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Entries in Sudan (35)


BNP admits guilt, fined $8.9 billion for U.S. sanctions violations

Jean-Laurent Bonnafé, Chief Executive Officer of BNP Paribas (Image courtesy of Euro Business Media via YouTube)French banking giant BNP Paribas agreed to plead guilty to criminal charges and pay an $8.9 billion penalty for transferring billions of dollars on behalf of blacklisted Sudan, Iran and Cuba, U.S. authorities said Monday.

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BNP Paribas faces penalties for potential U.S. sanctions violations

BNP Paribas has set aside $1.1 billion for a potential settlement with federal and state government agencies that are investigating possible U.S. sanctions violations.

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Weatherford pays $152.6 million for FCPA violations, $100 million for trade sanctions

Weatherford International agreed Tuesday to pay $152.6 million to the DOJ and SEC for FCPA offenses in the Middle East and Africa and violation of the Iraq oil-for-food program.

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Weatherford expects $250 million settlement

Oil field services company Weatherford International said Monday it hopes to finalize a settlement with the U.S. government of FCPA and oil-for-food violations and trading with sanctioned countries for about $250 million.

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Weatherford uncovers 'potential violations' 

Oil field services company Weatherford International Ltd. said in its quarterly filing with the SEC Friday that it has 'uncovered potential violations of U.S. law in connection with activities in several jurisdictions.'

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$4 Billion Lost To Corruption In Southern Sudan

Since 2005, Southern Sudan has collected about $10 billion in oil revenues. The stolen funds would therefore constitute 40% of the country’s oil revenues.

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Good Intentions, Bad Results

Does foreign aid cause corruption? It does, mainly by helping corrupt regimes stay in power. And because corrupt regimes are the most unstable, aid also fuels civil unrest.

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The Bribes Of War

War is not only hell, it's corrupt too. Of the bottom ten countries on Transparency International's 2010 Corruption Perception Index, six have active wars, insurrections, or major civil disturbances.

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A Prince Of Persia

Iran has all the ingredients to be an FCPA minefield. It's big -- 66 million people in an area about the size of Alaska -- and it's the world's 6th largest oil producer. On top of that, it has a corruption problem, ranking near the bottom of the latest Corruption Perception Index -- 168th, tied with Burundi, Equatorial Guinea, Haiti, and Turkmenistan.

But although the country routinely makes world headlines, it's hardly mentioned on the FCPA Blog. Why not?

Iran has been off limits to U.S. companies from around the time the FCPA became law in 1977. The U.S. first imposed sanctions on Iran in 1979. After the takeover of the American embassy in Teheran, President Carter banned  imports of Iranian oil and blocked all transfers of property in the U.S. owned by the Central Bank and Government of Iran. In 1980, he embargoed all U.S. exports to and imports from Iran, and stopped U.S. citizens from traveling or conducting financial transactions there.

Some of those sanctions were loosened after the U.S. hostages were released. But in 1987, President Reagan imposed a new embargo on Iranian-origin goods and services. And in 1995, after Iran was labelled a sponsor of international terrorism, President Clinton again banned U.S. involvement with Iran's oil and gas development. He later confirmed that "virtually all trade and investment activities with Iran by U.S. persons, wherever located, are prohibited," according to the Treasury Department. With some small adjustments, that's how things stand today.

Criminal penalties for violating the U.S. sanctions are stiff -- fines up to $1,000,000 and prison for up to 20 years, four times harsher than the FCPA's penalties.

Even without America's business, Iran was the focus of an important FCPA case. In 2006 the Norwegian company Statoil was hit with DOJ and SEC enforcement actions for bribery and books and records violations. Statoil in 2002 had paid $5.2 million in bribes to a modern-day prince of Persia -- the son of a former president of Iran, and promised to pay $20 million more for access to the giant Pars oil field. The company eventually self-disclosed the payments and paid $3 million to Norwegian prosecutors and $21 million in penalties and disgorgement to the DOJ and SEC (with credit for the $3 million it paid back home).

That was the first FCPA criminal enforcement action against a foreign company -- Statoil is an "issuer," trading on the NYSE under the symbol STO. Its three-year deferred prosecution agreement with the DOJ expired in November 2009.

