Code Named Ruthenium

The U.K.'s Serious Fraud Office today reported in dramatic fashion the arrest of three top executives of French industrial giant Alstom's British unit. They're suspected of paying bribes overseas to win contracts.

After today's arrests, the company said:

Several Alstom offices in the United Kingdom have been raided on Wednesday 24 March by police officers and some of its local managers are being questioned. The police apparently executed search warrants upon the request of the Swiss Federal justice. Alstom has been investigated by the Swiss justice for more than 3 years on the motive of alleged bribery issues. Within this frame, Alstom’s offices in Switzerland and France have already been searched in the past years. Alstom is cooperating with the British authorities.

In August 2008, we reported that Swiss police had arrested a former Alstom manager and searched for evidence as part of a corruption and money-laundering investigation. Offices near Zurich and in Baden were raided, as were homes in several cantons.

Another international investigation of Alstrom involving suspected corrupt payments in Asia and South America between 1995 and 2003 has been ongoing. Reports in May 2008 said Swiss authorities found evidence Alstom paid around €20 million via shell companies to agents and others in Singapore, Indonesia, Venezuela and Brazil. Reports also mentioned payments of $6.8 million in connection with a $45 million contract for the Sao Paolo subway and a Brazilian energy plant.

The press said in June 2008 that French judges had charged a former Alstom consultant for his role in suspected overseas bribes. The company apparently appeared as a civil plaintiff in that case, claiming it may have been a victim of embezzlement.

Paris-based Alstom is a global leader in equipment and services for power generation and high-speed rail transport. It operates in more than 70 countries with about 80,000 employees. Revenues last year were €18.7 billion. It has an office in Windsor, Connecticut and its securities trade in the pink sheets (Other OTC: AOMFF.PK).

Here's the full text of the today's SFO release:

Three members of the Board of Alstom in the U.K. have been arrested on suspicion of bribery and corruption, conspiracy to pay bribes, money laundering and false accounting, and have been taken to police stations to be interviewed by the Serious Fraud Office.

Earlier this morning search warrants were executed at Alstom business premises and residential addresses at locations in Warwickshire, Leicestershire, Cheshire, Shropshire, Derbyshire, Staffordshire and London. This operation has involved 109 SFO staff and 44 police officers and Accredited Financial Investigators from Warwickshire, Leicestershire, Cheshire, West Mercia and Staffordshire Police Forces and the Metropolitan Police Service. The three men arrested during this operation are aged 52, 51 and 44.

Code-named Operation Ruthenium, the investigation by the SFO is into the suspected payment of bribes by companies within the Alstom group in the U.K. It is suspected that bribes have been paid in order to win contracts overseas, and that this has involved associated money laundering and other offences. The SFO has been working closely with the Office of the Attorney General and Federal Police in Switzerland and a number of Police Forces in the U.K.

Commenting on today's action, SFO Director Richard Alderman said, "The SFO is committed to tackling corruption. We are working closely with other criminal justice organisations across the world and are taking steps to encourage companies to report any suspicions of corruption, either within their own business or by other companies or individuals."

Executive Action At Innospec

Photo by MJCdetroitWhat stands out about Innospec's FCPA guilty plea yesterday is the hands-on role former top managers had in the criminal activity. For nearly a decade they used bribery as just another sales tool, a manipulative and cynical revenue spinner, and did what they could to cover it up.

By 2000, the company's flagship product, TEL, an additive used only in leaded gasoline, was in trouble. The market was drying up after the U.S. and other countries ordered the switch to cleaner, healthier unleaded fuels. But under their go-team bosses, Innospec's salesmen and agents began paying bribes to move TEL into mainly third-world markets.

The SEC's complaint said "Innospec’s former management did nothing to stop the bribery, and in fact authorized and encouraged it."

An email from a former agent in October 2005 to Innospec’s then business director and another executive said Iraqi officials were demanding a 2% kickback on sales. The e-mail said: “We are sharing most of our profits with Iraqi officials. Otherwise, our business will stop and we will lose the market. We have to change our strategy and do more compensation to get the rewards.” 

