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FCPA Blog Daily News

Entries in Mexico (184)

Thursday
Oct142010

Husband Remains A Fugitive

Although his wife is in U.S. custody and faces up to 40 years in prison, a Mexican man indicted in September for alleged in bribery involving officials at the Mexican state-owned electric utility is still at large.

Click to read more ...

Thursday
Sep302010

ABB Reaches $58 Million Settlement (Updated)

Electrical technology giant ABB Ltd. of Switzerland reached a settlement with the DOJ today of criminal FCPA charges and will pay a fine $30,420,000. And in resolving civil charges with the SEC, the company will disgorge $22,804,262 and pay a $16,510,000 civil penalty.

Click to read more ...

Wednesday
Sep292010

ABB Companies Charged In Houston

Dow Jones and others are reporting that the DOJ today charged two subsidiaries of ABB Ltd. with conspiracy to violate the FCPA.

Click to read more ...

Thursday
Sep162010

Two Indicted For Mexican Electric Company Bribes

A Los Angeles grand jury yesterday indicted a Mexican husband and wife for their alleged roles in bribery and money laundering involving Mexican government officials at the state-owned electric utilitiy, Comisión Federal de Electridad, or CFE.

Enrique Faustino Aguilar Noriega, 56, of Cuernavaca, Mexico, was charged in a seven-count indictment with conspiracy to violate the Foreign Corrupt Practices Act, four substantive FCPA violations, money laundering conspiracy, and money laundering.  Angela Maria Gomez Aguilar, 55, also of Cuernavaca, was charged with money laundering conspiracy and money laundering.

Angela Gomez Aguilar was arrested last month in Houston. She was moved to the Central District of California, where she's in custody.

According to the indictment, their company, Grupo Internacional de Asesores S.A. (Grupo), acted as a sales agent for an Azusa, Calif.,-based company. From 2002 until 2009, the indictment alleges, Enrique Aguilar was paid a 30 percent commission for sales to CFE. The indictment alleges that all or part of the commission was intended to be used to bribe Mexican officials in exchange for contracts with CFE. The final price of goods and services sold to CFE was increased by 30 percent to cover the cost of the alleged bribery.

The couple allegedly laundered the money in the Grupo brokerage account. The indictment alleges they bought a yacht for $1.8 million and a Ferrari for $297,500 for a CFE official. They're also charged with paying more than $170,000 worth of American Express bills and sending about $600,000 to relatives of a CFE official.

In November 2009, the general manager of a Sugar Land, Texas-based ABB subsidiary was arrested for his alleged role in a conspiracy to bribe Mexican government officials to win work from CFE.

John Joseph O'Shea, 57, of Pleasanton, California, was charged with one count of conspiracy to violate the Foreign Corrupt Practices Act (18 U.S.C. § 371), 12 counts of violating the FCPA (15 U.S.C. § 78dd-2 et seq), four counts of international money laundering (18 U.S.C. § 1956), and one count of falsifying records in a federal investigation (18 U.S.C. § 1519).

O'Shea allegedly hired Fernando Maya Basurto, 47, of Mexico City, to act as the ABB Texas unit's sales agent in Mexico. In December 1997, the CFE awarded a contract that generated more than $44 million dollars in revenue for ABB's Texas unit. In October 2003, CFE also awarded it a multi-year contract for maintenance and upgrades that generated more than $37 million in revenue.

ABB discovered the alleged bribery and fraud during an internal investigation. It self-disclosed the payments and related activities to the Justice Department and the Securities and Exchange Commission and helped with their investigations. In late 2008, the Swiss-based engineering company said it reserved about $850 million for possible resolution of U.S. and European corruption charges.

Basurto was first arrested in Dallas in April 2009 on a criminal complaint charging him with conspiracy to structure transactions and structuring transactions to evade currency reporting requirements. As part of his plea deal, the DOJ filed a superseding criminal information charging him with one count of conspiracy to violate the FCPA, to launder money, and to falsify records. The information said jurisdiction over Basurto was based on his being "an agent of a domestic concern, as that term is defined in the FCPA, 15 U.S.C. § 78dd-2(h)(1)."

He pleaded guilty in November 2009 in Houston and has been cooperating in the investigation. He faces up to five years in prison. The Justice Department hasn't announced his sentencing date.

Enrique Aguilar faces a up to five years in prison for the FCPA conspiracy count and each of the four substantive FCPA counts. The conspiracy and substantive money laundering counts each carry a maximum penalty of 20 years in prison. The government is also seeking criminal forfeiture.

