The FCPA Blog

Here are the top ten FCPA settlements of all time. If our math is right, the financial penalties (criminal fines, civil disgorgement, and prejudgment interest) add up to $2.8 billion, with almost 50% of that coming from the top two settlements. Five of the top six involve non-U.S. companies. The oldest case on the list is Titan Corporation's from 2005; the newest is Snamprogetti / ENI's from July 7, 2010.

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. Baker Hughes: $44.1 million in 2007.

8. Willbros: $32.3 million in 2008.

9. Chevron: $30 million in 2007.

10. Titan Corporation: $28.5 million in 2005.

The Justice Department on Monday described BAE's $400 million FCPA-related settlement as one of the biggest ever.

Here, by our reckoning, are the other big payouts:

Siemens' $800 million resolution with the DOJ and SEC in December 2008 is the most expensive so far.

Kellogg Brown & Root and Halliburton settled their case last year for $579 million.

Then comes BAE's $400 million payment.

Followed by Baker Hughes' 2007 price tag of $44.1 million.

Willbros paid $32.3 million last year.

Chevron's violations related to the U.N.'s oil-for-food program cost it $30 million, also last year.

Titan Corporation held the record after it paid $28.5 million in 2005 for its FCPA settlement.

Vetco's resolution cost it $26 million in 2007.

Lockheed paid $24.8 million in 1994, the biggest case of its time.

York International spent $22 million last year to end its enforcement action.

Statoil paid $21 million in 2006.

AGCO Corporation paid $19.9 million in 2009 to settle oil-for-food offenses.

AB Volvo's 2008 case settled for $19.6 million.

Novo Nordisk A/S paid $18 million in 2009 to settle oil-for-food offenses.

ABB's violations cost it $16.4 million in 2004.

Schnitzer Steel agreed to pay $15.2 million in 2006.

And Flowserve paid $10.5 million in 2009.

Several cases in the settlement pipeline, if they go as expected, will rank high on the list:

Technip said recently it has reserved €245 million (about $330 million) for a potential settlement of FCPA offenses with the DOJ and SEC for its role in the TSKJ Nigeria joint venture (see KRB / Halliburton above).

Daimler AG reportedly will pay around $200 million for its FCPA settlement.

Alcatel-Lucent said last month it will pay $137.4 million in a settlement that's agreed in principle with the DOJ and SEC.

Pride International, Inc. said it has set aside $56.2 million for an expected settlement with both U.S. agencies.

And Innospec Inc. disclosed last month that it hopes to settle bribery charges related to the U.N.'s oil-for-food program with the DOJ, SEC and the U.K.'s Serious Fraud Office for between $28.8 million and $40.2 million.

Comments about this list and corrections to it are welcome.

FCPA violations: The Justice Department is targeting individuals who pay bribes to foreign officials. Photo by Ken MayerTwo former Willbros managers on Thursday were given jail time for conspiracy to violate the Foreign Corrupt Practices Act. They bribed foreign government officials and employees of state-owned firms to win pipeline work and gain other advantages.

Jim Bob Brown, 48, was sentenced in federal court in Houston to one year and one day in prison and fined $17,500; Jason Edward Steph, 40, was sentenced to 15 months and fined $2,000.

Steph, who once served as general manager of on-shore operations for Willbros International, pleaded guilty in November 2007. He said in his plea that in 2005 he, Brown, and others arranged to pay about $1.8 million in cash to Nigerian officials.

Brown pleaded guilty in September 2006 to conspiracy to violate the FCPA. He and Steph cooperated with the government’s investigation.

Brown said from 1996 to 2004, he and others plotted to negotiate lower Nigerian federal and state taxes in exchange for bribes to revenue officials. And he admitted conspiring to make corrupt payments to officials in the Nigerian court system in exchange for favorable treatment on pending cases. Brown also paid at least $300,000 in bribes to Ecuadorian government officials from PetroEcuador and PetroCommercial in exchange for contracts. The DOJ said all the payments violated the FCPA's antibribery provisions.