The Business Director authorized over $195,000 in bribes, and in an e-mail discussing the wording of the invoice, said: "The fewer words the better!”

Innospec acted like a classic corrupter. According to the SEC complaint, it paid lavish travel and entertainment expenses for Iraqi officials, including a seven day honeymoon. It handed out mobile phone cards and cameras and paid thousands in cash for “pocket money.”  It even paid bribes to ensure the failure of a 2006 field test of MMT, a fuel product manufactured by a competitor.

In Indonesia, the bribes to push TEL sales came when the country was planning to go unleaded. At government-linked BP Migas, Innospec paid “special commissions” to a Swiss account and a “one off payment” of $300,000. The greed was mutual. The SEC said one Indonesian official indicated he would assist Innospec in landing TEL sales but he wanted more than just “cents” in return.

The case is far from over. The DOJ said as part of its guilty plea, the company "agreed to fully cooperate with the Department of Justice and other U.S. and foreign authorities in ongoing investigations of corrupt payments by Innospec employees and agents."

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

View the DOJ's March 18, 2010 release here.

Copies of the criminal information, sentencing memorandum, and plea agreement can be download from our post here.

Innospec's $40 Million Global Settlement

Specialty chemical maker Innospec Inc. resolved more than a dozen criminal charges in the U.S. and U.K. today, including Foreign Corrupt Practices Act (FCPA) and U.N. oil for food program offenses, and violations of the U.S. embargo against Cuba.

The Delaware company pleaded guilty to a 12-count criminal information charging wire fraud in connection with kickbacks to the former Iraqi government under the U.N. oil for food program, as well as FCPA violations for bribes to officials in the Iraqi Ministry of Oil. It will pay a $14.1 million criminal fine and retain an independent compliance monitor for three years.

Innospec manufactures the anti-knock compound tetraethyl lead (TEL) used in leaded gasoline. Demand for TEL dropped after enactment of the Clean Air Act. Its managment knew about and encouraged the bribery to boost sales.

It will disgorge $11.2 million in profits to the SEC to settle a civil complaint charging violations of the FCPA's anti-bribery, internal controls, and books and records provisions.

It also agreed to pay $2.2 million to the Office of Foreign Assets Control (OFAC) for violating the U.S. embargo against Cuba.

In London, a U.K. subsidiary pleaded guilty today to paying about $2.9 million in bribes to Indonesian officials to secure sales. The Serious Fraud Office, which charged the U.K. unit in late February, said Innospec Ltd will pay a criminal fine of $12.7 million. 

The DOJ said the British action started after "a referral from the Department of Justice in October 2007." The SFO said, "This case is part of the first 'global settlement' reached with a co-operating Company and has been resolved in cooperation with U.S. government authorities - DOJ, SEC and OFAC."

The SEC explained the bribery and management's role:

From 2000 to 2007, Innospec routinely paid bribes to sell Tetra Ethyl Lead (“TEL”), a fuel additive that boosts the octane value of gasoline, to state owned refineries and oil companies in Iraq and Indonesia. TEL was a significant source of revenue for Innospec; however, TEL sales were declining due to the passage of clean air legislation in the U.S. and abroad. Innospec also paid kickbacks to Iraq to obtain contracts under the United Nations Oil for Food Program (the “Program”). Innospec’s former management did nothing to stop the bribery, and in fact authorized and encouraged it. In addition, Innospec’s internal controls failed to detect the illicit conduct, which continued for nearly a decade. In all, Innospec made illicit payments of approximately $6,347,588 and promised an additional $2,870,377 in illicit payments to Iraqi ministries, Iraqi government officials, and Indonesian government officials in exchange for contracts worth approximately $176,717,341 in revenues and profits of $60,071,613.