As the DOJ says, an indictment is merely an accusation, and defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.

View the DOJ's September 15, 2010 release here.

Download the indictment in U.S. v. John Joseph O'Shea here.

Download Fernando Maya Basurto's plea agreement with the Justice Department here.

Saturday
Aug142010

Arrest In ABB Mexico Case

The Houston Chronicle reported the arrest Friday of a Mexican businesswoman on charges of violating the FCPA.

Angela Gomez, 55, is accused of serving as an intermediary between ABB and another U.S. firm for Nestor Moreno, chief of operations for Mexico's Federal Electric Commission.

The report said prosecutors alleged that Moreno received a yacht, Ferrari, and perhaps millions of dollars in cash in exchange for awarding contracts. At her hearing Friday, an FBI agent testified that "Gomez's signature was on a $297,000 check to Ferrari Beverly Hills, for a Spider sports car, as well payments totaling $1.8 million to the now-defunct South Shore Yacht Sales, in Chula Vista, Calif." 

Gomez and her husband own Global Financial Services, a Houston brokerage firm they allegedly used to pass some of the bribes to the Mexican official. She was arrested when she came to Houston to attend a civil arbitration hearing, the Chronicle report said. The paper said she appeared in federal court Friday in shackles and handcuffs.

In November 2009, the general manager of a Sugar Land, Texas-based ABB subsidiary was arrested for his alleged role in a conspiracy to bribe Mexican government officials. Prosecutors said the bribes were allegedly intended to secure contracts with Mexico's Federal Electric Commission, known in Spanish as the CFE.

John Joseph O'Shea, 57, of Pleasanton, California, was charged with one count of conspiracy to violate the Foreign Corrupt Practices Act (18 U.S.C. § 371), 12 counts of violating the FCPA (15 U.S.C. § 78dd-2 et seq), four counts of international money laundering (18 U.S.C. § 1956), and one count of falsifying records in a federal investigation (18 U.S.C. § 1519).

O'Shea allegedly hired Fernando Maya Basurto, 47, of Mexico City, to act as the ABB Texas unit's sales agent in Mexico. In December 1997, the CFE awarded the Texas business unit a contract, known as the SITRACEN contract, to upgrade the backbone of Mexico's electrical network system. The SITRACEN contract generated more than $44 million dollars in revenue for ABB's Texas unit. In October 2003, the CFE also awarded it a multi-year contract for maintenance and upgrades of the SITRACEN contract that generated more than $37 million in revenue.

ABB discovered the alleged bribery and fraud during an internal investigation. It self-disclosed the payments and related activities to the Justice Department and the Securities and Exchange Commission and helped with their investigations. In late 2008, the Swiss-based engineering company said it reserved about $850 million for possible resolution of U.S. and European corruption charges.

Basurto was first arrested in Dallas in April 2009 on a criminal complaint charging him with conspiracy to structure transactions and structuring transactions to evade currency reporting requirements. As part of his plea deal, the DOJ filed a superseding criminal information charging him with one count of conspiracy to violate the FCPA, to launder money, and to falsify records. The information said jurisdiction over Basurto was based on his being "an agent of a domestic concern, as that term is defined in the FCPA, 15 U.S.C. § 78dd-2(h)(1)."

He pleaded guilty in November 2009 in Houston and has been cooperating in the investigation. He faces up to five years in prison. The Justice Department hasn't announced his sentencing date.

Download the indictment in U.S. v. John Joseph O'Shea here.

Download Fernando Maya Basurto's plea agreement with the Justice Department here.

Monday
Mar082010

Shot-Show Prosecution May Expand

As reported Friday, one of the 22 shot-show defendants, Daniel Alvirez, is expected to plead guilty soon to charges of conspiracy to violate the Foreign Corrupt Practices Act. The government's two-count superseding information alleged that he plotted to bribe defense officials in Africa and the Republic of Georgia.

What to expect now? We asked someone familiar with the evidence, who requested anonymity. Here's what he or she told us:

The government's video and audio tapes are of good quality and the confidential informant, Richard Bistrong, should be an effective witness despite some baggage. Overall, the cases appear to be strong and supported by ample evidence.

There are indications of more foreign bribery involving the military-equipment industry; the allegations in the first 16 indictments (available here) and the superseding information may be the tip of the iceberg. 

The Justice Department is seeking to build bigger cases against some current defendants. It may also indict other individuals.

Investigators could also be looking at involvement by some well-known industry leaders -- an Indian military-equipment supplier, three U.S. public companies, and two large private security contractors among them.

