Will Nigeria Take Another Bite?

By Marcus Cohen, David Elesinmogun & Obumneme Egwuatu

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…

Multi-million dollar FCPA settlements based on bribery of Nigerian government officials have become commonplace in recent years, but only a tiny fraction of those penalty dollars are assessed by the Nigerian government.  In fact, the total amount of fines levied by the Economic and Financial Crimes Commission (EFCC), the body charged with prosecuting corruption cases in Nigeria, equates to less that 4% of the total penalties fines imposed by the United States, Germany, and the United Kingdom. (See the “Corruption Penalty Comparison Chart” below.) 

But should corporations that have already doled out tens of millions to the U.S. Department of Justice for violations of the Foreign Corrupt Practices Act (FCPA) really be concerned that the EFCC is going to take another bite?

The Nigerian people are the most direct victims of corrupt payments by foreign corporations.  In a recent statement, the Socio-Economic Rights and Accountability Project (SERAP), a non-profit Nigerian NGO, noted that bribery by foreign corporations “has caused immense damage and devastation to the economy and to institutions of governance, and directly undermined the full and effective enjoyment of internationally recognized human rights, especially economic, social and cultural rights by the citizens.

To redress this disparity, SERAP petitioned the EFCC on August 2 to ensure that multinational corporations pay commensurate damages to the Nigerian people for the foreign bribery committed in the country.  Specifically, SERAP’s petition demands that the EFCC “urgently take steps to seek adequate damages and compensation against multinational corporations who have been found guilty in the US of committing foreign bribery in Nigeria and to take all necessary steps to effectively bring to justice the Nigerian officials complicit in such cases of bribery.”  However, fears that the EFCC will suddenly seek millions in penalties from corporations that have already settled with the DOJ may be premature.

Apart from the public remonstrations of SERAP, there has been little outcry in Nigeria for bribery penalty parity.  The issue has gained little attention from either Nigerian government officials or in the press; which may be based on shrewd political and economic considerations.  Many Nigerians, both those serving in public office as well as those on the street, may not want to pursue multinational corporations already dinged for FCPA violations.  The underlying concern being that additional penalty demands by the EFCC may scare off foreign companies willing to invest in Nigeria.  Halliburton and Siemens continue to have a significant business presence in Nigeria, notwithstanding imposition of colossal penalties by the U.S, Germany, and Nigeria.  However, other multinational corporations may not stomach additional fines.

SERAP eloquently avers that the penalty disparity violates the fundamental provisions of the United Nations Convention against Corruption, ratified by Nigeria seven years ago.  Article 35 of the Convention provides that persons who have suffered damage as a result of an act of corruption have the right to adequate damages and compensation.  However, simply because the Nigerian government has the right to seek damages does not equate to a political wiliness to do so.  Further penalization of multinational companies may lead to corporate flight – the resulting loss of jobs ultimately, if unintentionally, punishing the Nigerian people.

Corruption Penalty Comparison Chart

Multinational Corp	Non-Nigerian Penalty Amt.	Nigerian Penalty Amt.
Siemens AG	$800M (US) & €796M (DE)	$46M
Halliburton/KBR	$727M (US)	$35M
Snamprogetti/ENI SpA	$365M (US)	$32.5M
JGC Corp	$218.8M (US)	$28.5M
Royal Dutch Shell	$48.2M (US)	$10M
Technip SA	$338M (US)	$0
Panalpina	$82M (US)	$0
Pride International	$56.1M (US)	$0
Willbros International	$41M (US)	$0
Tidewater Inc	$20.6M (US)	$0
Shell Nigerian Exploration	$18M (US)	$0
MW Kellogg (KBR)	£7M (UK)	$0
Noble Corp	$8.1M (US)	$0
Total Penalty Amt:	$3.87B	$152M

Marcus Cohen is of Counsel to Sandler, Travis & Rosenberg in Washington DC, where he advises clients on compliance with U.S. and international anti-corruption measures and export controls and sanctions laws. He can be reached at mcohen@strtrade.com.

David Elesinmogun and Obumneme Egwuatu are founding partners of Elesinmogun & Egwuatu, with offices in Lagos, Nigeria, and Washington DC. Elesinmogun's practice focuses on advising both Nigerian and international corporations in cross-border commercial ventures, banking, criminal law, securities regulation, environmental law and immigration. Egwuatu concentrates his practice on advising multinational corporations on investing in Nigeria and Africa and compliance with both Nigerian and U.S. law. They can be reached, respectively, at de@eandelawyers.com and oe@eandelawyers.com.

Recent Cases, Foreign Companies Dominate New Top Ten

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

Paris-based Alcatel-Lucent is the latest addition at number seven, knocking Shell's November 2010 Panalpina-related enforcement action off the list. 