From 2000 to 2003, Innospec's Swiss subsidiary, Alcor, was awarded contracts worth more than €40 million to sell TEL to refineries run by the Iraqi Ministry of Oil under the oil for food program. Alcor paid or promised to pay at least $4 million in kickbacks to the former Iraqi government. It inflated the price of the contracts by about 10 percent to fund the kickbacks before asking for U.N. approval. It then falsely characterized the payments on its books as "commissions" paid to Ousama Naaman, its agent in Iraq.

Naaman was indicted in August 2008 and arrested in Germany in July 2009. He was charged with one count of conspiracy to commit wire fraud and to violate the FCPA and two counts of violating the FCPA. The U.S. is trying to extradite him.

Innospec also admitted that a subsidiary sold nearly $20 million in oil soluble fuel additives from 2001 to 2004 to state-owned Cuban power plants without a license from OFAC, in violation of the Trading With the Enemy Act.

Innospec Inc. trades on NADAQ under the symbol IOSP.

View the SEC's litigation release No. 21454 / March 18, 2010 in Securities & Exchange Commission v. Innospec, Inc., Civil Action No. 1:10-cv-00448 (RMC) (D.D.C.) here.

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

View the DOJ's March 18, 2010 release here.

Download a copy of the March 17, 2010 criminal information in U.S. v. Innospec, Inc. here.

Download a copy of the government's sentencing memorandum here.

Download a copy of the Innospec's plea agreement here.

View the SFO's March 18, 2010 release here.

Please check back for the DOJ's charging documents and plea agreement.

Veraz Announces Expected Settlement

VOiP provider Veraz Networks said in an earnings release Thursday that it has reached agreement with the Securities and Exchange Commission to settle Foreign Corrupt Practices Act violations. It said it would pay a civil penalty of $300,000 and agree to entry of an injunction "prohibiting violations of the non-fraud provisions" of the FCPA. It also said the settlement still needs final approval by the SEC and the court. A copy of Veraz's March 11, 2010 release is here.

San Jose, California-based Veraz Networks trades on NASDAQ under the symbol VRAZ.

The SEC began investigating the company in early 2008. Veraz then launched an internal investigation and discovered potential FCPA violations in China and Indonesia, which it self-reported to the SEC. The SEC also requested documents related to Vietnam.

Because of the ongoing investigations, the company had to delay filing its quarterly reports for March and May 2008. That resulted in NASDAQ warning Veraz "that its common stock may be subject to delisting." NASDAQ ultimately granted an extension for the filings, which were made in July 2008, allowing Veraz's common stock to continue to be listed.

The company said in November 2009 that it had spent $2.5 million to investigate and handle the FCPA compliance issues.

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A copy of Veraz's November 16, 2009 Form 10-Q is here. The company's disclosure in that filing regarding the Foreign Corrupt Practices Act said:

On April 3, 2008, the Company received a letter from the SEC informing it that the SEC was conducting a confidential inquiry, or SEC Inquiry, and requesting that the Company voluntarily produce documents in connection with the SEC Inquiry. On April 5, 2008, the Company’s Board of Directors appointed a special committee, or Special Committee, consisting entirely of independent directors to cooperate with the SEC in connection with the SEC Inquiry and to oversee an independent investigation into the matters raised by the SEC Inquiry. . . .

On July 17, 2008, Independent Counsel reported their findings to representatives of the SEC and, on July 21, 2008, provided to the SEC copies of certain documents collected by Independent Counsel during the course of its independent investigation. The Company provided all the requested documents to SEC.

As a result of the SEC Inquiry, the Company was not able to file timely its quarterly report on Form 10-Q for the first quarter ended March 31, 2008 and, on May 21, 2008, the Company received a notification letter from NASDAQ stating that its common stock may be subject to delisting in accordance the NASDAQ rules.

The Company’s management attended a hearing on July 24, 2008 to request that NASDAQ grant the Company’s request for an extension of time in which to comply with the NASDAQ listing standards. On July 29, 2008, the Company filed its quarterly report on Form 10-Q for the quarter ended March 31, 2008 and now believes it is in compliance with all SEC filing requirements. Additionally, on August 6, 2008, the Company received notification from NASDAQ informing the Company that the NASDAQ hearing panel had determined to continue listing the Company’s common stock on the NASDAQ.

