US DOJ Unseals Criminal Charges Against Rolls-Royce Employees
Alleged Misconduct Involves China and Kazakhstan
November 13, 2017 2017 11 13
On November 7, 2017, the U.S. Department of Justice ("DOJ") unsealed criminal charges against five individuals in connection with an alleged bribery scheme to assist Rolls-Royce plc ("Rolls-Royce" or the "Company") in obtaining a US $145 million government contract to supply equipment and services for a gas pipeline from Kazakhstan to China.
2017 11 7 "" -- """" 1.45
The charges, which were filed in the U.S. District Court for the Southern District of Ohio, were brought against:
three former employees of Rolls-Royce and its former U.S.-based subsidiary RollsRoyce Energy Systems, Inc. ("RRESI"): Keith Barnett ("Barnett"), James Finley ("Finley"), and Aloysius Johannes Jozef Zuurhout ("Zuurhout"); "RRESI" Keith Barnett ("Barnett"), James Finley ("Finley") Aloysius Johannes Jozef Zuurhout("Zuurhout")
a former agent for RRESI in Kazakhstan, Petros Contoguris ("Contoguris"); and RRESI Petros Contoguris ("Contoguris")
an executive at an unnamed international engineering and consulting firm, Andreas Kohler ("Kohler"). Andreas Kohler ("Kohler")
Defendants Barnett, Zuurhout, Kohler each pleaded guilty on December 28, 2016, June 13, 2017, and July 20, 2017, respectively to one count of conspiracy to violate the U.S. Foreign Corrupt Practices Act ("FCPA"). Defendant Finley pleaded guilty to count of conspiracy to violate the FCPA and one count of violating the anti-bribery provisions of the FCPA. Defendant Petros Contoguris, who is a fugitive, was indicted on one count of conspiracy to violate the
FCPA, seven counts of violating the FCPA's anti-bribery provisions, one count of conspiracy to launder money, and ten counts of money laundering. The court has to set sentencing dates for the four defendants who pleaded guilty.
BarnettZuurhout Kohler 2016 12 28 2017 6 13 2017 7 20 "FCPA" Finley FCPA FCPA Petros Contoguris FCPA FCPA As background, Rolls-Royce in January 2017 entered into a global settlement with authorities in the U.S., U.K., and Brazil to resolve charges that it had bribed government officials in several countries, including Kazakhstan, in exchange for receiving government contracts. In connection with this global settlement, Rolls-Royce entered into a deferred prosecution agreement ("DPA") with DOJ under which the Company agreed to pay a US $170 million penalty for conspiring to violate the anti-bribery provisions of the FCPA. As part of the DPA, Rolls-Royce agreed to cooperate with DOJ's ongoing investigation. Separately, the Company (1) entered into a DPA with the U.K. Serious Fraud Office ("SFO") pursuant to which it agreed to pay a penalty of US $600 million and (2) resolved charges with Brazil's Ministrio Pblico Federal ("MPF") in which the Company agreed to pay a US $25.5 million penalty. 2017 1 FCPA 1.7 "SFO" 6 2,550 DOJ's prior prosecution of Rolls-Royce alleged, among other things, that RRESI made commission payments of approximately US $5.4 million to various commercial advisors while knowing that a portion of the payments would be used to bribe foreign officials who had influence over a joint venture between the Kazakh and Chinese governments that was developing a gas pipeline between the countries. Further, DOJ's prior prosecution alleged that the Company hired a local distributor in Kazakhstan while knowing the distributor was owned by a high-ranking Kazakh government official with decision-making authority over the joint venture's awarding of contracts. RRESI 540 DOJ's most recent charges against the aforementioned five individuals appear to be based, in part, on the conduct relating to the Company's activities in Kazakhstan that is described in the January 2017 DPA. 2017 1
RRESI was until 2014 a U.S.-based subsidiary of Rolls-Royce and a "domestic concern" under the FCPA's 15 U.S.C. 78dd-2. RRESI produced and supplied power turbines for oil and gas and power generation projects throughout the world.
