SFO Expands Innospec Prosecution

The U.K. Serious Fraud Office last week charged a former sales director from Innospec with corruption relating to contracts in Indonesia.

Miltos Papachristos, 48, became the third Innospec executive to be charged by the SFO. The dual citizen of Greece and the U.K. allegedly gave or promised to give bribes to Indonesian government officials to sell Innospec's gasoline additive.

In London last month, Innospec director David Turner, 56, pleaded guilty to three counts of conspiring to bribe public officials in Indonesia and Iraq. The court didn't set a date for his sentencing.

Turner, a U.K. citizen, settled civil charges with the U.S. SEC in 2010. He disgorged $40,000 and wasn't required to pay any further civil penalty.

Two other Innospec executives, Dennis Kerrison and Paul Jennings, have also been charged with criminal offenses in the U.K. Their next court appearance for a plea will be in April.

In 2010, Delaware-based Innospec reached a $40 million global settlement of more than a dozen criminal charges in the U.S. and U.K., including FCPA and U.N. oil for food program offenses. It had also violated the U.S. trade embargo against Cuba.

Ousama Naaman, Innospec's agent in Iraq, was sentenced in the U.S. to thirty months in prison last year. He pleaded guilty to conspiracy and violating the Foreign Corrupt Practices Act. He's the only individual to face U.S. criminal prosecution in the Innospec case.

In the U.K. action, the court granted Papachristos unconditional bail. He's scheduled to appear at Southwark Crown Court with the other defendants in April.

View the SFO's news release here.

Innospec Director Pleads Guilty In U.K.

The Serious Fraud Office said the former sales and marketing director in the U.K. for Innospec pleaded guilty this week to three criminal counts of conspiracy to corrupt.

David Turner, 56, appeared Tuesday at the Southwark Crown Court in London.

According to the SFO, he was charged with two counts of conspiring to bribe public officials in Indonesia and Iraq. The illegal payments were for sales of Innospec's gas additive products, including tetraethyl lead.

Turner also pleaded guilty, the SFO said, to conspiring to bribe Iraqi officials 'to ensure that tests on MMT, a competitor product manufactured by Ethyl Corporation, conducted by or on behalf of the Government of Iraq, concluded with an unfavourable assessment of that product.'

The alleged offenses occurred between 2002 and 2008.

The court didn't set a date for sentencing, the SFO said.

Turner, a U.K. citizen, settled civil charges with the U.S. SEC in 2010. He disgorged $40,000 and wasn't required to pay any further civil penalty.

Two other Innospec executives, Dennis Kerrison and Paul Jennings, have also been charged with criminal offenses in the U.K. Their next court appearance for a plea will be in April.

In 2010, Innospec -- a specialty chemical-maker based in Delaware -- reached a $40 million global settlement of more than a dozen criminal charges in the U.S. and U.K., including FCPA and U.N. oil for food program offenses, and violations of the U.S. trade embargo against Cuba.

Last month, Innospec's agent in Iraq, Ousama Naaman, was sentenced in the U.S. to thirty months in prison. He pleaded guilty to conspiracy and violating the Foreign Corrupt Practices Act.

No Innospec employees have faced criminal charges in the U.S.

Naaman also settled civil charges with the SEC in 2010. He agreed to disgorge $810,076 plus prejudgment interest of $67,030, and pay a civil penalty of $438,038.

The Serious Fraud Office said it had help in Turner's prosecution from the U.S. Department of Justice, the SEC, the City of London Police, and the Cheshire Constabulary.

Top Stories Of 2011

Some picks for the year's hottest FCPA headlines are these:

#1: Drop in corporate enforcement actions. In 2010, 23 companies settled FCPA cases for $1.8 billion; in 2011, just 15 companies settled for $508.6 million. Reason? The DOJ was distracted by an unprecedented number of FCPA-related trials. But there's no shortage of corporate investigations in the pipeline so look for enforcement to pick up next year. (We'll post our 2011 enforcement index right after the New Year holiday.)

#2: Mistrial in the first Africa sting case. A hung jury in July showed that the DOJ's FCPA unit isn't invincible after all. And in December, the judge dismissed the conspiracy counts against six other defendants in the case, resulting in one defendant's outright acquittal.

#3: Lindsey and Lee dismissals. Why would the government cheat in an FCPA prosecution when it usually wins without breaking a sweat? The judge found the DOJ's tactics so outrageous he dismissed the indictments after the jury heard the case and decided to convict the defendants on all counts. The DOJ is appealing the dismissals. If it loses, will it clean its own house?

#4: Putting the 'foreign' in Foreign Corrupt Practices Act. With the Magyar / Duetsche Telekom settlement this week, nine of the top ten FCPA cases involve non-U.S. companies. We think there's a message there from Washington to the rest of the world.

 #5: The DOJ - SFO partnership is in full bloom. The U.K.'s Serious Fraud Office is prosecuting three former Innospec execs. It charged Alcoa's super agent, Victor Dahdaleh, with corruption and proceeds-of-crimes offenses. And the SFO is leading the global investigation into Paris-based Alstom, a Siemens-sized scandal in the making.

#6: Enforcement actions are getting bigger. The top ten cases now account for criminal and civil penalties and disgorgement of $3.28 billion. Eight were settled in the past two years.

#7: An attitude adjustment at the DOJ? Associate AG Lanny Breuer promised to release detailed FCPA guidance next year, after a thirty-year wait. This month, the DOJ indicted eight former Siemens execs and agents, answering criticism that big companies plead and pay while their people walk.