During the course of the SEC inquiry, the Company became aware of allegations of misconduct relating to the Company’s business practices in the Asia Pacific region that, if true, may constitute violations of the U.S. Foreign Corrupt Practices Act, or FCPA. These potential FCPA violations include alleged misconduct related to a Chinese customer and an Indonesian customer. In addition, the Special Committee was informed and made the Company aware of allegations of possible fraud perpetrated against the Company and violations of the Company’s Code of Conduct and Ethics, or Policy. The allegations of possible fraud and violations of the Policy involve payments from a reseller to certain non-management employees (whose employment has since been terminated) and other potentially inappropriate commercial relationships between non-management employees and a reseller.

On January 27, 2009, the Company received a subpoena from the SEC requesting documents related to the Company’s business practices in Vietnam. In connection with such SEC investigation, the Company produced documents and provided testimony relevant to the SEC’s investigation and is continuing to cooperate with the SEC in its investigation. In November 2009, the Staff of the SEC contacted the Company concerning some of the transactions described above and the Company is cooperating with the Staff.

At the current time, the Company cannot determine the probability of or quantify the amount of any fines or penalties associated with the SEC matters discussed above.

There were no expenses incurred related to SEC investigation in the three and nine months ended September 30, 2009. During the three and nine months ended September 30, 2008, the Company had incurred SEC investigation expenses of $0.2 million and $2.3 million, respectively. To date, the Company has incurred expenses related to the SEC investigation of approximately $2.5 million.

Innospec Charged In U.K.

Britain's Serious Fraud Office said Thursday it has charged Innospec Limited, a U.K. subsidiary of Delaware-based Innospec Inc., with "conspiracy to corrupt, contrary to Section 1 of the Criminal Law Act 1977."  The allegations concern "bribery on a significant scale by Innospec and its agents in Indonesia."

Last week, U.S. parent Innospec Inc. said in its latest Form 10-K that it hopes to settle bribery charges related to the U.N.'s oil-for-food program in Iraq with the Justice Department, the Securities and Exchange Commission, and the U.K.'s Serious Fraud Office, for between $28.8 million and $40.2 million. The disclosure, which didn't mention Indonesia, said the Serious Fraud Office notified Innospec's British subsidiary in 2008 of an oil-for-food-related investigation.

Innospec manufactures specialty chemicals used as fuel additives.

The U.K. charges allege that from 2002 through 2006, some of the company's "directors, executives, employees and agents" conspired to bribe Indonesian public officials and their representatives to win contracts for the supply of tetraethyl lead.

In its U.S. disclosure last week, Innospec identified Ousama Naaman as its agent in Iraq. The Canadian citizen, 60, was indicted in August 2008 and arrested in July last year in Frankfurt, Germany. He's still there pending his extradition to the U.S. It's not known if he was involved in the company's business in Indonesia.

The next hearing in the U.K. case is scheduled for March 4, 2010. 

Java's Big Mess

You wouldn't expect a country with 240 million people and 17,000 islands strung along the equator from the Pacific to the Indian Ocean to be neat and orderly. Still, the public death match between Indonesia's national police and its popular Corruption Eradication Commission known as the KPK is particularly messy, even by local standards. That's because there's so much at stake. Corruption has long been Indonesia's biggest problem. And after plenty of broken promises from post-Suharto leaders, ordinary citizens had given up hoping for reform. Until the KPK came along.

The independent anti-graft body was created in 2003 and given real power -- warrantless wiretaps and special ad hoc courts to handle its cases. It aimed high, targeting members of parliament, prosecutors, judges, provincial governors, and central bankers. In its 86 cases so far, the conviction rate is 100%. In a 2008 case, an in-law of President Susilo Bambang Yudhoyono prosecuted for embezzlement from a bank was sentenced to nearly five years in prison. No wonder even the most skeptical Indonesians began believing in the KPK's magic.

