The US Securities & Exchange Commission ("SEC") and the US Department of Justice ("DOJ") last week announced settlements with no fewer than seven oil services and freight forwarding companies in connection with charges that the companies had violated the Foreign Corrupt Practices Act by paying millions of dollars in bribes to foreign officials.
The companies involved were Panalpina, Inc., Pride International, Inc., Tidewater, Inc., Transocean, Inc., GlobalSantaFe Corp., Noble Corporation, and Royal Dutch Shell plc. The SEC and DOJ had alleged that the companies had bribed officials in over 10 countries in exchange for preferential customs treatment, extending drilling contracts, influencing customs-related litigation, and obtaining false paperwork, among other violations. In total, the seven companies paid a total of $156.5 million in criminal fines and civil penalties and disgorgement of approximately $80 million.
The largest settlement involved Panalpina, Inc., which is a US subsidiary of Panalpina World Transport (Holding) Ltd., one of the world's largest suppliers of freight forwarding services. Panalpina, Inc. was charged with paying millions of dollars in bribes on behalf of its customers between 2002 and 2007 to government officials in Nigeria, Angola, Brazil, Russia and Kazakhstan in order to obtain favorable customs treatment.
Despite having provided what the DOJ called "exemplary" cooperation with the investigation, the settlement requires Panalpina to disgorge $11.3 million in the SEC matter and to pay a criminal fine of $70.56 million to settle with the DOJ. The scope of the government's investigation and the amounts of the settlements reflect that the SEC and DOJ continue to take a very aggressive approach regarding FCPA violations and they continue to take a tag-team approach to investigating and charging companies that are in their cross-hairs.
Companies with operations in countries in which bribery is prevalent should take a cue from Panalpina. Since the government's investigation began, Panalpina has conducted a comprehensive internal investigation, undertaken risk assessments in all of the countries in which it did business, hired outside consultants to help create an entirely new internal compliance program, terminated relationships with third parties which didn't meet the company's new compliance standards, and closed operations in several countries deemed to be too high-risk. Though Panalpina's actions certainly led to a reduction in the fine they received, the $70.56 million fine that the government was able to extract is a prime example of why companies need to have comprehensive FCPA compliance programs in place before, not after, the government comes knocking.