Countries and governments involved may include not just Georgia (mentioned in the superseding information) but also Peru, Mexico, Saudi Arabia, Guatemala, the Philippines, Colombia, and others. Representatives from some of the countries could be targeted by the Justice Department.

Wednesday
Feb172010

Pride Discloses Possible Settlement

Pride International, Inc. said this week it has set aside $56.2 million for an expected settlement with the Justice Department and the Securities and Exchange Commission of Foreign Corrupt Practices Act offenses. The Houston-based oil-rig operator first disclosed potential FCPA compliance issues in 2006.

In December last year, the SEC accused a former Pride vice president, Bobby Benton, of violating the FCPA. He allegedly bribed Mexican officials in 2004 and altered the company's accounts to hide the payments. The SEC's December 10 civil complaint, filed in federal court in Houston, seeks a civil penalty and disgorgement from Benton, as well as an injunction against future violations.

Pride earlier disclosed that its internal investigation found evidence of illegal payments from 2001 through 2006 directly or indirectly to government officials in Saudi Arabia, Kazakhstan, Brazil, India, Nigeria, Libya, Angola and the Republic of the Congo. The payments related to clearing rigs and equipment through customs, resolving customs disputes, immigration, tax, licensing and merchant marine issues.

Pride's February 16, 2010 release said:

Pride International, Inc. (NYSE: PDE) today announced that it has accrued $56.2 million in the fourth quarter of 2009 in anticipation of a possible resolution with the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) of potential liability under the U.S. Foreign Corrupt Practices Act. As described in Pride's quarterly and annual reports, the company voluntarily disclosed in 2006 to the DOJ and the SEC information relating to initial allegations of potential improper payments to foreign government officials and has continued to cooperate with the agencies' investigations. The accrual in the fourth quarter 2009 represents the company's best estimate of potential fines, penalties and disgorgement related to settlement of the matter with the DOJ and SEC. The monetary sanctions ultimately paid by the company to resolve these issues, whether imposed on the company or agreed to by settlement, may exceed the amount of the accrual.

We talked about Pride's February 2008 disclosure of its internal investigation here.

Friday
Dec112009

SEC Charges Ex-Pride VP

The Securities and Exchange Commission accused Bobby Benton, a former vice president of offshore drill rig operator Pride International, of violating the Foreign Corrupt Practices Act. He allegedly bribed Mexican officials in 2004 and altered the company's accounts to hide the payments. The SEC's December 10 civil complaint (below) was filed in federal court in Houston.

The SEC accused Benton of authorizing a third party to pay off Mexican customs officials and concealing bribes to Mexican and Venezuelan officials between 2003 and 2005. Benton allegedly deleted references in the audits to about $384,000 in payments made by “the manager of the Venezuelan branch of a French subsidiary of Pride” to third-party companies. The SEC said the alleged bribes went to a Venezuelan state-owned oil company official to extend three drilling contracts.

Pride disclosed in SEC filings including its latest quarterly report (here) an internal investigation into the company's Latin America operations that began in February 2006. It said possible FCPA violations were found, including payments of less than $1 million to government officials in Venezuela and Mexico. 

Benton is accused of authorizing a $10,000 bribe in 2004 to ensure a Mexican customs official would overlook deficiencies in a Pride supply boat. He's also accused of redacting references to another $15,000 bribe paid by an agent of Pride's Mexican subsidiary to keep a Mexican customs official from delaying a drilling rig for customs violations, according to the complaint.

The SEC is seeking a civil penalty and disgorgement from Benton, as well as an injunction against future violations.

Pride's internal investigation also found evidence of illegal payments of less than $2.5 million from 2001 through 2006 directly or indirectly to government officials in Saudi Arabia, Kazakhstan, Brazil, India, Nigeria, Libya, Angola and the Republic of the Congo. The payments related to clearing rigs and equipment through customs, resolving customs disputes, immigration, tax, licensing and merchant marine issues. 

The company self-disclosed the results of its investigation. It said it is in talks with the DOJ and SEC "regarding a potential negotiated resolution of these matters, which could be settled during 2009 and which . . . could involve a significant payment by us." It said a settlement is likely to "include both criminal and civil sanctions." The DOJ hasn't yet announced any enforcement actions involving Benton or the company.

View the Securities and Exchange Commission's December 14, 2009 Litigation Release No. 21335 in SEC v. Bobby Benton here.

Download the civil complaint in SEC v. Bobby Benton, Civil Action No. 4:09-CV-03963 (S.D. Texas, December 11, 2009) here.