The current top ten are:

1. Siemens (Germany): $800 million in 2008.

2. KBR / Halliburton (USA): $579 million in 2009.

3. BAE (UK): $400 million in 2010.

4. Snamprogetti Netherlands B.V. / ENI S.p.A (Holland/Italy): $365 million in 2010.

5. Technip S.A. (France): $338 million in 2010.

6. Daimler AG (Germany): $185 million in 2010.

7. Alcatel-Lucent (France): $137 million in 2010.

8. Panalpina (Switzerland): $81.8 million in 2010.

9. ABB Ltd (Switzerland): $58.3 million in 2010.

10. Pride (USA): $56.1 million in 2010.

Just six months ago, the top-ten list included four older cases -- all involving U.S. companies -- that have now dropped off. They were Baker Hughes from 2007, Willbros from 2008, Chevron from 2007, and Titan Corporation from a distant 2005.

[Editor's note: the most recent list is here.]

Compliance And Enforcement: By The Book

The case made headlines last month when seven companies settled FCPA-related charges for $236.5 million dollars. 

Logistics company Panalpina was named, along with its customers Shell, Transocean, Pride, Tidewater, Noble, and GlobalSantaFe.

There was no mentioned, however, of another Panalpina customer from the oil-and-gas services industry --  Global Industries. It was named in the first reports from 2007 about the case but disappeared from the story. Why?

Because for Global Industries, the case had a different ending.

The company suspected problems with Panalpina even before the Vetco Gray case -- which triggered the investigations into Panalpina -- was announced. Once alerted to the potential problems, the company took immediate action through its executive management and board of directors. Outside FCPA counsel was hired and the matter was self-disclosed to the DOJ and SEC. The board of directors authorized, and the company and outside counsel conducted, a thorough internal investigation of its operations in West Africa and turned the results over to the government.

In March, Global Industries announced that, "Early this year, representatives of the Securities and Exchange Commission and the Department of Justice informed the Company that each agency had concluded its FCPA investigation. Neither agency recommended any enforcement action or the imposition of any fines or penalties against the Company."

How did Global achieve that result?

Its general counsel and director of compliance gave these reasons:

• Historical evidence of a strong FCPA compliance program

• Global’s internal controls identified the FCPA issues

• Management took prompt and effective action

• Implementation of an enhanced compliance program

• Thorough investigation and cooperation with the enforcement authorities

What's the lesson?

The general counsel told us: "Having gone through a two-and-a-half year investigation has been an eye opener. But it proved to us that a good compliance program does help, not only to identify potential problems when they arise, but also when you're in front of the DOJ and SEC."

Kudos to Global Industries, and to the DOJ and SEC.

In New Top Ten, Eight Are Foreign

Following yesterday's seven-party settlement, Panalpina, Pride, and Shell join the top ten FCPA cases of all time, coming in at numbers seven, nine, and ten respectively.

Dropping off the list are Willbros, Chevron, and Baker Hughes.

Eight of the top ten (numbers 3 through 10) are from this year.

And amazingly, eight now involve foreign companies.

(Earlier this year, Paris-based Alcatel-Lucent said it will pay $137.4 million in a settlement agreed in principle with the DOJ and SEC.)

The current top ten FCPA-related settlements of all time are:

1. Siemens (Germany): $800 million in 2008.

2. KBR / Halliburton (USA): $579 million in 2009.

3. BAE (UK): $400 million in 2010.

4. Snamprogetti Netherlands B.V. / ENI S.p.A (Holland/Italy): $365 million in 2010.

5. Technip S.A. (France): $338 million in 2010.

6. Daimler AG (Germany): $185 million in 2010.

7. Panalpina (Switzerland): $81.8 million in 2010.

8. ABB Ltd (Switzerland): $58.3 million in 2010.

9. Pride (USA): $56.1 million in 2010.

10. Shell (UK/Holland): $48.1 million in 2010.

Editor's note: This post was updated here.

Seven Companies Settle For $236.5 Million (Updated)

Making history today for the most companies to simultaneously settle FCPA-related violations, Global logistics firm Panalpina and five of its oil-and-gas services customers resolved charges with the DOJ and SEC, and another customer settled with the SEC only.

The companies will pay $156.5 million in criminal fines and about $80 million in civil disgorgement, interest and penalties.

Panalpina. Switzerland-based Panalpina World Transport (Holding) Ltd. and its U.S.-based subsidiary, Panalpina Inc., bribed foreign officials on behalf of customers for customs clearance. Between 2002 and 2007, Panalpina said it paid "thousands of bribes totaling at least $27 million . . . in at least seven countries, including Angola, Azerbaijan, Brazil, Kazakhstan, Nigeria, Russia and Turkmenistan."

The DOJ charged Panalpina World Transport with conspiring to violate and violating the anti-bribery provisions of the FCPA. The company entered into a deferred prosecution agreement.

