Ralph Lauren Non-Prosecution Agreements
On April 22, 2013, Ralph Lauren Corporation entered into non-prosecution agreements with the United States Department of Justice (DOJ) and the United States Securities and Exchange Commission (SEC), to settle Foreign Corrupt Practices act (FCPA) charges. The allegations were that Ralph Lauren Corporation’s Argentine subsidiary paid bribes through its customs broker to Argentine government and customs officials to get products into the country without necessary paperwork and to avoid inspection of products by customs officials.
Ralph Lauren Corporation agreed to pay an $882,000 penalty to settle the DOJ criminal action, and over $700,000 in disgorgement and interest to settle the SEC civil action. The government cited the company’s self-reporting and thorough investigation and cooperation as reasons it decided to enter into a non-prosecution agreement. The SEC reports that the bribes were discovered when Ralph Lauren Corporation began implementing improvements to its worldwide controls and compliance efforts. Ralph Lauren Corporation has since ceased operations in Argentina.
Parker Drilling Resolves Panalpina-Related Charges for $11.76 Million
On April 16, Houston, Texas based Parker Drilling Company entered into a deferred prosecution agreement with the DOJ. Under the DPA, Parker Drilling agreed to pay an $11.76 million penalty to resolve charges that it violated the FCPA by authorizing payment to an intermediary, knowing the payment would be used to corruptly influence Nigerian government officials tasked with reviewing Parker Drilling’s adherence to Nigerian customs and tax laws.
In 2002, Nigeria formed a government commission, the Temporary Import Panel, to assess whether Nigeria’s Customs Service had collected certain duties and tariffs. The Panel assessed a $3.8 million fine after determining that Parker Drilling had violated Nigeria’s customs laws through its use of Panalpina World Transport (Nigeria) Limited to fraudulently claim that its rigs had been exported and then reimported into Nigeria. Rather than pay the assessed fine, Parker Drilling allegedly transferred $1.25 million to an intermediary agent to be used to resolve the customs issues. After the intermediary allegedly interacted with Nigeria’s Ministry of Finance, State Security Service, and a delegation from the president’s office, and after two senior executives at Parker Drilling reviewed and approved the agent’s additional expense invoices, the Panel’s fine was reduced from $3.8 million to $750,000.
The criminal Information was filed in the United States District Court for the Eastern District of Virginia, based on Parker Drilling’s electronic transmission of its SEC filings through the SEC’s Electronic, Gathering, Analysis, and Retrieval System (“EDGAR”), which is located in Alexandria, Virginia. DOJ’s use of the Eastern District of Virginia’s prosecution-friendly court and “rocket docket” to prosecute FCPA cases has increased over the past few years, through companies’ use of EDGAR for SEC filings.
In the related SEC civil matter, Parker Drilling agreed to pay $3.05 million in disgorgement and $1.04 million in prejudgment interest.
Four BizJet Executives Charged with FCPA Violations
On April 5, 2013, charges were unsealed against four former executives of BizJet International Sales and Support, Inc., the Tulsa, Oklahoma based U.S. subsidiary of Lufthansa Technik AG, which provides aircraft maintenance, repair and overhaul (MRO) services. The executives are charged with participating in a scheme to pay bribes to government officials in Mexico, Brazil, and Panama, in order to secure contracts for BizJet to perform MRO services for those governments.
The BizJet executives are Bernd Kowalewski, former president and CEO; Jald Jensen, former sales manager; Peter DuBois, former vice president of sales and marketing; and Neal Uhl, former vice president of finance. They are charged with conspiring to violate FCPA and to launder money, as well as substantive charges of violating the FCPA and money laundering. On January 5, 2012, DuBois pleaded guilty to one count of conspiracy to violate the FCPA and one count of violating the FCPA, and Uhl pleaded guilty to one count of conspiracy to violate the FCPA. Despite sentencing guidelines ranges of 108 to 120 months in prison for DuBois and 60 months for Uhl, both were sentenced to probation and eight months home detention based on their cooperation in the government’s investigation, which included DuBois wearing a wire. Kowalewski and Jensen are believed to be abroad.
In March 2012, following BizJet’s voluntary disclosure of some of this bribery activity, BizJet and DOJ entered into a deferred prosecution agreement under which BizJet paid an $11.8 million monetary penalty to resolve the FCPA charges.