We could be hearing more FCPA news involving Iran. Last week the Wall Street Journal said the SEC's enforcement and corporation finance divisions have sent letters to several pharmaceutical and energy companies that work in Iran, as well as in Cuba, Sudan, and Syria -- which all appear on the State Department's list of countries that sponsor terrorism. (Some medicines and medical devices are licensed for export from the U.S. to Iran.) The letters reportedly asked the companies, which haven't been named, what they are doing in the four countries to ensure compliance with the FCPA.


Sorry For The Harm

The World Bank last week debarred a U.K subsidiary of Macmillan Publishers for six years (reviewable after three years) after the parent company self-reported to the bank corrupt payments to public officials in Sudan. The bribes were unsuccessful in landing sales of textbooks under the World Bank-administered Sudan Multi-Donor Trust Fund.

The company also announced last week that it self-disclosed the payments to the U.K.'s Serious Fraud Office.

Graft is always bad. In a country like Sudan, its impact is magnified. After 20 years of civil war and lawlessness, Sudan ranks fourth worst on the Corruption Perception Index and third worst on the Failed States Index, trailed only by Somalia and Zimbabwe. Its people can expect to live about 52 years, compared with 62 in Cambodia, 72 in Indonesia, and 82 in Japan. Per capita gross domestic product (purchasing power) for its 41 million people is $2,300 while the world average is $10,500.

Millions there struggle every day for shelter, drinkable water, food, medicines, and education. Public corruption diverts money from basic necessities. It literally takes food off the table and textbooks out of the hands of children.

The World Bank's press release about the debarment was all business but Macmillan's was different, carrying a hint of sadness that was entirely fitting. In her public statement, Annette Thomas, Macmillan's chief executive, did something rare in the business world: she acknowledged the victims of corruption and the harm inflicted on them (even unsuccessful bribes help perpetuate corrupt systems and rulers).

Awareness of that harm was a factor leading to enactment of the Foreign Corrupt Practices Act. Although this case doesn't involve the FCPA, it's a reminder of why the FCPA and laws like it matter.

When A. A. Sommer, Jr. was a commissioner of the SEC in 1976, a year before the FCPA became law, he said: "[T]here are moral problems as well as legal problems that go far beyond simply the question of illegal payoffs to foreign officials. There are questions concerning the role of multi­national corporations, the extent to which they have obligations to the countries in which they conduct their business, the extent to which they should seek to raise the standards of conduct there, the respect which they should show the laws of other countries." Three decades later the once skeptical Wall Street Journal could say the quixotic Foreign Corrupt Practices Act had turned into one of Congress's finer moments.

Corruption ruins millions, maybe billions of lives. Those who say graft is a crime against humanity are more right than the rest of us like to admit. The DOJ, SEC, Serious Fraud Office, and World Bank should use all available tools to pursue and punish those who commit public bribery anywhere. Prosecutors shouldn't be diverted by the weird corporatization of government services that blurs the distinction of who's a "foreign official." And they shouldn't compromise ethics because "black knights" will rush in where honest companies fear to tread. That's a short-term and short-sighted view of the world and the marketplace.

Macmillan didn't say how much it paid Sudanese officials. But a bribe of any size that could have deprived a child of a textbook would be disturbing. CEO Annette Thomas said, "We are deeply shocked to have discovered these issues, and are sorry for the harm that such behaviour will have done."

The World Bank's April 30, 2010 announcement of Macmillan (U.K.) Limited's debarment is here.

Macmillan Publisher's May 6, 2010 announcement is here.


Kleptocrats In Court

The United States fights foreign kleptocrats through Proclamation 7750, by denying them and their families U.S. visas. And through Section 314(a) of the Patriot Act, which it can use to reach out to more than 25,000 financial institutions to find accounts and transactions of anyone who may be involved in laundering kleptocratic assets. But there's nothing the United States can do on its own -- or even with its G-20 allies -- to turn back kleptocracy. Only a truly global program with real teeth can do that. And surprisingly, the framework for it is already in place.

The International Criminal Court (ICC), with its seat in The Hague, came into existence on July 1, 2002. It was created by a treaty called the Rome Statute (available here), which now has 108 State Parties. The ICC is a permanent international criminal court, with the mission to "help end impunity for the perpetrators of the most serious crimes of concern to the international community." The Court isn't part of the United Nations; its funding comes from State Parties, voluntary contributions from governments, NGOs, individuals and corporations.

