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.

ABB In, Titan Out

ABB joins the list of top ten FCPA settlements of all time, coming in at number seven. And after a run of five years in the top ten, Titan Corporation drops to number eleven. That means half the top ten cases are now from 2010, and six involve non-U.S. companies.

They are:

1. Siemens: $800 million in 2008.

2. KBR / Halliburton: $579 million in 2009.

3. BAE: $400 million in 2010.

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

5. Technip S.A.: $338 million in 2010.

6. Daimler AG: $185 million in 2010.

7. ABB Ltd: $58.3 million in 2010.

8. Baker Hughes: $44.1 million in 2007.

9. Willbros: $32.3 million in 2008.

10. Chevron: $30 million in 2007.

Editor's note: This post was updated here.

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Who are candidates to join the top ten?

We'd include:

Alcatel-Lucent, which said six months ago it will pay $137.4 million in a settlement agreed in principle with the DOJ and SEC.

Panalpina has reserved about $110 million for an expected FCPA settlement with the DOJ and SEC, and a separate antitrust resolution. In April it said the settlements should happen "in the near future."

Pride International, Inc. said in February it has set aside $56.2 million for an expected settlement with the DOJ and SEC.

The Enforcement Rap Sheet

If the DOJ and SEC are prosecuting corporations instead of individuals for FCPA violations -- an idea raised in another post -- the numbers should show it. So let's take a look.

We'll use figures from Shearman & Sterling's latest FCPA Digest to compare prosecutions from 2005 through 2009. For 2010, we'll use our own numbers.

For all the years examined, a joint enforcement action by the DOJ and SEC against a corporate defendant and any its subsidiaries, or any one individual, is counted one time. For each year, only newly initiated enforcement actions are counted.

In 2005, there were eight corporate enforcement actions and eight individual prosecutions.

In 2006, there were eight corporate and nine individual prosecutions.

In 2007, the start of the modern FCPA era, there were 25 corporate and 17 individual enforcement actions.

In 2008, there were 16 corporate and 18 individual actions.

In 2009, there were 15 new corporate actions and 42 individuals charged, including the 22 shot-show defendants indicted in December 2009.

So far in 2010, our count is 13 new corporate actions and 12 individuals charged.

The combined numbers for 2005 through today show 84 corporate actions and 105 individuals charged.

What does that mean? There's a rough equivalency between corporate and individual actions. In most years the ratio is nearly one-to-one if the 22 shot-show defendants aren't counted. If the shot-show defendants are counted, there are five individual actions for every four corporate actions. And the ratio for each of the years, except the shot-show year of 2009, holds quite steady. The raw numbers, then, don't support the idea that corporate enforcement is gaining the upper hand over individual actions.

But the raw numbers don't tell a crucial fact -- who the individual defendants worked for. If a significant number of them worked for companies that weren't charged, or if multiple defendants worked for the same company, that would mean for many corporate enforcement actions, no individuals from those companies faced FCPA prosecutions.

Here's what we know. There are several cases where two or more individual defendants worked for the same company that was itself an FCPA defendant. Examples would be the eight defendants from Control Components Inc., four from Nexus Technologies, four from Alliance One, and three from Willbros. And there are many cases where the employers of individual defendants weren't charged. Included would be Ports Engineering Consultants Corporation, employer of Charles Jumet and John Warwick, AMAC International, employer of Shu Quan-Sheng, and JD Locator Services, employer of Juan Diaz. That leaves lots of corporate enforcement actions since 2005 where no individuals from those companies have been charged.

Which brings us back to the earlier question: Are corporate settlements replacing the prosecution of individuals from the companies involved in the settlements?

Coming up: A look at the enforcement record in a new way.

Overheard In Hollywood

After Gerald and Patricia Green were convicted last year of one count of conspiring to violate the Foreign Corrupt Practices Act, nine counts of violating the FCPA, and seven counts of money laundering, prosecutors asked for ten-year jail terms. The Greens' lawyers argued for no time behind bars.