Monday
Nov232009

Ex-ABB Manager Arrested, Mexican Agent Pleads Guilty

The Justice Department announced on Monday (November 23) the arrest of the former general manager of a Sugar Land, Texas-based ABB subsidiary for his alleged role in a conspiracy to bribe Mexican government officials. The bribes were allegedly intended to secure contracts with the Comisión Federal de Electricidad (CFE), a Mexican state-owned utility company. The DOJ also said a Mexican citizen who acted as a middleman pleaded guilty in the case and is cooperating in the investigation.

The DOJ charged John Joseph O'Shea, 57, of Pleasanton, California, in an 18-count indictment returned by a federal grand jury in Houston on November 16. He was charged with one count of conspiracy to violate the Foreign Corrupt Practices Act (18 U.S.C. § 371), 12 counts of violating the FCPA (15 U.S.C. § 78dd-2 et seq), four counts of international money laundering (18 U.S.C. § 1956), and one count of falsifying records in a federal investigation (18 U.S.C. § 1519).

Although not named in the DOJ release or charging documents, ABB has confirmed that O'Shea was its employee. Fortune carried this statement from the company: "The individual is a former employee of an ABB unit in Texas. He was terminated in the fall of 2004. ABB continues to cooperate with U.S. authorities."

O'Shea hired Fernando Maya Basurto, 47, of Mexico City, to act as the Texas unit's sales agent in Mexico. Under his contract, Basurto received a percentage of sales as his commission. In December 1997, CFE awarded the Texas business unit a contract, known as the SITRACEN contract, to upgrade the backbone of Mexico's electrical network system. The SITRACEN contract generated more than $44 million dollars in revenue for ABB's Texas business unit. In October 2003, CFE also awarded it a multi-year contract for maintenance and upgrades of the SITRACEN contract that generated more than $37 million in revenue.

According to the indictment, O'Shea and Basurto agreed to pay 10 percent of the revenues from the SITRACEN contract to officials at CFE. And for the Evergreen contract, O'Shea authorized more than $900,000 in bribes to CFE officials. He also took a kickback of 1 percent. The indictment alleges that O'Shea, Basurto and others covered up the bribery after ABB fired O'Shea. They fabricated documents that "purported to be evidence of a legitimate business relationship between the Texas business unit and the Mexican companies that provided the false invoices." The indictment described emails between Basurto and O'Shea in which they discussed creating fake correspondence and a phony contract.

ABB discovered the alleged bribery and fraud during an internal investigation. It self-disclosed the payments and related activities to the Justice Department and the Securities and Exchange Commission and helped with their investigations.

Basurto was first arrested in Dallas in April on a criminal complaint charging him with conspiracy to structure transactions and structuring transactions to evade currency reporting requirements. He was later indicted on the same charges on June 10, 2009. As part of his plea deal, the DOJ filed a superseding criminal information charging him with one count of conspiracy to violate the FCPA, to launder money, and to falsify records. The information said jurisdiction over Basurto was based on his being "an agent of a domestic concern, as that term is defined in the FCPA, 15 U.S.C. § 78dd-2(h)(1)."

He pleaded guilty on November 16 in Houston. He faces up to five years in prison and a fine of $250,000 or twice his gain or the victim's loss caused by his crimes. The Justice Department hasn't announced his sentencing date.

Basurto's indictment gave details of the bribes. It said, for example:

Basurto would maintain control over all of these funds [from the Texas business unit] and would, at CFE Official C's instruction, wire funds from these accounts to a Merrill Lynch brokerage account. CFE Official C would then cause some of these funds to be further transferred to the son-in-law of CFE Official N and to the brother of CFE Official C. Basurto would follow additional instructions from CFE Official C concerning the "Good Guys" funds, including giving CFE Official C approximately $20,000 in cash.

For O'Shea, the conspiracy and falsification of records counts each carry a maximum penalty of five years in prison and a fine of the greater of $250,000 or twice the value gained or lost. Each of the 12 substantive FCPA counts carry a maximum penalty of five years in prison and a fine of the greater of $100,000 or twice the value gained or lost. The four international money laundering counts each carry a maximum penalty of 20 years in prison and a fine of the greater of $500,000 or twice the value of the property involved in the transaction. The indictment also gives notice of criminal forfeiture.

 The DOJ said German authorities assisted in the investigation. Payments allegely were made to the CFE officials through German banks and accounts there.