Consistent with DOJ’s continuing efforts to work more closely with local law enforcement in other countries, the DOJ stated in its press release that law enforcement in Mexico and Panama had assisted DOJ in the matter.
French Citizen Charged with Obstruction of Justice in FCPA Probe
On April 15, French citizen Frederic Cilins was arrested and charged with attempting to obstruct an ongoing investigation into whether a mining company paid bribes to win mining contracts in the Republic of Guinea. According to the affidavit of FBI Agent Peter Kilpatrick in support of the criminal complaint, Cilins attempted to bribe a cooperating witness to deliver to him documents for destruction, despite that the documents had been requested by a grand jury subpoena, and asked the cooperating witness to file a false affidavit.
The mining company is not identified by name in the complaint. However, Agent Kilpatrick in his affidavit quotes from a November 2, 2012 Financial Times article identifying Beny Steinmentz Group Resources (BSGR) as the mining company at issue. According to that article, the Guinean government is conducting an investigation backed by George Soros into how, in 2008, BSGR secured an iron ore mining concession for half of the Simandou mountain area in Guinea, after the Guinean government stripped the concession from Rio Tinto.
The DOJ complaint against alleges several explanations for why the concession was awarded to BSGR. First, the complaint alleges that Cilins, on behalf of BSGR, offered $12 million to the cooperating witness, who is the former wife of a now deceased high-ranking official in the Guinean government, to be distributed among herself and other Guinean officials in exchange for influencing the awarding of the concession. Second, the complaint alleges that in 2007, a Guinea-based BSGR subsidiary and an entity controlled by the complaining witness entered into a contract under which the complaining witness’s company would assist the BSGR subsidiary in its efforts to obtain permits for mining research in exchange for 5% of the shares of the BSGR subsidiary. Various other contracts between the parties for payments for services are described in the complaint.
BSGR paid $160 million or less for the concession in 2008. But in 2010, Vale of Brazil, the world’s largest iron ore miner, agreed to pay BSGR $2.5 billion for a 51% stake in its Guinean mining interests. Last October, Vale put the Simandou project on hold following the Guinean government’s decision to review all mining contracts and statement that it would cancel licenses obtained through bribes. In early April, Vale announced that it is refusing to make further payments to BSGR until further progress is made on the mining efforts. It has so far paid BSGR $500 million under the joint venture agreement. BSGR is demanding full and immediate payment.
THE UNITED KINGDOM
Senior British journalist charged over bribes
The executive editor of The Sun newspaper has been charged with authorising bribes to a government official, making him one of the most senior journalists to be caught up in Britain's extensive media ethics scandal.
Fergus Shanahan is accused of sanctioning one of his journalists to make two payments totaling £7,000 to an unidentified public official in exchange for the disclosure of information. The alleged payments are said to have occurred between August 2006 and August 2007 when Mr Shanahan was deputy editor of The Sun.
The prosecution official announcing the charges said the decision followed an investigation by Operation Elveden, the specialist Metropolitan Police unit set up to examine potentially illegal payments from reporters and editors to public officials. A representative of the Crown Prosecution Service said, “Our decision to prosecute was considered carefully in accordance with the DPP's guidelines on the public interest in cases affecting the media.”
Mr Shanahan joins a growing list of senior Sun journalists who have found themselves either under arrest or facing criminal charges over claims of corruption, most notably Rebekah Brooks, the former CEO of News International. Ms Brooks faces some of the scandal's most serious charges, including conspiracy to hack phones, bribery, and obstruction of justice
The chief executive of News International, Mike Darcey, said it would be offering Mr Shanahan “every support as he goes through the legal process”. Mr Shanahan is scheduled to appear in court in May 2013.
THE REST OF THE WORLD
SNC-Lavalin Group, Inc. has reached a settlement with the World Bank Group over investigations into the Padma Bridge project in Bangladesh.
The $1.2 billion project, which has reportedly been marred with numerous problems of corruption, was partly funded by the bank. SNC-Lavalin was allegedly involved in a conspiracy to pay bribes to officials in Bangladesh when bidding for the contract.
The head of the bank’s anti-corruption unit, Leonard McCarthy, said, “I hope that SNC-Lavalin’s commitment under this agreement (the settlement) represents meaningful action and in deterring the risks of fraud and corruption to development projects.”
