On November 4, 2010, the Department of Justice (DOJ), and Securities and Exchange Commission (SEC) announced that they have agreed to resolve investigations of Foreign Corrupt Practices Act (FCPA) violations against the following companies:
- Panalpina World Transport (Holding) Ltd.;
- SNEPCO, a Nigerian subsidiary of Royal Dutch Shell plc (aka “Shell”) ;
- Transocean Inc., a Cayman Island subsidiary of Transocean Ltd;
- Tidewater Marine International Inc, a Cayman Island subsidiary of Tidewater, Inc.;
- Pride International Inc. and Pride Forasol S.A.A., a wholly owned French subsidiary of Pride International (aka, “Pride”);
- Global SantaFe Corp.; and
- Noble Corporation.
The DOJ stated that the cases against Panalpina, Shell, Transocean, and Tidewater arose from transactions in which the companies allegedly engaged in a scheme to pay bribes to numerous foreign officials in order to circumvent local rules and regulations relating to the import of goods and materials in foreign jurisdictions, including Angola, Azerbaijan, Brazil, Kazakhstan, Nigeria, Russia and Turkmenistan. To resolve the investigations each company entered into a deferred prosecution agreement with the DOJ that required, among other things, each company to pay a substantial criminal penalty (Panalpina - $70.56 million; SNEPCO - $30 million; Transocean - $13.44 million; and Tidewater - $7.35 million). The companies also agreed to disgorge profits from the transactions in related civil enforcement actions brought by the SEC.
The charges against Pride arose from a transaction in which Pride allegedly paid bribes to government officials in order to extend drilling contracts for rigs operating offshore in Venezuela, to secure a favorable judicial decision relating to a customs dispute for a rig imported to India, and to avoid the payment of customs duties and penalties relating to a rig and equipment operating in Mexico. To resolve the investigation Pride International entered into a deferred prosecution agreement with the DOJ and Pride Forasol agreed to plead guilty to charges that (i) it conspired to violate the anti-bribery provisions of the FCPA, (ii) it violated the anti-bribery provisions of the FCPA, and (iii) it aided and abetted the violation of the books and records provisions of the FCPA. The agreements require the payment of a $32.625 million criminal penalty. Pride also agreed to pay approximately $23.5 million in disgorgement of profits and prejudgment interest in a related civil enforcement action brought by the SEC.
The charges against Noble arose from a transaction in which it paid $74,000 to a Nigerian freight forwarding agent when certain employees knew that some of the payments would be passed on as bribes to Nigerian customs officials. To resolve the investigation the company entered into a non-prosecution agreement with the government requiring, among other things, Noble to pay a $2.59 million criminal penalty. The agreement recognizes Noble’s early voluntary disclosure, thorough self-investigation of the underlying conduct, full cooperation with the department and extensive remedial measures undertaken by the company. Noble also agreed to pay approximately $5.5 million in disgorgement of profits and prejudgment interest in a related civil enforcement action brought by the SEC.
The SEC’s action against Global SantaFe arose from a transaction in which it paid bribes to Nigerian officials in order to obtain paperwork saying its equipment had left Nigerian waters despite the fact that it never moved. To resolve the investigation Global SantaFe agreed to pay a disgorgement of $3.76 million and a penalty of $2.1 million.
Each of the Deferred Prosecution Agreements included an attachment entitled “Corporate Compliance Program.” These attachments articulate DOJ’s current thinking on FCPA “best practices” and provide valuable guidance for companies assessing their current FCPA policies and procedures. Interestingly, DOJ indicates that these new standards are the minimum that companies should employ going forward. The standards require, among other things,
- clearly articulated and visible policies against violations of the FCPA,
- visible corporate support of such policies,
- implementation of compliance standards and procedures designed to reduce FCPA violations, and
- the assignment of responsibility for the implementation and oversight of such policies, standards and procedures to “one or more senior corporate executives.”
To the extent that the use of agents and business partners is permitted at all by companies, they must “institute appropriate due diligence and compliance requirements pertaining to the retention and oversight of all agents and business partners.” These include “properly documented risk-based due diligence pertaining to the hiring and appropriate and regular oversight of agents and business partners,” and informing agents and business partners of the company’s commitment to abide by the prohibitions against foreign bribery, and of the company’s ethics and compliance standards.
These cases and their related settlements graphically illustrate the perils companies face in engaging in international transactions. As the cases of SNEPCO, Transocean, Tidewater, and Noble show, illegal payments made by agents and business partners may expose companies to substantial FCPA liability. Accordingly, companies looking to engage business partners and agents for international transactions should conduct thorough and ongoing investigations of such business partners and agents focusing specifically on indications that such agents or business partners may make illegal payments to foreign officials. Moreover, companies engaging agents and business partners for foreign transactions need to regularly ensure that such agents and business partners have a thorough understanding of the FCPA and the types of payments that are prohibited.