Under the Rome Statute, the ICC Prosecutor can launch investigations after a referral from any State Party or from the United Nations Security Council. The Prosecutor can also initiate investigations by its own motion. So far, three State Parties -- Uganda, the Democratic Republic of the Congo, and the Central African Republic -- have referred to the Court situations occurring on their territories. And the Security Council referred the crisis in Darfur, Sudan -- a non‐State Party. That resulted in an ICC arrest warrant being issued this month for Sudan's president, Omar Hassan Ahmad Al Bashir, for war crimes and crimes against humanity. It was the first time the ICC had issued an arrest warrant for a sitting head of state.

The Court hasn't been used against kleptocracy, and the Rome Statute as written and currently interpreted might not cover it. But commentators, academics and activists are pressing the case for change.

Law professor and scholar Sonja B. Starr, who has worked inside other international tribunals, argued in a 2007 Harvard Law School working paper (available from SSRN here) that the international prosecution of grand corruption is needed and could be effective. She said that "on average, the richer a country is in natural resources, the poorer most of its citizens are likely to be. In many of those countries rich in oil, diamonds, and gold, most of the population lives in abject poverty, lacking in the most basic health, sanitation, and educational services. Meanwhile, government officials accumulate fabulous personal wealth, as billions of dollars vanish from the state’s coffers. . . The consequence is extreme poverty, and extreme poverty kills. Angola’s life expectancy, for instance, is 36.1 years; one-third of all children die before age five."

But, she said, ICC prosecutions might be the answer. Certainly they would disrupt on-going patterns of grand corruption. Arresting kleptocrats is one way; another is tracing and freezing their assets, a remedy well within the ICC's authority and ability to carry out. Even if the defendants could somehow evade arrest and trial, at least the stolen money that's been frozen couldn't be used to keep a corrupt regime in power or destabilize the region. And, she said, with convictions the ICC could order asset forfeitures, resulting in possible recoveries of huge amounts of looted national wealth. She also argued that referring cases to the ICC would increase transparency and accountability, making it harder for kleptocrats to extract bribes from international companies or use financial institutions to move or hide ill-gotten assets.

Father Gabriel Dolan of Nairobi's Catholic Justice and Peace Commission sees all around him the reasons why kleptocracy is a crime against humanity. He too thinks it should be prosecuted by the ICC:

When families spend their lives in 10 x 10 feet rooms and take three weeks to raise funds to bury their loved ones; when your neighbors are deprived of antiretroviral treatment (ART) because of unaccounted billions from the Global Fund for Aids; when casual workers earn Sh300 [$3.75] for 14-hour days and spend two bob to watch the evening news relay how the grand coalition has robbed them today, then you know that grand corruption is a crime against humanity. When hundreds of thousands cannot access secondary education and the majority are condemned to an early grave then you know the heavens cry out for justice. . . .
What's the downside? Some countries might not like the idea of a potential flood of ICC arrest warrants and prosecutions. Diplomatic tensions could rise, particularly within regional groupings. That already happened inside the African Union after the ICC issued the arrest warrant for Sudan's Al Bashir. His regional neighbors -- many of whom are State Parties and bound to comply with the Rome Statute -- are conflicted. They aren't sure now whether to invite him for dinner or place him under arrest. And some might wonder if putting kleptocrats at risk of international prosecution will encourage them to hold onto power, when they'd otherwise leave office in exchange for domestic amnesty, which the ICC doesn't recognize.

Where does the U.S. stand? As of today, it isn't one of the 108 State Parties to the Rome Statute. Under the Clinton administration, the United States joined the 60 countries that supported the founding of the International Criminal Court. But the Bush administration reversed that policy, citing risks to national sovereignty, and never signed the Rome Statute.

That hasn't stopped support for the ICC from spreading across all regions, however. Among the African countries, for example, State Parties now include: Benin, Botswana, Burkina Faso, Burundi, Central African Republic, Chad, Congo, Democratic Republic of Congo, Comoros, Djibouti, Gabon, Gambia, Ghana, Guinea, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritius, Namibia, Niger, Nigeria, Senegal, Sierra Leone, South Africa, Tanzania, Uganda and Zambia.

Will the new U.S. administration shift its policy toward the ICC, and eventually throw U.S. support behind the prosecution of grand corruption? There's been some talk about it in Washington, but no action. At least not yet.

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This is Part III of Cornering The Kleptocrats (Part I is here and Part II is here) and concludes the series. We gratefully acknowledge the practical help and support received from readers in the United States, Europe, Africa and Asia.

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