In July 2004, ABB and two subsidiaries disgorged $5.9 million and paid a $10.5 million penalty for FCPA violations involving Nigeria, Angola and Kazakhstan. In a 2007 earnings release, ABB said it disclosed to the DOJ and SEC "suspect payments made by employees of company subsidiaries in Asia, South America and Europe, in particular Italy. These suspect payments were discovered as a result of ABB's internal audit and compliance program." See our post here.

As the DOJ says, an indictment is merely an accusation, and O’Shea is presumed innocent until and unless proven guilty beyond a reasonable doubt.

View the DOJ's November 23, 2009 release here.

Download the November 16, 2009 criminal indictment in US v. John Joseph O'Shea here.

Download the November 16, 2009 superseding criminal information in US v. Fernando Maya Basurto here.

Download Basurto's plea agreement with the Justice Department here.

Monday
Sep282009

Supply-Side Corruption

The 2008 Bribe Payers Index (BPI) from Transparency International attempts to measure how much corruption the major economies export to other countries. TI hired Gallup International to survey 2,742 executives from 26 countries (at least 100 interviews per country) between 5 August and 29 October 2008. The executives came from Argentina, Brazil, Chile, Czech Republic, Egypt, France, Germany, Ghana, Hungary, India, Indonesia, Japan, Malaysia, Mexico, Morocco, Nigeria, Pakistan, the Philippines, Poland, Russia, Senegal, Singapore, South Africa, South Korea, the United Kingdom and the United States.

Interviewees were given a list of 22 countries. They were asked to score each country on a 5-point scale (from 1=never, to 5=almost always) by answering the question: “How often do firms headquartered in (country name) engage in bribery in [your home] country?” The 22 "exporting"countries selected for evaluation represented 54 percent of the world's total trade and foreign direct investment flows in 2006.

What's measured is the perception of companies headquartered in the "exporting" countries to pay bribes when doing business abroad. Companies from Belgium and Canada came out on top as the cleanest; those from China and Russia were last.

Here's the complete 2008 BPI ranking:

1 Belgium
1 Canada
3 Netherlands
3 Switzerland
5 Germany
5 United Kingdom
5 Japan
8 Australia
9 France
9 Singapore
9 United States
12 Spain
13 Hong Kong
14 South Africa
14 South Korea
14 Taiwan
17 Italy
17 Brazil
19 India
20 Mexico
21 China
22 Russia
The survey also evaluated 19 business segments to determine which were most likely to use illegal payments to influence government decisions. Worst ranked were public works contracts and construction, real estate and property development, oil and gas, heavy manufacturing, and mining. The cleanest were information technology, fisheries, and banking and finance.

Among other things, the survey raises questions about the lack of enforcement parity among the major economies. The BRIC countries plus Mexico sit at the bottom of the survey -- their companies are perceived as most likely to use bribery abroad to win work. Yet those countries don't prosecute overseas graft. For American companies, that's bad news. The growing economic power of India and China especially will make the level playing field more elusive than ever.
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Thursday
Feb262009

Pride's Disclosure Tells The Story

We admire Pride International, Inc.'s approach to its Foreign Corrupt Practices Act disclosures. The company talks about the serious problems it had for years with sensitive payments, and how it's been dealing with them. The countries involved included Venezuela and Mexico, India and Malaysia, Saudi Arabia, Kazakhstan, Brazil, Nigeria, Libya, Angola and the Republic of the Congo, among others. Bribes apparently were paid directly or by intermediaries to clear rigs and equipment through customs, and to help solve problems with immigration, tax, and licensing authorities. Some of the payments in question involved global logistics firm Panalpina and other third parties.

Sadly, people near the top of the company probably knew what was going on. The ex-chief operating officer resigned his position in mid-2006 but has stayed as an employee during the FCPA investigation. If the audit committee or the board of directors think there's "cause" under his employment agreement to terminate his services, he could lose retirement benefits and maybe a lot more. Other senior people have already been fired or placed on administrative leave, and some resigned because of the FCPA investigation. The company says it has "taken and will continue to take disciplinary actions where appropriate and various other corrective action to reinforce our commitment to conducting our business ethically and legally and to instill in our employees our expectation that they uphold the highest levels of honesty, integrity, ethical standards and compliance with the law."

Who is Pride? It's a can-do Houston-based drilling contractor for the oil and gas industry. It has over 7,000 employees working around the world. "We have positioned our fleet," its website says, "in some of the world's largest and most active exploration and production areas, with a market presence in West Africa (Angola), Latin America (Brazil), the Gulf of Mexico, the Mediterranean and Middle East. Today, we operate a total of 45 rigs."

