and optimizing production through the life of the field.

Halliburton Company shares trade on the NYSE under the symbol HAL.

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The full FCPA disclosure in Halliburton's 10-Q filed on October 21, 2011 for the period ending September 30, 2011 said:

'We are conducting an internal investigation of certain areas of our operations in Angola, focusing on compliance with certain company policies, including our Code of Business Conduct (COBC), and the FCPA and other applicable laws. In December 2010, we received an anonymous email alleging that certain current and former personnel violated our COBC and the FCPA, principally through the use of an Angolan vendor. The email also alleges conflicts of interest, self-dealing and the failure to act on alleged violations of our COBC and the FCPA. We contacted the DOJ to advise them that we were initiating an internal investigation with the assistance of outside counsel and independent forensic accountants.

'During the third quarter of 2011, we met with the DOJ and the SEC to brief them on the status of our investigation and provided them documents. We expect to continue to have discussions with the DOJ and the SEC, and we intend to continue to cooperate with their inquiries and requests as they investigate this matter.

'Because these investigations are at an early stage, we cannot predict their outcome or the consequences thereof.'

*     *     *

Download Halliburton Company's 10-Q filed October 21, 2011 here.

Who Paid FCPA-Related Fines Overseas?

Here's a list of fines paid overseas for bribery by companies that have settled FCPA enforcement actions.

There may be others but these are what a friend of the FCPA Blog has found so far.

Of the seventeen spots, Siemens occupies three and sits on top with a whopping $856 million fine paid in Germany.

Nigeria has most often followed FCPA enforcement actions. It appears seven times, the U.K. five times, Germany, Costa Rica, Italy, Norway, and the Holland once each.

The list points to a problem more global companies will face -- bribery prosecutions and penalties in multiple jurisdictions. We talked about the coming chaos in June.

	Company	Country	Total Fines (US$)	Date Reported
1	Siemens	Germany	856,000,000	Dec-08
2	BAE	UK	49,000,000	Feb-10
3	Siemens	Nigeria	46,500,000	Nov-10
4	Halliburton	Nigeria	35,000,000	Dec-10
5	Eni SpA / Snamprogetti	Nigeria	32,500,000	Dec-10
6	Technip	Nigeria	30,000,000	Feb-11
7	JGC Corp	Nigeria	30,000,000	Feb-11
8	Innospec	UK	12,700,000	Mar-10
9	MW Kellogg /KBR	UK	11,400,000	Feb-11
10	Alcatel Lucent	Costa Rica	10,000,000	Jan-10
11	Aon Ltd	UK	8,500,000	Jan-09
12	Johnson & Johnson / DePuy	UK	7,850,000	April-11
13	Tidewater Inc	Nigeria	6,300,000	Mar-11
14	Statoil	Norway	3,000,000	Oct-04
15	Nobel Corp	Nigeria	2,500,000	Jan-11
16	Siemens	Italy	1,200,000	Apr-09
17	Azko Nobel	Holland	600,000	Dec-07