Panalpina Inc. was charged with conspiring to violate the books and records provisions of the FCPA and with aiding and abetting customers in violating the books and records provisions of the FCPA.

The Panalpina companies were fined $70.5 million.

In its SEC settlement, Panalpina Inc. agreed to pay $11.3 million in disgorgement of profits.

Panalpina's $81.8 million settlement, Pride's $56.1 million deal, and Shell's $48.1 million settlement (discussed below) land them all in the top ten FCPA settlements of all time.

Shell. SNEPCO, a Nigerian subsidiary of Royal Dutch Shell plc , was charged with conspiring to violate the antibribery and books and records provisions of the FCPA, and with aiding and abetting a violation of the books and records provisions. SNEPCO paid $2 million to its subcontractors knowing some or all of the money would be paid as bribes to Nigerian customs officials by Panalpina to import materials and equipment into Nigeria.

Shell entered into a deferred prosecution agreement and will pay a $30 million criminal penalty. 

In their SEC settlement, Royal Dutch Shell and U.S. subsidiary Shell International Exploration and Production Inc. agreed to pay $18.1 million in disgorgement of profits and prejudgment interest

Transocean. The DOJ charged a Caymans Island subsidiary of Swizerland-based Transocean Ltd. with conspiring to violate the antibribery and books and records provisions of the FCPA, violating the anti-bribery provision of the FCPA, and aiding and abetting the violation of the books and records provisions of the FCPA.

The company paid about $90,000 in bribes through its freight forwarding agents to clear drill rigs through customs.

Transocean entered into a deferred prosecution agreement and will pay a $13.4 million criminal penalty.

In its SEC settlement, Transocean agreed to disgorge $7.2 million in profits and prejudgment interest.

GlobalSantaFe. In a related SEC enforcement action, GlobalSantaFe Corp., which in 2007 merged with a subsidiary of Transocean Inc. to later form Transocean Ltd, agreed to pay $5.9 million to resolve civil antibribery and record keeping and internal controls violations. 

Tidewater. A Cayman Island subsidiary of New Orleans-based Tidewater Inc. was charged with conspiring to violate the antibribery and books and records provisions of the FCPA, and with violating the books and records provisions of the FCPA.

The company paid $160,000 in bribes through its employees and agents to tax inspectors in Azerbaijan to improperly secure favorable tax assessments. It also paid $1.6 million through Panalpina to Nigerian customs officials to clear vessels into Nigerian waters.

Tidewater entered into a deferred prosecution agreement and will pay a $7.35 million criminal penalty.

In its SEC settlement, Tidewater Inc. agreed to pay $8.3 million in disgorgement of profits, prejudgment interest and civil penalties.

Pride. Houston-based Pride International Inc. and a French subsidiary paid $800,000 in bribes directly and indirectly to government officials in Venezuela, India and Mexico. The bribes were paid to extend drilling contracts for three rigs operating offshore in Venezuela, to secure a favorable decision relating to a customs dispute for a rig imported into India, and to avoid the payment of customs duties and penalties relating to a rig and equipment operating in Mexico.

Pride was charged with conspiring to violate the antibribery and books and records provisions of the FCPA, violating the anti-bribery provisions of the FCPA, and violating the books and records provisions of the FCPA.

Pride International entered into a deferred prosecution agreement but did not pay any criminal penalties. During the course of the investigation, the DOJ said, Pride "provided information and substantially assisted in the investigation of Panalpina."

Its French subsidiary, Pride Forasol, was charged with conspiring to violate the anti-bribery provisions of the FCPA, violating the anti-bribery provisions of the FCPA, and aiding and abetting the violation of the books and records provisions of the FCPA.

Pride Forasol paid a $32.6 million criminal penalty.

In its SEC settlement, Pride International agreed to pay $23.5 million in disgorgement of profits and prejudgment interest.

Noble. Noble Corporation, organized in Switzerland, paid $74,000 to a Nigerian freight forwarding agent, knowing that some of the payments would be passed on as bribes to Nigerian customs officials. It  falsely recorded the bribe payments as legitimate business expenses in its corporate books.

Noble received a non-prosecution agreement and will pay a $2.59 million criminal penalty.

The DOJ said Noble's non-prosecution agreement recognizes the firm's "early voluntary disclosure, thorough self-investigation of the underlying conduct, full cooperation with the department and extensive remedial measures undertaken by the company. As a result of these factors, among others, the department agreed not to prosecute Noble or its subsidiaries for the bribe payments, provided that Noble satisfies its ongoing obligations under the agreement."

In its SEC settlement, Noble Corporation agreed to pay $5.5 million in disgorgement of profits and prejudgment interest.

___________________

View the DOJ's November 4, 2010 release here.

Download the SEC's civil complaints against Panalpina here, Shell here, Noble here, Tidewater here, Pride here, Transocean here, and GlobalSantaFe here.