As we did a year ago here, we're reprinting below Pride International's FCPA disclosure from its annual report (Form 10-K), this one for the period ending December 31, 2008. Pride filed it with the Securities and Exchange Commission this week. It's a long read (for a blog post, anyway). But it's filled with details and admissions not usually found in similar disclosures. We think it also gives fair warning to shareholders and other stakeholders that an eventual resolution with the Justice Department and SEC could be expensive and disruptive.

Pride International, Inc. trades on the New York Stock Exchange under the symbol PDE.

Download Pride's February 25, 2009 Form 10K (annual report) here.
___________

During the course of an internal audit and investigation relating to certain of our Latin American operations, our management and internal audit department received allegations of improper payments to foreign government officials. In February 2006, the Audit Committee of our Board of Directors assumed direct responsibility over the investigation and retained independent outside counsel to investigate the allegations, as well as corresponding accounting entries and internal control issues, and to advise the Audit Committee.

The investigation, which is continuing, has found evidence suggesting that payments, which may violate the U.S. Foreign Corrupt Practices Act, were made to government officials in Venezuela and Mexico aggregating less than $1 million. The evidence to date regarding these payments suggests that payments were made beginning in early 2003 through 2005 (a) to vendors with the intent that they would be transferred to government officials for the purpose of extending drilling contracts for two jackup rigs and one semisubmersible rig operating offshore Venezuela; and (b) to one or more government officials, or to vendors with the intent that they would be transferred to government officials, for the purpose of collecting payment for work completed in connection with offshore drilling contracts in Venezuela. In addition, the evidence suggests that other payments were made beginning in 2002 through early 2006 (a) to one or more government officials in Mexico in connection with the clearing of a jackup rig and equipment through customs, the movement of personnel through immigration or the acceptance of a jackup rig under a drilling contract; and (b) with respect to the potentially improper entertainment of government officials in Mexico.

The Audit Committee, through independent outside counsel, has undertaken a review of our compliance with the FCPA in certain of our other international operations. In addition, the U.S. Department of Justice has asked us to provide information with respect to (a) our relationships with a freight and customs agent and (b) our importation of rigs into Nigeria. The Audit Committee is reviewing the issues raised by the request, and we are cooperating with the DOJ in connection with its request.

This review has found evidence suggesting that during the period from 2001 through 2006 payments were made directly or indirectly to government officials in Saudi Arabia, Kazakhstan, Brazil, Nigeria, Libya, Angola, and the Republic of the Congo in connection with clearing rigs or equipment through customs or resolving outstanding issues with customs, immigration, tax, licensing or merchant marine authorities in those countries. In addition, this review has found evidence suggesting that in 2003 payments were made to one or more third parties with the intent that they would be transferred to a government official in India for the purpose of resolving a customs dispute related to the importation of one of our jackup rigs. The evidence suggests that the aggregate amount of payments referred to in this paragraph is less than $2.5 million. We are also reviewing certain agent payments related to Malaysia.

The investigation of the matters described in the prior paragraph and the Audit Committee’s compliance review are ongoing. Accordingly, there can be no assurances that evidence of additional potential FCPA violations may not be uncovered in those or other countries.

Our management and the Audit Committee of our Board of Directors believe it likely that then members of our senior operations management either were aware, or should have been aware, that improper payments to foreign government officials were made or proposed to be made. Our former Chief Operating Officer resigned as Chief Operating Officer effective on May 31, 2006 and has elected to retire from the company, although he will remain an employee, but not an officer, during the pendency of the investigation to assist us with the investigation and to be available for consultation and to answer questions relating to our business. His retirement benefits will be subject to the determination by our Audit Committee or our Board of Directors that it does not have cause (as defined in his retirement agreement with us) to terminate his employment. Other personnel, including officers, have been terminated or placed on administrative leave or have resigned in connection with the investigation. We have taken and will continue to take disciplinary actions where appropriate and various other corrective action to reinforce our commitment to conducting our business ethically and legally and to instill in our employees our expectation that they uphold the highest levels of honesty, integrity, ethical standards and compliance with the law.

