The FCPA Blog

Jack Grynberg: "I have been pursuing fraud in the energy industry for the past 15 years."Colorado-based independent oilman Jack Grynberg filed a 311-page complaint in December with the European Commission. He's asking for an investigation into alleged bribery and tax evasion in Kazakhstan by several oil companies he once partnered with. His claims relate to oil and gas developments dating back to the early 1990s -- the same ones at the center of the U.S. prosecutions of James Giffen and Brian Williams. See our post James Giffen And America's Secrets.

Grynberg, 78, who speaks six languages including Russian, is alleging "wholesale bribery and corruption of top Kazakh government officials." He claims the corruption led to his company's loss of rights in the Greater Kashagan and Karachaganak Oil Fields -- estimated to hold more than 9 billion barrels of recoverable oil and 25 trillion cubic feet of natural gas.

His complaint names BP plc, StatoilHydro A.S.A., Total S.A., Royal Dutch Shell plc, ENI S.p.A., ExxonMobil, ConocoPhillips, and Inpex.

In a release he sent to the FCPA Blog, he said:

My lawsuit in Brussels will attempt to open the window on this large scale bribery, tax evasion and corruption scheme, obtain subpoena power, and finally answer . . . questions which have remained unanswered for too long. It is unfortunate that the U.S. Department of Justice is attempting to prosecute the messengers, namely Mr. James H. Giffen and Mr. Brian J. Williams, instead of the main criminals and their cheif executives. My hope is that the European Commission will take a more balanced and assertive approach.

The complaint to the EC asserts that the alleged bribery infringed Articles 81 and 82 of the EEC Treaty (antitrust and abusive behavior).

Why the European Commission? Grynberg says he's exhausted his potential U.S. remedies and hasn't been able to subpoena the witnesses he needs (he deposed Giffen, who asserted his 5th Amendment privilege). Grynberg's civil fraud and Rico suit in the District Of Columbia against BP, Statoil, British Gas, and their top executives was bounced last year. The court ordered private arbitration in Canada under agreements Grynberg had signed for the projects.

Grynberg has a rich history of litigation, some of it productive. According to his own documents, he has been "pursuing fraud in the energy industry for the past 15 years." He cites these examples:

• In 1995, he filed one of the first False Claim Act qui tam lawsuits against 60 natural gas pipeline companies in the U.S., listing "13 ways condensate (light oil) and natural gas are stolen from federal and Native American lands."

• In 2007, Congresswoman Carolyn Maloney of New York introduced H.R. 435 (reintroduced this year as H.R. 1462), intended to stop the theft of condensate on federal and Native American lands in ways Grynberg identified.

• In September last year, he was awarded $5.66 million in a federal suit in the District of Columbia against the Central African Republic's President, Minister of Mines and Energy, and former Ambassador to the U.S. His suit claimed they demanded a $2 million bribe for an exclusive oil and gas development concession that Grynberg was ready to develop under previously signed agreements. He has also filed a complaint about the bribe demand in the International Centre for Settlement of Investment Disputes of the World Bank. A hearing is scheduled in Paris later this month.

• He's pushing amendments to the Foreign Corrupt Practices Act in Congress through H.R. 6188, which would create a private right of action under the FCPA.

Download the executive summary of Jack Grynberg's complaint to the European Commission here.

Nearly everything in the court's electronic record of James Giffen's criminal prosecution is beyond reach. Almost 200 pleadings and orders are in the docket but only a dozen can be viewed or downloaded, and the indictment isn't one of them. It's sealed tight, buttoned down, locked up. Or so it seemed just last week.

Then Cody Worthington from the District of Columbia said: "Well, apparently it’s not sealed in the case Grynberg vs. BP et al. . . it’s Exhibit 4 in that case . . .1:08-cv-00301-JDB. I just looked it up in Pacer and it’s available for anyone with an account and $2.40." Cody said he'd been keeping a copy of the Giffen indictment on his hard drive for awhile -- "collecting electronic dust." So he sent us a copy.

Based on total page views, here are the top five posts from the FCPA Blog so far in 2008:

1. Feeling the Heat Overseas, June 9, 2008

Foreign companies can't be blamed for wondering if they're being singled out under the Foreign Corrupt Practices Act. The names in the FCPA-related headlines alone are enough to cause high anxiety. ABB, Siemens, BAE, DaimlerChrysler, AstraZeneca and many more. But are U.S. prosecutors really focusing too much attention on U.K., European and other foreign companies instead of American firms? Probably not, at least according to the numbers. Here's the situation. . . .

It's a familiar and unwelcome moment. Those on the other side of the table spot the FCPA compliance language for the first time:

The joint venture and all its personnel shall comply in all respects with the requirements of the United States Foreign Corrupt Practices Act.

Faces darken. The mood in the room goes sour. . . .