But the national police, politicians, judges and prosecutors are fighting back. A few weeks ago, two KPK commissioners were arrested and charged with abusing their power during an investigation of a collapsed bank. The two were suspended and held at police headquarters in Jakarta.

After the arrests, the KPK -- which has about 600 employees -- leaked hours of wiretaps implicating police in a plot to entrap -- and maybe harm -- the two commissioners. The tapes were broadcast on national TV, causing KPK supporters across the country to take to the streets and launch a Facebook protest that now has more than a million fans. The police released the commissioners but may still prosecute them. President Yudhoyono -- who's been trying to stay aloof from the controversy -- appointed a fact-finding committee to look into the entrapment allegations against the police.

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Aspects of Indonesia's power struggle (as told by the local press) resemble an implausible soap opera. In May this year, the KPK's chairman, Antasari Azhar, 56, was arrested on charges of killing a rival in a love triangle. (Antasari was unpopular with most reformers; they said he lacked the skills and standing to lead the KPK.) The woman involved is a pretty 23-year-old golf caddy, Rhani Juliani, who worked at a golf course in Antasari's posh neighborhood. She had secretly married another man she'd met at the club, Nasrudin Zulkarnaen, although she knew he already had two other wives. As the Singapore Straits Times said about Nasrudin, "He was known to be a big tipper . . . ."

After Ms. Juliani and Antasari became lovers, police said, he hired a businessman to arrange the killing of her secret polygamist husband, Mr. Nasrudin (who, by the way, had caught the lovers in flagrante and was threatening to blackmail Antasari). In March this year, Nasrudin was shot in the head by a gunman on a motorcycle through the window of his BMW. Police are now saying that after they arrested Antasari in May for the murder, he gave evidence about his fellow KPK commissioners and their alleged abuse of power. KPK supporters believe Antasari agreed to fabricate evidence discrediting his old agency in a deal he made with corrupt police, prosecutors and judges.

Antasari's trial started a few weeks ago in Jakarta. When Ms. Juliani -- who is now treated like a celebrity everywhere she goes -- showed up to take the witness stand, the judge blocked media coverage, saying he feared that "licentious testimony from her could reach minors."

As we said, it's messy.

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Happy Thanksgiving to our American readers. We'll be back on Friday.

The FCPA's Imperialist Myth

Elizabeth Spahn (left), a professor at the New England School of Law, stopped by this week. She left a comment about Andy Spalding's latest post. In it, she cited her recent article that asks: Why is there so little legal scholarship regarding international bribery? Why aren't law professors training their students on the issue? Why, she asks, don’t legal educators want to talk about international anti-corruption initiatives?

The answer, she says, is tied up with false notions in the West about legal imperialism. Law professors (she's been one since 1978) shy away from teaching about bribery abroad "because of a well intentioned discomfort with the idea of imposing Western moral values on cultures and systems vastly different from our own." In 72 pages of clear and exciting prose, she explores -- and debunks -- the idea that the Foreign Corrupt Practices Act and other anti-bribery initiatives are bad for anyone except those who are caught and punished.

Prof Spahn was a Fulbright professor at Peking University Law School and the Beijing Foreign Studies University during 1999–2000, lecturing on American constitutional law and employment law. In 2005, she returned to China as a Fulbright senior specialist in Chongqing. The corruption she saw in Asia left her in no doubt about what's wrong and what has to be done:

A global “culture of corruption” has indeed arisen. . . . It directly affects the safety of ordinary consumers throughout the world who depend on imports from a wide spectrum of MNCs doing business in countries with high levels of corruption and weak legal regimes. It directly undermines environmental reform technology and clean up efforts globally. It frustrates efforts to achieve very basic human rights. Bribery skews purchasing decisions making a mockery of any hope of a rational market. If the economists are to be believed, bribery significantly exacerbates the growing global gap between the unimaginably rich and the desperately poor.