Robert Card, president of SNC-Lavalin group said “The Company has already taken, and will continue to take, measures to ensure rigorous compliance and control procedures are in place.” The company demonstrated this intent by updating its code of ethics and training along with the hire of a “world-renowned leader in compliance and corporate governance” to take up the position of its chief compliance officer.
The specific terms of the settlement are confidential, but the World Bank has said that it has debarred the subsidiary of the Canadian construction company from bidding on any of its projects for a 10 year period. This represents the longest suspension ever levied by the bank’s anti-corruption unit.
In an update to news posted in last month’s Anti-Corruption Digest, Italian investigators probing the alleged corrupt helicopter deal between the Indian military and AugustaWestland say they believe they have uncovered evidence of further corruption.
The Finnmeccanica subsidiary is said to be under investigation for a new matter surrounding the procurement of 197 helicopters. It is reported that authorities uncovered documents revealing that, in 2010, Brigadier V.S. Saini demanded more than 250 million rupees (£3 million) from AugustaWestland in order to “help eliminate the competition” for the contract.
AgustaWestland was in fact eliminated from the helicopter procurement process without any money apparently changing hands. The Army has questioned Brigadier Saini but is yet find “any tangible evidence” against him. The Indian authorities have reportedly sought help from their Italian counterparts.
An executive of “a French power and transportation company” has been charged by authorities in the USA for his role in an alleged scheme to bribe officials in Indonesia.
It is reported that Frederic Pierucci allegedly paid bribes to several high-ranking members of Perusahaan Listrik Negara, Indonesia’s state owned electricity company, and to a number of officials in the country, including a member of the Indonesian Parliament. The scheme, which allegedly ran between 2002 and 2009, was intended to secure a number of contracts related to the Tarahan power project. The Department of Justice has since revealed that David Rothschild, a former Alstom executive, pleaded guilty to charges stemming from the same bribery scheme late last year.
The charges do not identify Alstom by name, but Tim Brown, a company spokesman, is quoted as saying that the company had “been working constructively with the Department of Justice for the last two years to address any allegations of past misconduct” and went on to declare that “the company is committed to assuring that it conducts its worldwide business fully in compliance with all laws and regulations.”
An investigation by police in Poland has triggered a Foreign Corrupt Practices Act (FCPA) and UK Bribery Act 2010 probe into Image Sensing Systems, a Minnesota based company. Two employees of the technology company’s Poland office have been charged with criminal violations of tender and corruption laws related to a project near the city of Łódź.
Image Sensing has said that no charges have been filed against it or its Polish subsidiary and that it had reported its investigation to the Securities Exchange Commission and Department of Justice, which jointly enforce the FCPA. “We take these matters very seriously, and are cooperating fully. Image Sensing Systems aims to conduct its business lawfully and ethically” said Kris Tufto, Chief Executive of the company. The company didn’t comment whether it had contacted the Serious Fraud Office, which enforces the Bribery Act.
Following the two charges, the company has hired an outside law firm and launched an internal probe into its compliance with the U.S. FCPA, the UK Bribery Act and Polish law.
The Supreme Court of Korea has confirmed a three year and six month prison term for Shin Jae-min, previously a vice culture minister, for bribery.
Mr Shin was convicted of receiving bribes worth about 117 million won (over £67,000) from Lee Kuk-chul, the chairman of SLS Group, in exchange for using his influence so that the mid-sized group could avoid undergoing a debt workout programme, between 2008 and 2009.
South Korea’s top court also upheld the district court’s order that Shin pay a fine of 54 million won (£31,000) and forfeit about 110 million won (£64,000).
British oil firm Tullow Oil is facing investigation in Uganda over claims it considered paying bribes to government officials. The allegation surfaced during a court battle between Tullow and rival Heritage - the former claiming recompense for a £206m Ugandan capital gains tax bill it says it wrongly paid on its £1bn acquisition of Heritage.
Tullow Oil said it had defended itself this month in front of an ad hoc committee of the Ugandan Parliament, set up to investigate the allegations of corruption. It refuted claims that the company bribed senior ministers in exchange for concessions in Uganda’s oil fields, stating that “Tullow has, at no time, made any payments to the Ugandan Government Ministers … [the] allegations are entirely false and have been strenuously and regularly denied”.