In May 2008, Willbros Group and its subsidiary Willbros International paid $22 million and entered into a deferred prosecution agreement with the DOJ to settle criminal FCPA charges in connection with corrupt payments to Nigerian and Ecuadorian officials. Willbros Group also paid $10.3 million (disgorgement of $8.9 million, plus prejudgment interest of $1.4 million) to resolve the SEC's civil enforcement action.

In December 2008, another former executive and an ex-consultant of Willbros International Inc. were charged in the case. Consultant Paul G. Novak, 43, pleaded guilty in November 2009 to conspiracy to violate the FCPA. He's scheduled to be sentenced on February 19. James K. Tillery, 49, a former Willbros International executive, was also charged but remains at large.

In May 2008, the Securities and Exchange Commission charged Steph and former employees Gerald Jansen, Lloyd Biggers, and Carlos Galvez with aiding and abetting Willbros Group's violation of the antibribery, books and records, and internal controls provisions of the FCPA, and knowingly circumventing the FCPA's internal controls and books and records provisions. All four consented to permanent injunctions, with Jansen and Galvez ordered to pay civil penalties of $30,000 and $35,000 respectively. Determination of Steph's civil penalty was deferred pending his sentencing in the criminal case.

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Substantive FCPA violations and conspiracy to violate the FCPA both carry a maximum sentence of five years in prison. Here are some recent FCPA-related sentences:

• In November last year, Frederic Bourke, who was convicted at trial, was sentenced to a year and day in jail for conspiracy.

• David Kay and Douglas Murphy started serving their sentences last year for substantive FCPA violations. They were convicted at trial and sentenced to 37 months and 63 months respectively.

• In April 2009, Virginia-based physicist Shu Quan-Sheng was sentenced to 51 months in prison. He pleaded guilty in November 2008 to one count of violating the Foreign Corrupt Practices Act and two counts of violating the Arms Export Control Act.

• In September 2008, two former executives from telecoms company ITXC Corporation avoided prison. Roger Michael Young was sentenced to five years probation with three months home confinement after he pleaded guilty in July 2007 to violating the FCPA and the Travel Act. Steven J. Ott also pleaded guilty and was sentenced to five years probation with six months in a community confinement center and six months home confinement.

• Also in September 2008, Albert "Jack" Stanley, KBR's former CEO, pleaded guilty to a two-count criminal information charging him with conspiracy to violate the Foreign Corrupt Practices Act and conspiracy to commit mail and wire fraud. He agreed to a seven year jail term with a chance for reduction based on his cooperation. 

• In  April 2008, a former World Bank employee, Ramendra Basu, received 15 months in prison for conspiring to award World Bank contracts to consultants in exchange for kickbacks and for helping a contractor bribe a foreign official. He pleaded guilty to conspiring to commit wire fraud and to violating the FCPA.

A copy of the DOJ's January 28, 2010 release is here.

See our prior posts about Willbros and its personnel here.

A former consultant for a subsidiary of Houston-based Willbros Group Inc. pleaded guilty on November 12 to paying $6 million in bribes to officials who worked in the Nigerian government, in government-owned companies, and in a political party there. Paul G. Novak, 43, pleaded guilty in federal court in Houston to one count of conspiracy to violate the Foreign Corrupt Practices Act and one substantive count of violating the FCPA. He's scheduled to be sentenced on February 19, 2010.

The bribes were intended to help Willbros win and keep contracts for the Eastern Gas Gathering System (EGGS) Project, worth about $387 million. The project was a natural gas pipeline system in the Niger Delta.

Novak, along with alleged co-conspirators James Kenneth Tillery, Jason Steph, Jim Bob Brown and three employees from a German construction company based in Mannheim, Germany, agreed to make the corrupt payments to, among others, government officials from the Nigerian National Petroleum Corporation, the National Petroleum Investment Management Services, a senior official in the executive branch of the federal government of Nigeria, members of a Nigerian political party and officials from the Shell Petroleum Development Company of Nigeria Ltd.