Last week we reported here about the civil suit filed in the U.S. District Court in D.C. by Colorado-based oilman Jack Grynberg, 76, against BP, Statoil and British Gas, along with some of their current or former top executives. The core allegation is that the defendants, without Grynberg's knowledge and using some of his money, bribed officials in Kazakhstan in order to win oil rights for joint ventures in which Grynberg had an interest. . . .

Last week we heard that Alba -- not the movie star Jessica but the smelter Aluminum Bahrain BSC -- had sued Alcoa for bribing Bahraini officials in exchange for supply contracts. The allegations sounded exactly like an offense under the Foreign Corrupt Practices Act. Alba's federal lawsuit, however, is based not on the FCPA but on common law fraud and RICO -- the Racketeer Influenced & Corrupt Organizations Act found at 18 U.S.C. §§1961-68. So what happened to the FCPA? . . .

. . . No matter how you spin it -- and Messrs. Christie and Ashcroft have been doing plenty of that -- the appointments have the appearance of impropriety. Peel away the PR and the best you can say is that there was some obvious cronyism going on. The worst you can say is that the DOJ created a scheme by which U.S. Attorneys can extract millions of dollars from wrongdoers and funnel the money to former bosses, friends and political allies. We don't buy the sinister version for a second, but lots of people will take it as gospel. . . .

The always-helpful D & O Diary has a great post about FCPA-related civil litigation here. The topic is big news these days, with interest spurred by front-page suits brought by alleged victims of overseas public corruption -- most lately the government of Iraq, Bahrain's Alba and Denver oilman Jack Grynberg.

In the post and in a memo linked to it here, the D&O Diary moves the discussion further downstream -- to shareholder derivative suits based on FCPA-related conduct or allegations. And the subject isn't merely academic.

There's Willbros' $10.5 million settlement of a class action suit after the company restated results and upped its reserve to cover potential FCPA-related penalties; Immuncor's $2.5 million settlement of a suit claiming the company and some of its leaders misled investors about business practices and internal controls; and an ongoing securities lawsuit in which the plaintiffs claim that Nature's Sunshine Products, Inc. lacked internal controls and didn't properly account for foreign transactions.

Shareholder derivative suits based on allegations of overseas public bribery have also been filed against BAE Systems and Alcoa (see Alba above). Those cases, the memo says, illustrate how leading plaintiffs' securities lawyers are leaping in, signaling that more such suits are on the way.

For directors and officers, the potential coverage gaps in liability insurance are eye-opening. For example, D&O policies sometimes contain a so-called "commissions exclusion." It precludes coverage for losses from claims related to payments to or for an agent or employee of any foreign government. If that sounds like a prohibited payment under the FCPA, it's because the exclusion, as the memo notes, was created right after the FCPA's enactment. Then there's excluded coverage for FCPA-related fines and penalties, defense expenses for enforcement actions and . . . . well, lots more.

A special thanks to Kevin LaCroix and his D&O Diary for the reliable and otherwise hard-to-find information

View our prior posts on the private right of action for FCPA-related conduct here.
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Friday's coming just in time. We've used up more than our alloted pixels this week, but it wasn't our fault. There was Jack Grynberg's riveting tell-all complaint against his former big-oil partners, fresh allegations of cover-up or neglect or both in Seimens' internal investigation, and rising outrage at the impotence of the law, courtesy of BAE, Prince Bandar, Mr. Blair and the Serious Fraud Office. Added to all that was the appearance of the Buy-Now button to the right, which garnered a million clicks (if we round up to the nearest seven-digit number).

So let's take a breather with . . . a few anecdotes. These, readers will understand, are never intended to trivialize corruption, but to expose it. Nor to belittle or embarrass anyone who has to make a living in a corrupt society.

-- A fellow from Azerbaijan said the public there complained about the "bribe cost" of drivers' licenses being too high. So the government sent its official anti-corruption team to hang out in the motor vehicle bureau. Result? Now you have to pay bribes to both the motor vehicle people and the anti-corruption squad...

-- The Saudi customs clerk showed the man his goods inside the fenced holding area. Instead of unlocking the gate, the customs clerk rubbed his thumb and finger tips together in the universal demand for baksheesh. The man emptied his pockets on the table in front of the clerk. When the clerk saw that all the money the man carried amounted to just $36, he yelled, "What are you, English?"

-- Back in Azerbaijan, it's common knowledge that people buy juicy government posts, and that the top customs spot at the airport is purportedly worth $200,000. Job seekers do their market research to determine what the rate of return on their investment will be, given normal corruption levels during their tenure.

That's it for this busy week. But if you've got a first-hand story or a second-hand anecdote, send it along by email here (anonymity guaranteed) or as a no-name comment to this post here. We won't publish the emails or comments now, but we'll share them (without attribution) from time to time.