Search

Editors

Richard L. Cassin Publisher and Editor

Andy Spalding Senior Editor

Jessica Tillipman Senior Editor

Elizabeth K. Spahn Editor Emeritus

Cody Worthington Contributing Editor

Julie DiMauro Contributing Editor

Thomas Fox Contributing Editor

Marc Alain Bohn Contributing Editor

Bill Waite Contributing Editor

Shruti J. Shah Contributing Editor

Russell A. Stamets Contributing Editor

Richard Bistrong Contributing Editor 

Eric Carlson Contributing Editor

Bill Steinman Contributing Editor

Aarti Maharaj Contributing Editor


FCPA Blog Daily News

Entries in Serious Fraud Office (246)

Thursday
Apr172008

The Week In Review

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.

Wednesday
Apr162008

SFO Chief Calls For US-Style Reforms

U.K.-based Ethical Corporation magazine has just released its 2008 anti-corruption special report. The 22-page publication (available by request here) is packed with Foreign Corrupt Practices Act compliance advice, descriptions of best practices from GE and others, and lots of news and analysis about enforcement trends.

It's all great content from this first-class publisher and compliance-event organizer (they draw a staggering 75,000 visitors a week to their website). But what caught our eye is managing editor John Russell's interview with U.K. Serious Fraud Office director Robert Wardle, who leaves his post at the SFO on April 21.

Wardle was interviewed before the High Court ruled last week that his decision to stop an investigation into BAE over the Al-Yamamah arms deal with Saudi Arabia was unlawful. He was criticized for his role by the High Court, which said: "It is the failure of government and the defendant [Wardle] to bear that essential principle in mind that justifies the intervention of this court."

In the interview, Wardle makes it clear that the U.K.'s anti-corruption effort needs to be reformed before it can be effective. That's apparent, given that the Serious Fraud Office, the U.K. body that investigates and, where possible, prosecutes U.K. companies or indi­viduals for corruption, hasn't brought a single prosecution after more than ten years of the U.K. having been party to the OECD Convention on Combating Bribery of Foreign Public Officials. How should the U.K. reform its anti-corruption efforts? By being more like the United States and its Foreign Corrupt Practices Act, Wardle says.

"[T]he UK should further emulate the US," Wardle says, "by making use of plea-bargaining agreements, which grant suspects in corruption cases a reduced sentence in exchange for their co-operation. He believes that there should be a specific accounting rule prohibiting companies from taking steps to cover up suspicious trans­actions, like the books and records provision of the FCPA. He explains: 'We would benefit if companies knew it would be a specific criminal offence to conceal bribes.' Wardle would also like to see UK companies face greater liability for crimes committed by their employees. 'We should be looking at making a company responsible when a reasonably senior manager has been responsible for the offence or the payments,' he says."

Wardle ends his frustrating tenure at the SFO lamenting that U.K. companies still lack sufficient deterrents to bribing foreign public officials. He says: "One of the problems we have is that companies need to know that there is a price to be paid for corruption overseas."

Without doubt, American companies -- still waiting to see a level playing field for global anti-corruption enforcement -- will share Wardle's hope for long over-due reforms in the U.K.

Tuesday
Apr152008

All The News That Fits The Prince

Hurrays all around for the British High Court's ruling last week. It said the Serious Fraud Office broke the law last year when, under irresistible pressure from the Blair government, it dropped an investigation into alleged bribes from British defense contractor BAE to Saudi Prince Bandar. Whenever the rule of law wins a big one, which it surely did in London last week, there's something to cheer about.

The SFO's decision to stand down was a travesty. It seemed clear at the time that had the investigation continued, it would have confirmed that BAE secretly paid £1 billion to Prince Bandar in return for inside help selling Typhoon jet fighters to the Saudi government; that the money moved irregularly from American banks to accounts in Switzerland; and that the prince, who was once Saudi Arabia's ambassador to Washington, shared the largess with other Saudi officials. According to reports, the prince didn't bother to deny what had happened, only that neither he nor BAE had broken any laws -- notwithstanding British prohibitions on international public bribery, Swiss money laundering concerns, and the application of the U.S. Foreign Corrupt Practices Act.

While shutting down the investigation was a shocking development -- and although Mr. Blair said vaguely that the reason was the U.K.'s national security -- the case still seemed to be just the latest international corruption saga, albeit on a grand scale and played out in the public eye. But then in mid February this year, things took a sinister turn.