In August, and after much delay, Judge George Wu sentenced the husband-and-wife Hollywood movie producers to just six months in jail and six months home confinement. The sentences were among the most lenient for individuals convicted of FCPA and related offenses.

We don't know Judge Wu's reasons for imposing the light jail terms. But here's a fascinating excerpt from a sentencing memo filed by the Greens' lawyers. Regular readers will see familiar arguments from posts here and here (and we continued the discussion in a more recent post here).

Defense counsel said:

The ten highest FCPA settlements ever have occurred within the last five years. . . . Most involve some combination of criminal fines and SEC disgorgement of profits.

These ten cases have monetary penalties totaling approximately $2.8 billion. Of the ten, the six highest occurred within last 20 months and total approximately $2.67 billion.

This trend has begged the question among pundits whether the government’s goal relating to FCPA cases is actually enforcement, or simply putting a price tag on noncompliance. Do these giant financial penalties actually punish and deter the giants or, simply establish a cost of doing business and shield top executives culpable in the most egregious FCPA violations from punishment?

Despite the government’s repeated assertions regarding increased criminal prosecution of individuals and the sentences those individuals receive, such examples are glaringly absent . . . . In fact, of the ten cases listed, only Titan, Willbros, and KBR have resulted in criminal prosecution of individuals potentially resulting in a term of incarceration.

The prosecutors said in a reply brief:

[T]his Court must decline defendants' remarkable invitation to join the wholesale speculation of FCPA "pundits" as to whether corporate settlements are "shielding" top corporate executives from punishment. Aside from being pure conjecture, such a question has no bearing on "the need to avoid unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct." . . . . (citations omitted)

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Our Top Ten post was also cited and linked in the D & O Diary's much anticipated annual event, What to Watch Now in the World of D&O.

Kevin LaCroix wrote:

Indeed, the top ten FCPA settlements collectively total $2.8 billion, but the top six, all of which took place just in the last 20 months, represent 95% of the total. Four of the top six settlements were reached just in 2010. Because of the massive scale of the settlements that the SEC has been achieving in this area, the potential rewards for whistleblowers are enormous.

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Many thanks to all readers, inside the courtroom and elsewhere.

If anyone knows what it means to be called a "pundit" with quotation marks, please let us know. But only if it's flattering, which we somehow doubt.

Graft Buster Enters French Politics

Eva Joly, a Norwegian-born former French magistrate, is running for the French presidency under the Green Party banner.

She became famous across Europe for being a fearless anti-corruption campaigner, even taking on former minister Bernard Tapie and Crédit Lyonnais bank.

Her best-known case involved French oil giant Elf Aquitaine. She uncovered fraud leading to criminal convictions of Elf’s top two executives and to the resignation of Roland Dumas, president of France’s Constitutional Court. She received death threats during the eight-year investigation.

She moved from Norway to France at 18. After working her way through night law school and then practicing law, in 1990 she became an investigating magistrate in Paris.

She's also worked for the Icelandic government, helping it uncover white collar crime that contributed to the country's financial collapse.

Last year, Joly, 66, was elected as a French member of the European Parliament. Now she wants to run for president of France in the 2012 elections.

She told the France24 news site: “I am going into politics because I recognise the limitations of voluntary action … I have a strong desire to improve relations between the developed and developing world. I want to change power structures within society. I am desperate to see a more just and more united society.

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Why say it? It's fashionable these days for critics -- we won't name them -- to say there's no evidence the FCPA has reduced bribery. But saying there's no evidence of crimes not committed isn't exactly, you know, conclusive of anything.

Then again, there's plenty of evidence of less bribery because of the FCPA at companies like Siemens, BAE, Daimler, KBR, ABB, Baker Hughes, Willbros, Chevron, and so on. For us, that's the evidence that counts.

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In whose interests? Great post today from Kevin LaCroix at the D&O Diary -- Do Defendant Companies Financially Underperform Following Securities Lawsuit Settlements?