#8: Fifteen-year prison term. Joel Esquenazi, one of the Haiti telco defendants, took his chances at trial and lost big. His sentence is the longest in FCPA history. Despite the DOJ's missteps in the Africa sting and Lindsey trials, Esquenazi's sentence shows how dangerous and devastating FCPA prosecutions can be.

#9: 'Foreign officials' galore. Motions by FCPA defendants to dismiss based on who's a foreign official failed in the Carson, Lindsey, and Esquenazi cases. The DOJ's view that foreign state-owned enterprises are 'instrumentalities' under the FCPA and their people are therefore 'foreign officials' is the law. Really.

#10: TSKJ keeps on giving. With a mega-settlement this year by JGC and a humongous forfeiture by Jeffrey Tesler, the feds' take on the case climbed to $1.65 billion. No wonder a dozen or so other countries want their own version of the FCPA. There's a fortune to be made in anti-corruption enforcement.

Thirty Months For Naaman

Innospec's former agent who pleaded guilty last year to bribing Iraqi officials and violating the U.N.'s oil for food program was sentenced today to thirty months in federal prison and fined $250,000.

Naaman, 62, a Canadian citizen, is the only individual prosecuted so far in the United States for Innospec's bribery.

The judge didn't say when he has to surrender and start serviing his prison sentence. He's now free on personal recognizance bond.

Innospec, a Delaware-based specialty-chemical maker, reached a $40 million global settlement last year of more than a dozen criminal charges in the U.S. and U.K.

The DOJ had asked that Naaman be jailed for seven and a half years. Based on his guilty plea, he could have been jailed for more than ten years. His lawyers had argued for time served based on his custody after arrest and later under home detention.

Three former Innospec executives -- Dennis Kerrison, Paul Jennings,  and David Turner -- have been charged by the U.K. Serious Fraud Office with overseas bribery. Their next hearing in London is set for January 6, 2012.

Naaman was arrested in July 2009 in Frankfurt, Germany. The Justice Department extradited him to the United States. In a superseding information, he was charged in Count One under 18 U.S.C. §371 with conspiracy to defraud the U.N. oil-for-food program and to violate both the antibribery and books and records provisions of the FCPA. In Count Two, he was charged under 15 U.S.C. §78dd-l with violating the FCPA and under 18 U.S.C. §2 as an aider and abettor.

In his guilty plea, Naaman admitted paying or promising to pay more than $3 million to officials at Iraq's Ministry of Oil and the Trade Bank of Iraq to win business for Innospec. The company makes and markets the anti-knock compound tetraethyl lead (TEL) used in leaded gasoline. Demand for TEL dropped in most Western countries after enactment of the U.S. Clean Air Act. But Innospec's management encouraged bribery to boost sales in other markets, mainly in developing countries.

In August last year, Naaman and David Turner, one of the London defendants, settled civil FCPA charges with the SEC.

Turner agreed to disgorge $40,000 to the SEC. He wasn't required to pay any civil penalty. The SEC said he provided "extensive and ongoing cooperation in the investigation." Naaman agreed to disgorge $810,076 plus prejudgment interest of $67,030, and pay a civil penalty of $438,038. The civil penalty will be reduced by $250,000 -- the amount of his criminal fine.

What Sentence Is Fair For Naaman?

When Ousama Naaman is sentenced -- now scheduled for December 22 at 10:30 AM before Judge Ellen S. Huvelle in federal court in the District of Columbia -- prosecutors will ask for a seven and half year prison term.

Naaman has said that if his bribery conspiracy was really as bad as the DOJ claimed, why weren't others prosecuted? Why was he the only conspirator to face charges in the United States?

Naaman was Innospec's former agent in Iraq. He pleaded guilty in June last year to one count of conspiracy to violate the Foreign Corrupt Practices Act and commit wire fraud, and one count of violating the FCPA.

After indicting Naaman, the DOJ handed off to the U.K. the prosecution of those who may have helped him bribe Iraqi officials. As of today, the U.K. Serious Fraud Office has charged three individuals in the case.

Naaman argued in a brief last month that the U.K. has a more lenient sentencing regime. Even if individuals charged there are more culpable then he is, Naaman said, they won't face long prison terms.

Naaman told Judge Huvelle:

It is unclear what course the government expects the United Kingdom will take with the other co-conspirators. On the one hand, it says it will "defer prosecution" to a foreign sovereign, but -- on the other hand -- the government argues that there can be "no disparity" when the coconspirator has not been charged or sentenced. Obviously, if the co-conspirators are charged in the United Kingdom under a far more lenient sentencing regime than exists in the United States, this will produce a relevant sentencing disparity.

To support his argument, Naaman tracked sentences imposed on defendants convicted in other SFO prosecutions for oil-for-food bribery prosecutions.

The U.K.'s sentencing record, Naaman said, looks like this:

•  Mark Jessop sentenced to 24-weeks imprisonment for engaging in 54 contracts worth more than $12.3 million with Iraq.

•  Riad El-Taher paid $500,000 in bribes to Iraqi officials and was sentenced to 10-months imprisonment, which was later reduced to 8 months.

•  Aftab Noor Al-Hassan sentenced to a suspended sentence or 16-months imprisonment for paying $1.6 million in bribes to Iraqi officials for oil contracts that profited him $4.4 million.

•  Richard Forsyth sentenced to 21-months imprisonment, David Mabey sentenced to 8-months imprisonment and Richard Gledhill was given a suspended sentence of 8-months imprisonment for making illegal payments to Iraq of more than €420,000.

Last month, a reader talking about the Tesler case reminded us that multi-jurisdictional anti-bribery enforcement is complicated. The Naaman case proves his point.