At a High Court hearing in London contesting the SFO's scuttling of the investigation, a two-judge panel, according to the Guardian newspaper, "heard unchallenged allegations that it was Prince Bandar, the alleged beneficiary of £1bn in secret payments from the arms giant BAE, who threatened to cut off intelligence on terrorists if the investigation into him and his family was not stopped. Investigators said they were given to understand there would be 'another 7/7' and the loss of 'British lives on British streets' if they carried on delving into the payments. The government argued . . . that these threats were so 'grave' and put Britain's security in such 'imminent' threat that the head of the Serious Fraud Office had no option but to shut down his investigation immediately."

It sounded way too . . . sensational, a silly plot twist in a B-movie where everyone in sandals is a bad guy. But last week Lord Justice Moses and Justice Sullivan confirmed the worst. The threats were real, they said; the U.K. government didn't dispute the facts. Speaking of the prince's message and the government's reaction to it, the justices said: "Had such a threat been made by one who was subject to the criminal law of this country, he would risk being charged with an attempt to pervert the course of justice. . . . So bleak a picture of the impotence of the law invites at least dismay, if not outrage."

The editors of the Wall Street Journal said this: "Mr. Blair has eloquently argued on other occasions that bringing democratic institutions to the Middle East is a vital part of fighting Islamic terrorism. In stopping the BAE case, his administration missed a perfect opportunity to show the Saudis that one of the foremost of these institutions is the rule of law -- and that neither justice nor human lives should be toyed with for expediency's sake."

The Journal's sentiment is right, of course, but it makes a molehill out of a mountain. This case is about a lot more than a missed opportunity to show the Saudis the benefits of the rule of law. It's about the enormous chasm that separates the West and one of its touted in situ allies in the war on terror. It's about oil-importing countries being vulnerable to political blackmail. It's about the agenda in Iraq and the region and whether any of it makes sense in light of the self-interests of the local regimes.

But coming back to our bailiwick, the British High Court said it will issue orders for action later. In the U.S., the Justice Department is running its own investigations into BAE and Prince Bandar, who incidentally has retained for his defense Freeh Group International, among whose partners are former FBI director Louis Freeh, former head of enforcement at the SEC Stanley Sporkin, and retired British High Court judge Sir Stephen Mitchell.

What will happen with this case in London and Washington in the coming months? We have no idea. But either we'll all discover along with the Saudis that the West does in fact have the political will to enforce the rule of law when it comes to international public corruption. Or we'll see, as the High Court lamented, a sad capitulation and the awful impotence of the law.

View prior posts about BAE and Prince Bandar here.

Wednesday
Apr092008

British High Court Slams Decision To Drop BAE Investigation

The U.K. Guardian reports today (here) that the British High Court has ruled in scathing language that the decision by the Serious Fraud Office to drop an investigation into bribery allegations involving BAE Systems and Saudi Prince Bandar was improper. The court said it will issue orders for further action later.

For anyone new to this story, British defense contractor BAE Systems is accused of paying £1 billion to the former Saudi ambassador to the United States, Prince Bandar (who allegedly passed money to other officials), in return for help selling Typhoon jet fighters to the Saudi government. The Serious Fraud Office started an investigation but Prime Minister Tony Blair shut it down last year, citing national security. Meanwhile, the U.S. Department of Justice picked up the investigation and started gathering evidence about possible Foreign Corrupt Practices Act violations directly from British witnesses. Both BAE and Prince Bandar have denied violating any laws.

The SFO's decision to drop its investigation was challenged earlier this year in court by public interest groups. The High Court in London heard in mid February "unchallenged allegations that it was Prince Bandar, the alleged beneficiary of £1bn in secret payments from the arms giant BAE, who threatened to cut off intelligence on terrorists if the investigation into him and his family was not stopped. Investigators said they were given to understand there would be 'another 7/7' and the loss of 'British lives on British streets' if they carried on delving into the payments. The government argued . . . that these threats were so 'grave' and put Britain's security in such 'imminent' threat that the head of the Serious Fraud Office had no option but to shut down his investigation immediately."

In the lead up to February's High Court hearings, the Guardian almost single-handedly kept the story alive. Here are excerpts from today's report:

_______________

In a stunning victory for the activist groups that launched the legal challenge, the two judges said Tony Blair's government and the SFO caved in too readily to threats by Saudi Arabia over intelligence sharing and trade.

In an often scathing judgement, Lord Justice Moses and Justice Sullivan rejected the SFO's argument that it was powerless to resist the Saudi threats.

"So bleak a picture of the impotence of the law invites at least dismay, if not outrage," they said.

"Had such a threat been made by one who was subject to the criminal law of this country, he would risk being charged with an attempt to pervert the course of justice."