To fund the bribes, Steph and others used a Willbros' subsidiary, Willbros West Africa Inc. (WWA), to enter into agreements with two consulting companies Novak represented. Without providing any services, the consulting companies would invoice WWA and be paid from Willbros' bank account in Houston to accounts in Lebanon. Novak then used money from the Lebanese accounts to bribe the Nigerian officials.

In addition to Novak, two Willbros employees have pleaded guilty in the case and Willbros has entered into a deferred prosecution agreement:

On September 14, 2006, Jim Bob Brown, a former Willbros executive, pleaded guilty to one count of conspiracy to violate the FCPA, for his role in making corrupt payments to Nigerian government officials to obtain and retain the EGGS contract and for making corrupt payments in Ecuador. Brown's sentencing is currently scheduled for January 28, 2010.

On November 5, 2007, Jason Steph, also a former Willbros executive, pleaded guilty to one count of conspiracy to violate the FCPA, for making corrupt payments to Nigerian government officials to obtain and retain the EGGS contract. Steph's sentencing is also scheduled for January 28, 2010. See our post here.

On May 14, 2008, Willbros Group Inc. and Willbros International Inc. entered into a deferred prosecution agreement and agreed to pay a $22 million criminal penalty, for the illegal payments to government officials in Nigeria and Ecuador. See our post here.

James K. Tillery was charged, along with Novak, for his alleged role in the bribery scheme in an indictment unsealed on December 19, 2008. According to the indictment, Tillery was a Willbros employee and executive from the 1980s through January 2005. He remains a fugitive. See our post here.

Download the DOJ's November 12, 2009 release here.

We've mentioned before Dan Newcomb's FCPA Digest, calling it the most definitive publicly-available catalog of FCPA prosecutions, enforcement actions and disclosed investigations. So it's great to see the release of the March 2009 version, available here.

This year, Philip Urofsky becomes editor-in-chief. He told us last week, "In this Digest, we entirely scrapped the previous Trends & Patterns, which had largely become a statistical update, and replaced it with a more analytical piece." The T&P section has always been a favorite of ours, and this year's new-and-improved version (available here) didn't disappoint.

About the prosecution of individuals, for example, it said:

More recently, there is a strong trend of actions against individuals being brought separately or even in advance of charges against their employers and then, in all likelihood, following classic prosecutorial strategy of working up the chain of command, using the individuals to build the government’s case against their superiors and eventually the company. In Willbros, the DOJ charged four employees over a two-year period, with two pleading in previous years (Steph and Brown) and an indictment being returned against two others (Tillery and Novak) in February 2008. Finally, in May 2008, Willbros Group and Willbros International agreed to a deferred prosecution agreement. Similarly, the DOJ entered into a plea agreement with the former CEO of KBR, Stanley, in 2008, well in advance of settling the matter with Halliburton/KBR in early 2009.

And concerning disgorgement, a topic we recently talked about here, it said:

A final trend and pattern worth noting is the SEC’s continued demand for disgorgement of ill-gotten profits in cases in which only books & records violations are charged, such as in the [oil for food] cases. Whether or not a false entry in a company’s books and records (or a failure to implement adequate internal controls) truly results in increased profits is open to question. To date, however, no FCPA defendant has publicly challenged the SEC on whether disgorgement is appropriate when the sole charge is false books and records. Prior to the ABB case in 2004, the SEC had never collected disgorgement in FCPA cases; since then it has sought it in virtually every case with only a few exceptions, such as Dow Chemical, Delta & Pine Land, Lucent, and Conway. In Tyco, the SEC collected $1 in ill-gotten gains (along with $50 million in penalties related to other violations). While this is an isolated example of the SEC seeking such nominal disgorgement, the case does underscore the overall policy of levying disgorgement sanctions in nearly all cases against issuers.

We spend a lot of time in the FCPA Digest. And whenever we turn to it, we're grateful for the hard work and generosity of founding-editor Dan Newcomb, Philip Urofsky and their entire team.
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