We voluntarily disclosed information relating to the initial allegations and other information found in the investigation and compliance review to the DOJ and the Securities and Exchange Commission and are cooperating with these authorities as the investigation and compliance reviews continue and as they review the matter. If violations of the FCPA occurred, we could be subject to fines, civil and criminal penalties, equitable remedies, including profit disgorgement, and injunctive relief. Civil penalties under the antibribery provisions of the FCPA could range up to $10,000 per violation, with a criminal fine up to the greater of $2 million per violation or twice the gross pecuniary gain to us or twice the gross pecuniary loss to others, if larger. Civil penalties under the accounting provisions of the FCPA can range up to $500,000 and a company that knowingly commits a violation can be fined up to $25 million. In addition, both the SEC and the DOJ could assert that conduct extending over a period of time may constitute multiple violations for purposes of assessing the penalty amounts. Often, dispositions for these types of matters result in modifications to business practices and compliance programs and possibly a monitor being appointed to review future business and practices with the goal of ensuring compliance with the FCPA.

We could also face fines, sanctions and other penalties from authorities in the relevant foreign jurisdictions, including prohibition of our participating in or curtailment of business operations in those jurisdictions and the seizure of rigs or other assets. Our customers in those jurisdictions could seek to impose penalties or take other actions adverse to our interests. We could also face other third-party claims by directors, officers, employees, affiliates, advisors, attorneys, agents, stockholders, debt holders, or other interest holders or constituents of our company. In addition, disclosure of the subject matter of the investigation could adversely affect our reputation and our ability to obtain new business or retain existing business from our current clients and potential clients, to attract and retain employees and to access the capital markets. No amounts have been accrued related to any potential fines, sanctions, claims or other penalties, which could be material individually or in the aggregate.

We cannot currently predict what, if any, actions may be taken by the DOJ, the SEC, any other applicable government or other authorities or our customers or other third parties or the effect the actions may have on our results of operations, financial condition or cash flows, on our consolidated financial statements or on our business in the countries at issue and other jurisdictions.
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Thursday
Dec252008

Help Wanted For Siemens Report

One of ProPublica's outstanding investigative reporters, T. Christian Miller, wrote the story below (which ProPublica co-published with MSN Money). We reprint it under ProPublica's generous license ("You can republish our articles for free, if you credit us, link to us, and don't edit our material or sell it separately.")

If you have trouble accessing the DOJ and SEC charging documents linked in the story (we did), you can also find them at the bottom of our earlier post here.

_________

Help Us Name Names in Siemens Corruption Scandal

by T. Christian Miller, ProPublica - December 22, 2008 1:05 pm EST

Get ready for the Siemens World Corruption Tour, 2001-2008. Siemens pleaded guilty last week to corruption across the globe, receiving a record-setting fine -- $1.6 billion (which sounds like a lot, but really, it's just 0.3 percent of their revenue during those years.)

In announcing the fine, the Justice Department and the Securities and Exchange Commission released formal complaints detailing how Siemens bribed government officials all around the world. (We published a story in Sunday's New York Times profiling the Siemens accountant at the center of the scandal.)

However -- and this is a big "however" if you're into accountability -- they released none of the names of the corrupt bureaucrats that took the cash or the Siemens officials who paid it.

This was done, Justice folks said, to protect the integrity of ongoing investigations and to comply with privacy laws in various countries.

At the hearing prosecutors seemed a bit wistful that they couldn't reveal the names, which were provided to Judge Richard Leon in a sealed file. Lori Weinstein, the dogged prosecutor who pursued the case, said the department could not provide exact names. But, she said, the documents were sprinkled with clues to provide "sufficient clarity" for the court to figure out who was who.

Some identifications are vague -- there are plenty of "government officials." But others are more specific. (Hello, "Wife of the former Nigerian Vice President, a dual U.S.-Nigerian citizen.") ProPublica figures that with the help of readers, we might be able to ID at least some of these folks. Below, you'll find descriptions of the bribees. Send us a name and a link sourcing the information.

To get things started, take the case of the Argentine identity card contract. The SEC's complaint said that Siemens paid bribes to a certain "president of Argentina" who left office in 1999. Not too hard to figure out that one -- Carlos Menem ran the country from 1989 to 1999. Looks like the buck really did stop there.

This is by no means an exhaustive list. As of last count, 16 countries had investigations ongoing into Siemens. Our list below includes only those bribery schemes detailed in the formal complaints by the Justice Department and the Securities and Exchange Commission.

E-mail us if you find clues to figure out the other grafters.

Argentina
Source: SEC Complaint, p. 21
National Identity Card contract (1998-2004)
Contract Amount: $1 billion
Bribe Amount: $40 million
Recipients:

  • President of Argentina until 1999 (Carlos Menem)
  • Minister of the Interior
  • Head of Immigration Control
  • Cabinet ministers

Bangladesh
Source: SEC Complaint, p. 19
Mobile Phone contract (2004-2006)
Contract Amount: $40.9 million
Bribe Amount: $5.3 million
Recipients:

  • Son of then-Prime Minister
  • Minister of Posts & Telecommunications
  • Director of Procurement for the Bangladesh Telegraph & Telephone Board
  • In addition, Siemens Ltd. Bangladesh hired relatives of two BTTB and Ministry of Posts and Telecom officials.