To give in so easily, the judges said, "merely encourages those with power, in a position of strategic and political importance, to repeat such threats, in the knowledge that the courts will not interfere with the decision of a prosecutor to surrender".

Campaign Against Arms Trade (CAAT) and Corner House Research had sought a review of the decision by the SFO director, Robert Wardle, in December 2006 to drop the investigation into allegations of bribery and corruption over the £43bn Al-Yamamah arms deal, signed in 1985.

"No one, whether in this country or outside, is entitled to interfere with the course of our justice," Moses and Sullivan ruled. . . .

The judges ruled that the SFO decision was unlawful but made no formal orders for further action - something they will consider at a further hearing. It is believed the most likely course will be that the SFO will have to reconsider its decision.

They had harsh words for the attitude of the SFO and the Blair government in never even considering the option of telling the Saudis their threats would be ignored.

"No-one suggested to those uttering the threat that it was futile, that the United Kingdom's system of democracy forbad pressure being exerted on an independent prosecutor whether by the domestic executive or by anyone else; no-one even hinted that the courts would strive to protect the rule of law and protect the independence of the prosecutor by striking down any decision he might be tempted to make in submission to the threat."

At a two-day hearing in February, lawyers for CAAT and Corner House argued that the SFO dropped its investigation due to Saudi Arabian pressure that amounted to diplomatic blackmail.

Blair, the then prime minister, said the Saudis had privately threatened to cut intelligence cooperation over terrorism unless the inquiry was stopped.

The government did not dispute this version of events, the judges noted in their ruling.

They decided that Wardle "was required to satisfy the court that all that could reasonably be done had been done to resist the threat", and said: "He has failed to do so." . . .

David Leigh, the Guardian's investigations editor, said: "The Guardian unearthed and published the facts about BAE's dealings with Saudi Arabia as long ago as 2004. We passed our evidence to the SFO, who embarked on a long inquiry.

"Recently we also decided to name Prince Bandar as the recipient of £1bn from BAE. We are very pleased that today's high court judgment vindicates all the work the Guardian has done in the public interest to expose this scandal."

The judges were told Prince Bandar, a Saudi national security adviser allegedly involved in the bribery, was behind threats to hold back information about potential suicide bombers and terrorists. . . .

__________________

View prior posts about BAE and Prince Bandar here.

Sunday
Feb242008

BAE And Prince Bandar Stay In The News

In mid-February the British High Court heard how Saudi Arabia threatened to end all anti-terrorism cooperation with the U.K. unless the Blair government quashed an investigation into alleged corruption. A social justice advocacy group called the Campaign Against Arms Trade and the Corner House has alleged that the government acted unlawfully in December 2006 when it told the Serious Fraud Office to stand down. After two days of hearings, the court is now considering whether to order the SFO to re-open its examination into BAE System's alleged illegal payments to Saudi Arabian officials in exchange for the sale of jet fighters.

The U.K. Guardian reported that the two-judge High Court panel "heard unchallenged allegations that it was Prince Bandar, the alleged beneficiary of £1bn in secret payments from the arms giant BAE, who threatened to cut off intelligence on terrorists if the investigation into him and his family was not stopped. Investigators said they were given to understand there would be 'another 7/7' and the loss of 'British lives on British streets' if they carried on delving into the payments. The government argued . . . that these threats were so 'grave' and put Britain's security in such 'imminent' threat that the head of the Serious Fraud Office had no option but to shut down his investigation immediately."

The U.K. government's decision to end the investigation drew criticism from the OECD and apparently spurred Swiss authorities to look into possible breaches of anti-money laundering laws and American prosecutors to examine whether there were violations of the Foreign Corrupt Practices Act. Both BAE and Prince Bandar have denied breaking any laws.

Meanwhile, the Associated Press reported on February 9 that a United States federal district court has temporarily blocked Prince Bandar -- the former Saudi ambassador to the United States and now head of Saudi Arabia's National Security Council -- from removing real estate sales proceeds from the U.S. pending resolution of a class-action lawsuit. "The suit filed last September by a tiny Michigan city retirement system accuses current and former directors of BAE Systems PLC, a giant British defense company, of breaches of fiduciary duties in connection with $2 billion or more in alleged illegal bribes paid to Bandar in connection with an $86 billion BAE arms sale to Saudi Arabia in 1985. Bandar also is named as a defendant in the suit, along with the former Riggs Bank of Washington and its successor, PNC Financial Group. BAE and Bandar have strongly denied that illegal payments were made to Bandar."