Prof Spahn has the courage to put her heart into her scholarship. Having real people in mind elevates her words and her message. Listen to this:

My own attention was directed to anti-corruption reform at the very beginning of my field work in Asia. Before entering China to teach law, I decided that I should learn more about rice in order to better understand the root of Asian culture. I spent six weeks in Bali, Indonesia (an idyllic setting). One week I spent in a village without running water or electricity, vainly attempting to learn how to plant rice. At the inevitable banquet, on the night before I, as a Western “imperialist human rights feminist rule of law” advocate, was nervously to enter Communist China, I chatted with the patriarch of the Balinese family, a gracious elderly farmer who was blind due to cataracts he knew could be cured by Western surgery if only the money were available.

“What one thing would help his family most?” I asked. I anticipated several potential answers: running water, better medical access, perhaps electricity run into the village (I had already provided the all-important new soccer ball for the village kids as my thank you gift). His answer was that if only the corruption could be eliminated or even just reduced, his family, his village, could manage the rest on their own. This was the beginning of my true education about Asia.

Eighteen months later, at the end of my long stay in China, I was no longer nervous. (The saying is that you visit China for two weeks, you write an article; you visit for six months and write a book. After a year you can no longer speak at all. After a year and a half immersion, my connection to Chinese culture was firm, and I was pretty much speechless.)

Walking around elite Peking University’s beautiful Nameless Lake for the last time with one of my very favorite Chinese students of all time, who is perhaps the last of the genuine true believers in Marxism and the Party, I asked what topic I could work on that might really help Chinese people. “Corruption,” he said.

The simple Balinese rice farmer and the elite Peking University Party Member agreed. And so this human rights /rule of law advocate turned her attention to corruption. Seven years of hard study later, I must say they were both correct. I am grateful to both of them for my education and happy to have my speech back.

Elizabeth Spahn's article, "International Bribery: The Moral Imperialism Critiques," 18 Minn. J. Int'l L. 155 (2009), can be downloaded here.
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Crime And Corruption In The Spice Islands

The head of Indonesia's anti-corruption agency was arrested Monday for murdering a prominent local businessman. Antasari Azhar, 56, chairman of the Corruption Eradication Commission or KPK, is accused of killing a rival in a love-triangle. The woman is alleged to be a 22-year-old golf caddy who was working at a club in Azhar's neighborhood.

Police say Azhar hired another businessman to arrange the killing, which was carried out by a gunman on a motorcycle who shot the victim in the head through the window of his BMW. Police said they've arrested the others involved in the murder plot.

Azhar claims he's innocent and has hinted that he's being persecuted by interests threatened by his anti-corruption work. Under his watch, those arrested have included key politicians, lawmakers, central bank officials and businessmen. Reports are here and here.

Indonesian President Susilo Bambang Yudhoyono, currently campaigning for re-election, has made the fight against government graft his central theme. He's leading in the polls, with many Indonesians and foreign investors convinced that the government's latest anti-corruption drive is the first-ever sincere attempt to clean up the country. Indonesia's ranking on the Corruption Perception Index has improved recently, from 143 in 2007 to 126 last year.

Azhar has been suspended from the Corruption Eradication Commission and the remaining four members say they'll press ahead. They apparently plan to announce some major investigations they say Azhar had been blocking. His appointment in 2007 drew fire from many who thought he was unqualified. The NGO Indonesia Corruption Watch led the protests. "This is not just based on opinion but based on our investigation; based on our track record report; we think that Antasari has not enough integrity to be KPK's leader," Corruption Watch's Adnan Topa Husodo had said.

Indonesia is one of the world's most important countries and one of the hardest to govern. The former Dutch colony has around 240,000,000 people, including the world's largest Muslim population, spread over an archipelago of 17,000 islands, 6,000 being inhabited. There are more than 550 known languages and dialects in the country, 13 of which have more than a million speakers. It's the third-largest democracy on the planet but only held its first free elections in 1999. In addition to its ingrained corruption, problems include terrorism, poverty, unemployment, inadequate public services, a massive-but-under-funded bureaucracy, mountains of red tape, and opaque government administration at local and national levels.