Venezuela
Source: SEC Complaint, p. 14
Metro contracts (2001-2007)
Valencia and Maracaibo metro systems
Contract Amounts: $642 million
Bribe Amount: $16.7 million
Recipients:

  • A high-ranking member of the central Venezuela government
  • Two prominent Venezuelan attorneys acting on behalf of government officials
  • A former Venezuelan defense minister and diplomat

Israel
Source: SEC Complaint, p. 17
Power plants (2002-2005)
Contract Amount: $786 million
Bribe Amount: $20 million
Recipients:

  • Former director of the Israel Electric Company
  • Payments routed through brother-in-law of former CEO of Siemens Israel Ltd.

Nigeria
Source: SEC Complaint, p. 20
Telecommunications projects (2000-2001)
Contract Amount: $130 million
Bribe Amount: At least $4.5 million
Recipients:

  • Wife of the former Nigerian Vice President, a dual U.S.-Nigerian citizen who lived in the U.S.
  • "likely" the former President of Nigeria
  • "likely" the former Vice President of Nigeria

Vietnam
Source: SEC Complaint, p. 22
Hospital equipment sales (2005-2006)
Contract Amount: $6 million
Bribe Amount: $383,000
Recipients:

  • Government officials

Source: SEC Complaint, p. 27
Mobile network (2002)
Contract Amount: $35 million
Bribe Amount: $140,000
Note: Siemens did not win the project but agreed to pay 8 percent to 14 percent of project value to Vietnamese government officials
Recipients:

  • "likely" Vietnamese Ministry of Defense officials
  • Vietel, state-owned mobile phone network

China
Source: SEC Complaint, p.16
Metro trains and signaling devices contracts (2002-2007)
Contract Amount: $1 billion
Bribe Amount: $22 million
Recipients:

  • Government officials

Source: SEC Complaint, p. 18
High voltage lines (2002-2003)
Contract Amount: $838 million
Bribe Amount: $25 million
Recipients:

  • Government officials

Source: SEC Complaint, p. 23
Medical equipment sales (2003-2007)
Contract Amount: $295 million
Bribe Amount: $14.4 million
Recipients:

  • Deputy Director, Songyuan City Central Hospital, convicted in China and sentenced to 14 years in prison

Source: SEC Complaint, p.24
Hospital equipment sales (1998-2004)
Contract Amount: Unknown
Bribe Amount: $650,000
Recipients:

  • Chinese hospital officials

Russia
Source: SEC Complaint, p. 25
Traffic control system (2004-2006)
Contract Amount: $27 million
Bribe Amount: $741,419
Recipients:

  • Government officials

Source: SEC Complaint, p. 27
Hospital equipment (2000-2007)
Contract Amount: Unknown
Bribe Amount: $55 million
Recipients:

  • Russian state-owned hospital officials

Mexico
Source: SEC Complaint, p. 26
Refinery modernization (2004)
Contract Amount: Unknown
Bribe Amount: $2.6 million
Recipients:

  • Senior official of Pemex, state-owned oil company

Iraq
Source: SEC Complaint, p. 28
Oil for Food program (2000-2003)
Contract Amount: $124 million
Bribe Amount: $1.7 million
Recipients:

  • Iraqi Ministry of Electricity officials
  • Iraqi Ministry of Oil official
So who are these folks? Send us a name and a link sourcing the information.
_________

Will readers of the FCPA Blog contribute to this story? Let's see.

* * *
A Siemens / Jefferson Link? Meanwhile, a story in the Dec. 24 edition of Harper's Magazine by Ken Silverstein refers to the earlier joint ProPublica/New York Times story about Siemens, and then says: "Now ProPublica has asked for help identifying some of the alleged recipients of the bribes who are described but not named in the SEC complaint. One of those people appears to be Jennifer Atiku-Abubakar, who is tied to the scandal involving the former Louisiana congressman William Jefferson and is also a donor to the Republican Party. But I want to emphasize that I have no way of knowing whether the charges made in the complaint about her are accurate. . . . According to this Washington Post story, she is the wife of Atiku Abubakar, the very controversial former vice president of Nigeria from 1999 to 2007."
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