The AP story said U.S. District Judge Rosemary M. Collyer issued "a temporary restraining order, signed Feb. 5, that the suit by the City of Harper Woods Employees' Retirement System raises serious questions of law that warrant a temporary order keeping Bandar from taking the proceeds of real estate sales out of U.S.-based accounts. . . . The retirement system suit maintains that Bandar used funds illicitly obtained from BAE Systems to acquire U.S. real estate, including a Colorado ranch and mansion once placed on the market at $135 million and the former William Randolph Hearst mansion in California, offered for sale last summer at $165 million."

The same AP story reported developments in the U.K. this way: "In London, lawmakers disclosed last month that Britain's head of overseas intelligence had warned that Saudi Arabia probably would stop sharing vital information on terrorism if prosecutors pursued an investigation into alleged corruption in the arms deal. MI6, Britain's overseas intelligence service, believed Saudi Arabia would probably end information-sharing with Britain if investigators continued the inquiry, former Attorney General Peter Goldsmith told the committee. MI6 raised objections to the prosecution before Britain's Serious Fraud Office decided to end the case, he said."

View the February 16, 2008 report from the Guardian here.

View the February 9, 2008 report from the Associated Press here.

View prior posts about BAE Systems here.

Sunday
Dec092007

Enforcement Sans Frontières

By most counts, U.S. authorities are now investigating between 50 and 60 companies for possible violations of the Foreign Corrupt Practices Act. That's a record number. How many of them will face enforcement actions is anyone's guess. But three investigations worth watching have this in common: the targets are industry-leading multinationals headquartered outside the United States. The U.S. government hasn't said much about the cases, but the message seems clear: if other countries won't police their corporate citizens, American authorities will do it for them -- at least when it comes to international public corruption.

Panalpina (Switzerland) -- In February 2007, the Department of Justice said in connection with the Vetco case that bribes in Nigeria "were paid through a major international freight forwarding and customs clearance company to employees of the Nigerian Customs Service . . .” Since then, about a dozen leading oil and gas services companies have announced FCPA investigations resulting from their relationship with logistics leader Panalpina. By mid year, the DOJ and the Securities and Exchange Commission had extended the investigation into Panalpina's activities in Nigeria, Kazakhstan and Saudi Arabia, and had sent letters to its customers, “asking them to detail their relationship with Panalpina . . . ." Schlumberger, Tidewater, Nabors Industries, Transocean, GlobalSantaFe Corp., Noble Corp. and Global Industries are among those involved. In September, Panalpina said it is cooperating with U.S. prosecutors and exiting the Nigeria logistics and freight forwarding market for all oil and gas services customers. With crude prices near triple digits, can the U.S. government afford to cripple output anywhere in the name of FCPA enforcement? Probably not. But the DOJ may have made special arrangements directly with the Nigerian government for customs clearance and permitting on behalf of the oil services companies. That will allow them to keep working but still comply with the FCPA. Meanwhile, the investigation of Panalpina continues. Prior posts about Panalpina are here.

Siemens (Germany) -- In early October 2007, the German engineering and industrial giant settled global corruption charges with Munich prosecutors. Siemens paid a fine of €201 million and at the time admitted to questionable payments around the globe of approximately €420 million. But the settlement didn't resolve the FCPA investigation by U.S. authorities, and Siemens later disclosed that its internal review, run by a U.S. law firm, has identified questionable payments of up to €1.3 billion. The company is also facing possible charges of public corruption in Italy, China, Hungary, Indonesia and Norway. When Siemens finally reaches a deal with U.S. prosecutors, it will likely pay the highest penalties ever for FCPA offenses. The current record of $44.1 million is held by Baker Hughes. Prior posts about Siemens are here.

BAE Systems (United Kingdom) -- The defense contractor is accused of paying £1 billion to Prince Bandar (who allegedly passed money to other officials) in return for help selling Typhoon jet fighters to the Saudi government. The Serious Fraud Office started an investigation but Prime Minister Tony Blair shut it down last year, citing national security. That darkened the OECD's tenth anniversary celebration of its Anti-Corruption Treaty, to which the United Kingdom is a signatory. Meanwhile, the U.S. Department of Justice picked up the investigation and started gathering evidence about possible FCPA violations directly from British witnesses. The U.K. government has already complained about U.S. investigative tactics. And Prince Bandar has lawyered up big time -- retaining Freeh Group International, whose partners include former FBI director Louis Freeh, former head of enforcement at the SEC Stanley Sporkin, and a retired British high court judge, Sir Stephen Mitchell. Prior posts about BAE are here.

Page 1 ... 17 18 19 20 21