Despite all that, Indonesia has enormous potential and promise. The country enjoys an amazing resilience -- its economy, for example, grew by more than 5 percent annually over the past five years and is even doing well in the downturn. Private-sector industrial infrastructure is modern and efficient; exports compete regionally and beyond. The elected leaders since 1999 have largely abandoned protectionism and embraced trade and fiscal freedom, working to develop the huge domestic consumer market to go with its export base.

If Indonesia can ever tame its run-amok corruption -- and that's still a big "if" -- the country might finally take its place as a credible (and perhaps irresistible) investment alternative to China and India.
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KBR: Nigerians Tell Their Own Story

A new Nigeria-based publication called Next has just posted an article (here) naming some of the officials who took bribes from KBR and its TSKJ joint venture for the $6 billion Bonny Island LNG development project. The story by Dapo Olorunyomi and Mojeed Musiliku names three former presidents among the bribe takers, including Sani Abacha, Abdusalami Abubakar, and Olusegun Obasanjo.

The reporting appears to be based primarily on documents produced during U.S. and French investigations of KBR, TSKJ, Jack Stanley (KBR's former CEO) and Jeffrey Tesler, an alleged London-based KBR middleman. He was indicted earlier this year by U.S. authorities for violating the Foreign Corrupt Practices Act and is being extradited from the U.K.

KBR resolved FCPA charges with the Justice Department and Securities and Exchange Commission in February, agreeing to pay $579 million in penalties and disgorgement. Jack Stanley pleaded guilty last year to violating the FCPA and faces up to 7 years in prison and a fine of about $11 million. He and KBR admitted paying at least $182 million in bribes for contracts for the Bonny Island project.

Among the details in Next's story are these:

Having put the Train 1 and 2 contracts in the can, TSKJ turned its gaze on the Train 3 contract. For this, Stanley flew to Abuja again in the second quarter of 1997, with the sole mission of asking Mr. Abacha to recommend a trusted front man to collect his bribe.

Shortly after [Abacha] died on June 8, 1998, Mr.Tesler promptly erased him from the list of bribe beneficiaries, substituting him with the new helmsman, Abdulsalami Abubakar.

To keep the entire scheme on the rails, Stanley flew back to Abuja on February 28, 1999, asking Mr. Abubakar, to recommend a trusted front man to collect his bribe.

Another Nigeria-based publication, Vangard, last week carried an article (here) by Chudi Offodile, a former member of Nigeria's House of Representatives and Chairman of the House’s Public Petitions Committee from 2003 to 2005, where he was responsible for investigations. After spotting irregularities, he says his committee recommended dropping TSKJ and all its members from the Bonny Island project and other contracts in Nigeria. But, writes Offodile, he was continually stonewalled by high-level politicians.

He tells how his investigation got started and finally ended. He begins this way:

No one would have heard of the Nigeria LNG bribery scandal if not for Georges Krammer, former Director General of the French company, Technip [a TSKJ member]. Krammer was accused of paying 3 million euros in illegal commissions during investigations into Elf-Aquitane operations in Asia and Africa.

Krammer claimed the commissions were legal and in line with company's policy. Technip management disputed his claims and left him to face charges of misappropriating 3 million euros. Angered by this development, Krammer who had worked for Technip for 35 years, squealed. He went before Judge d’ Instruction Renaud Van Ruymbeke and told him how Technip’s commission payment system worked in Indonesia, Thailand and on the LNG Project in Nigeria.

Thus began the French investigation of the Nigeria LNG project with Renaud Van Ruymbeke in charge. The French investigation triggered off other investigations in Switzerland, the United States, and Nigeria. . . .

These two reports are unusual not only because of the details being disclosed. But also because both publications are reporting from inside Nigeria, in some cases about government officials still in power.
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Obama On Corruption

With his family ties to Kenya and Indonesia, and who can forget Chicago, Barak Obama should know plenty about public corruption -- and he does. The subject was clearly on his mind when he visited Kenya in 2006 (he's pictured left with his 83-year-old Kenyan grandmother).

