'Carbon copy prosecutions' change the rules of the game

A recent University of Chicago Legal Forum article looks deep into an important new enforcement trend -- duplicative enforcement actions in multiple countries.

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Will Nigeria Take Another Bite?

The penalty for paying bribes in Nigeria may increase following demands from a Nigerian NGO that the Nigerian government seek its share of the recent anti-graft bounty. Maybe…

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Recent Cases, Foreign Companies Dominate New Top Ten

n the top ten FCPA settlements of all time, eight are now from 2010 and eight also involve non-U.S. companies.

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Compliance And Enforcement: By The Book

Why did one company escape prosecution in the Panalpina case when most of its peers did not? Here's the story.

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In New Top Ten, Eight Are Foreign

With Panalpina, Pride, and Shell joining the top ten FCPA settlements of all time, there are now eight foreign companies on the list.

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Seven Companies Settle For $236.5 Million (Updated)

Global logistics firm Panalpina and six of its oil-and-gas services customers settled FCPA-related charges today with DOJ and SEC.

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Panalpina, Shell Near FCPA Settlements, Paper Says

The Wall Street Journal has reported that Panalpina and its customer Shell may be close to settling FCPA-related charges with the DOJ and SEC.

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GE In $23 Million SEC Settlement

General Electric Company, whose compliance program is among the most respected and admired in the world, has settled civil violations of the Foreign Corrupt Practices Act with the Securities and Exchange Commission.

The company today agreed to pay $23.4 million to resolve claims that arose from a $3.6 million kickback scheme by four GE subsidiaries -- two of which were acquired after the offenses occurred. The kickbacks were paid under the United Nation's oil-for-food program. The GE subsidiaries were selling medical and water purification equipment to the Iraqi government.

The SEC charged GE and two subsidiaries -- Ionics Inc. and Amersham plc -- with civil violations of the books and records and internal controls provisions of the FCPA.

The kickbacks were paid from 2000 to 2003 and were not properly accounted for. They consisted of cash, computer equipment, medical supplies, and services to the Iraqi Health Ministry or the Oil Ministry. GE acquired two of the subsidiaries in 2004 and 2005 and became liable for their securities law violations, including FCPA offenses.

Cheryl J. Scarboro, the head of the SEC's FCPA unit, said: "GE failed to maintain adequate internal controls to detect and prevent these illicit payments by its two subsidiaries to win oil for food contracts, and it failed to properly record the true nature of the payments in its accounting records. Furthermore, corporate acquisitions do not provide GE immunity from FCPA enforcement of the other two subsidiaries involved."

In the SEC settlement, GE was ordered to disgorge $18,397,949 of profits and pay $4,080,665 in prejudgment interest and a penalty of $1 million. GE and subsidiaries Ionics Inc. and Amersham plc agreed not to violate Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934.

The SEC said it has taken 15 FCPA enforcement actions against companies involved in the now discredited U.N. oil for food program and has recovered more than $204 million. The program was intended to provide humanitarian relief for the Iraqi population, which faced hardship under international trade sanctions. It allowed the Iraqi government to purchase humanitarian goods through a U.N. escrow account. The Iraqi government instructed vendors to use middlemen and to inflate prices to fund the kickbacks.

In addition to GE, other companies charged under the oil-for-food program include Chevron, Total SA, AB Volvo, Innospec, Ingersoll-Rand, Akzo-Nobel, and Fiat.

The DOJ did not join the enforcement action against GE or the subsidiaries. It usually prosecutes criminal antibribery offenses under the FCPA, which require payments to foreign officials. In GE's case, the kickbacks apparently went directly to Iraqi ministries and not to government officials.

The SEC said that in settling the case, it "considered remedial acts promptly undertaken by GE and the cooperation the company afforded the Commission staff in its investigation."

View the SEC's July 27, 2010 press release here.

View the SEC's Litigation Release No. 21602 and Accounting and Auditing Enforcement Release No. 3159 (both dated July 27, 2010) in Securities and Exchange Commission v. General Electric Company; Ionics, Inc.; and Amersham plc, Civil Action No. 1:10-CV-01258 (D.D.C.)(RWR) here.

View the SEC civil complaint against GE, Ionics, and Amersham here.

Panalpina Expects Settlement Soon

Swiss logistics giant Panalpina said yesterday it has reserved about $110 million for an expected FCPA settlement with the Justice Department and Securities and Exchange Commission and a seperate antitrust resolution. It said the settlements should happen "in the near future."

The corruption investigation dates back to at least early February 2007. The DOJ noted then in connection with Vetco's FCPA settlement that bribes in Nigeria "were paid through a major international freight forwarding and customs clearance company to employees of the Nigerian Customs Service . . .”

In the following months, about a dozen leading oil and gas-related companies received letters from the DOJ and SEC asking them to "detail their relationship with Panalpina . . . ." Shell, Schlumberger, Tidewater, Nabors Industries, Transocean, GlobalSantaFe Corp., Noble Corp. and Pride International were among those involved.

In July 2007, Panalpina disclosed that some customers of its U.S. subsidiary had “been requested by U.S. authorities to produce documents related to the provision of its services to Nigeria for a specific customer and its contractor. This request was triggered by the plea agreement of such customer with the U.S. authorities for allegedly making improper payments to Nigerian officials to secure preferential customs treatment. . . . U.S. authorities have extended the scope of their review to Panalpina’s documents related to services into Nigeria, Kazakhstan and Saudi Arabia for a limited number of customers.”

In August 2008, Panalpina said compliance concerns had forced it to withdraw completely from the Nigerian domestic market. It had already suspended domestic logistics and freight forwarding services there in September 2007 for all oil and gas-related customers. It said then it was cooperating with the DOJ and SEC in a Foreign Corrupt Practices Act investigation.

Yesterday's full announcement, available here, said:

In view of the advanced stage of the settlement negotiations with the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC), Panalpina has decided to reserve CHF 120 million, an amount anticipated to cover fines, other penalties and legal expenses relating to the settlement of both the U.S. Foreign Corrupt Practices Act (FCPA) and the U.S. antitrust investigations. This amount will be reflected accordingly in the company's 2010 half year financial statements. The finalization of the settlement with the U.S. authorities is expected in the near future. The above reserve does not cover other ongoing, non-U.S. antitrust investigations against the international freight forwarding industry in particular the proceeding launched by the European Commission as Panalpina is unable to predict the amount of any potential fine with certainty.

The company operates through 500 branches in 80 countries with about 13,500 employees worldwide. It serves the rest of the world through local partners.

Panalpina Welttransport (Holding) AG trades on various European exchanges, and in the U.S. OTC pink sheets under the symbol PLWTF.PK.

Special thanks to Marc Alain Bohn for help with this post.

Jack Grynberg Battles On

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.