RRESI 2014 78dd-2 RRESI Defendant Keith Barnett is a U.S. citizen and former employee of RRESI and thus
a domestic concern and employee of a domestic concern who, at the time of his departure from RRESI, was serving as a Regional Director of Sales for the Asia/Pacific region. Keith Barnett RRESI -- Keith Barnett RRESI Defendant James Finley is a U.K. citizen who formerly served as a senior executive at Rolls-Royce and was responsible for the Company's energy sales division, including the sales of equipment manufactured and distributed by RRESI. According to the criminal information, Finley was thus an "agent" of a domestic concern (i.e., RRESI). James Finley RRESI Finley RRESI"" Defendant Aloysius Johannes Jozef Zuurhout is a Dutch national and a former energy sales employee of Rolls-Royce who assisted in the sale of equipment manufactured by RRESI. Although the information does not identify Zuurhout as an employee of a domestic concern, Zuurhout met with other co-conspirators in Ohio to discuss the bribery scheme. Aloysius Johannes Jozef Zuurhout RRESI Zuurhout Zuurhout Asia Gas Pipeline, LLC ("AGP") was a state-owned joint venture between Kazakhstan's KazMunayGas and China's National Petroleum Corporation that was established to construct a gas pipeline between the two countries. Asia Gas Pipeline, LLC ("AGP") KazMunayGas Gravitas & CIE International Ltd. ("Gravitas") is a Turkish-based commercial agent and advisor for oil and gas projects. Defendant Petros Contoguris, who was the Founder and Chief Executive Officer of Gravitas, acted as a commercial agent for RRESI in connection with RRESI's bid for certain pipeline contracts that were awarded by AGP. According to the indictment, Contoguris is thus an agent of a domestic concern. Gravitas & CIE International Ltd. ("Gravitas") Petros Contoguris Gravitas RRESI AGP Contoguris An unnamed international engineering and consulting firm (identified in the charging documents as "Technical Advisor") served as an independent consultant to AGP. Defendant Andreas Kohler is an Austrian national and employee in the Munich office of the Technical Advisor. The information states that, among other conduct in furtherance of the conspiracy, Kohler's actions caused RRESI to make corrupt payments from RRESI's bank account in Ohio.
"" AGP Andreas Kohler Kohler RRESI
According to the charges, the Defendants conspired between 2008 and 2012 to pay bribes to a foreign official in Kazakhstan in exchange for the foreign official's directing a government contract to RRESI. In connection with this scheme, DOJ alleges that AGP began accepting bids for contracts for the construction of a pipeline between Kazakhstan and China in or around 2008. 2008 2012 RRESI AGP 2008
At around this time, RRESI, acting through Finley, Barnett, and Zuurhout, allegedly hired Contoguris to assist RRESI with its efforts to obtain the AGP contracts. According to DOJ, RRESI specifically sought Contoguris's assistance to pay bribes to various government officials in order to help RRESI win the AGP contracts. RRESI FinleyBarnett Zuurhout Contoguris AGP RRESI Contoguris RRESI AGP
During the same period, DOJ alleges that Contoguris conspired with several employees of the Technical Advisor to identify bidders for the AGP contracts who would be willing to pay kickbacks in exchange for receiving the contracts. Contoguris AGP
In or around 2008, DOJ alleges that RRESI, Contoguris, and employees of the Technical Advisor began negotiating an agreement pursuant to which RRESI would pay a commission to Contoguris which Contoguris would then apportion among himself, an unnamed Kazakh government official, and the employees of the Technical Advisor. 2008 RRESIContoguris RRESI Contoguris Contoguris
In or around 2009, AGP awarded RRESI a contract to supply 11 gas turbine units to AGP, which contract was valued at approximately US $145 million. Between 2009 and 2013, AGP purportedly transferred the funds due under the contract to RRESI's bank accounts in the Southern District of Ohio. 2009 AGP RRESI AGP 11 1.45 AGP 2009 2013 RRESI
Between 2010 and 2012, the Defendants allegedly transferred a portion of these funds to Gravitas's bank accounts in the U.K. as commission payments while knowing that a portion of these payments would later be paid as bribes to the unnamed Kazakh government official who had influenced AGP's decision to award the US $145 million contract to RRESI.
2010 2012 Gravitas AGP RRESI 1.45 Items of Note: These charges are among the first since the issuance of the Yates Memo in which DOJ has brought FCPA-related charges against a company's employees after first bringing an enforcement action against the company itself. In the Yates Memo, which was issued in September 2015, DOJ expressed its intention to pursue charges against individuals responsible for corporate criminal violations. Up until this point, however, there have been few criminal prosecutions of individuals, though, as here, charges in other cases may be under seal. These charges thus serve as an important reminder that DOJ remains focused on individuals involved in criminal conduct. FCPA 2015 9 In the same vein, the Rolls-Royce DPA stated that the Company had earned full cooperation credit. Under the Yates Memo, a corporation is not eligible for cooperation credit unless the company discloses "all relevant facts about individual misconduct." Here, that cooperation appears to have yielded results for DOJ. "" "" "" These charges are yet another example of the coordinated efforts by law enforcement across different jurisdictions in bribery investigations. DOJ's press release announcing the charges recognizes the efforts of its counterparts in the U.K. and Brazil and also credits law enforcement in Austria, Germany, the Netherlands, Singapore, and Turkey.
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