A speech from that trip is now posted at wrageblog, a new antibribery compliance site from Alexandra Wrage. She's the founder of Trace International, the global non-profit group that conducts due diligence and stages compliance training. Few have done more for antibribery compliance than Alexandra. If anyone can give the blogosphere a good name, she can.

Getting back to Kenya -- it ranks a dismal 147th on the 2008 Corruption Perception Index, tied with Bangladesh, Russia and Syria. On the current Index of Economic Freedom, it's number 90, earning special condemnation for its weak rule of law: Lax property rights and extensive corruption hold down overall economic freedom. Corruption is perceived as pervasive, giving Kenya one of the world's worst scores in this vital area. Non-transparent trade regulations and customs inefficiency hurt overall trade freedom. As in many other Sub-Saharan African nations, Kenya's judiciary is underdeveloped and subject to the political whims of the executive.

No wonder, then, that when he spoke to a crowd at the University of Nairobi during his 2006 visit, then-Senator Obama didn't pull any punches. He warned that everything they've worked for, including their freedom, is threatened by corruption. From a talk covering the big themes of capitalism, bureaucracy, transparency and accountability, here's some of what he had to say:

Corruption is not a new problem. It’s not just a Kenyan problem, or an African problem. It’s a human problem, and it has existed in some form in almost every society. My own city of Chicago has been the home of some of the most corrupt local politics in American history, from patronage machines to questionable elections. In just the last year, our own U.S. Congress has seen a representative resign after taking bribes, and several others fall under investigation for using their public office for private gain.

But while corruption is a problem we all share, here in Kenya it is a crisis - a crisis that’s robbing an honest people of the opportunities they have fought for - the opportunity they deserve. . .

It is painfully obvious that corruption stifles development - it siphons off scarce resources that could improve infrastructure, bolster education systems, and strengthen public health. It stacks the deck so high against entrepreneurs that they cannot get their job-creating ideas off the ground. In fact, one recent survey showed that corruption in Kenya costs local firms 6% of their revenues, the difference between good-paying jobs in Kenya or somewhere else. And corruption also erodes the state from the inside out, sickening the justice system until there is no justice to be found, poisoning the police forces until their presence becomes a source of insecurity rather than comfort. . . .

In the end, if the people cannot trust their government to do the job for which it exists - to protect them and to promote their common welfare - all else is lost. And this is why the struggle against corruption is one of the great struggles of our time. . . .

We know that the temptation to take a bribe is greater when you’re not making enough on the job. And we also know that the more people there are on the government payroll, the more likely it is that someone will be encouraged to take a bribe. So if the government found ways to downsize the bureaucracy - to cut out the positions that aren’t necessary or useful - it could use the extra money to increase the salary of other government officials.

Of course, the best way to reduce bureaucracy and increase pay is to create more private sector jobs. And the way to create good jobs is when the rules of a society are transparent - when there’s a clear and advertised set of laws and regulations regarding how to start a business, what it takes to own property, how to go about getting a loan - there is less of a chance that some corrupt bureaucrat will make up his own rules that suit only his interests. Clarifying these rules and focusing resources on building a judicial system that can enforce them and resolve disputes should be a primary goal of any government suffering from corruption.

In addition, we know that the more information the public is provided, the easier it will be for your Kenyan brothers and sisters out in the villages to evaluate whether they are being treated fairly by their public servants or not. Wealth declarations do little good if no one can access them, and accountability in government spending is not possible if no one knows how much was available and allocated to a given project in the first place. . . .

An accountable, transparent government can break this cycle. When people are judged by merit, not connections, then the best and brightest can lead the country, people will work hard, and the entire economy will grow - everyone will benefit and more resources will be available for all, not just select groups. . . .

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And don't forget . . . the Securities Docket has information about a January 28, 2009, webcast on "game-changing developments in 2008 in the enforcement of the Foreign Corrupt Practices Act." The full scoop is here.
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