Cases on violations of the Foreign Corrupt Practices Act are settled regularly, and we often consider settlements as setting precedents. We provide a brief overview of the most important settlements every month. This month, we briefly discuss recent settlements reached in the US with Hewlett-Packard and Marubeni Corporation for apparent violations of the FCPA.
Hewlett-Packard, the international computer company headquartered in the US, entered into a USD 108 million settlement with the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC). The settlement includes a guilty plea by its subsidiary Hewlett-Packard Russia to two felonies for conspiracy and substantive violations of the Foreign Corrupt Practices Act (FCPA).
The violations relate to a project to automate the computer and telecommunications infrastructure of the Office of the Prosecutor General of the Russian Federation and a project to install IT equipment at the Polish National Police agency. The first project was considered to be a “golden key” to unlock business with Russian government agencies. As admitted in the statement of facts, Hewlett-Packard Russia used an elaborate buy-back deal structure in order to create excess profit margins. As part of the deal structure, payments were made to an intermediary. These payments were subsequently transferred through a cascading series of shell companies in Belize, the UK, and elsewhere, some of which were directly associated to government officials.
According to the SEC, there were also aggravating circumstances, such as the sophisticated way of hiding the corrupt payments and the lack of due diligence efforts on the shell companies by Hewlett-Packard Russia. The extensive cooperation and robust internal investigation conducted by Hewlett-Packard were, however, also acknowledged. This was also the case for the disciplinary measures, the enhancement of compliance functions and anti-corruption remedial efforts.
The Japanese trading company Marubeni Corporation pleaded guilty and agreed to pay USD 88 million in a settlement with the DOJ for its participation in a scheme to pay – and conceal – bribes to high-ranking officials in Indonesia. Marubeni also agreed to cooperate with the DOJ and to maintain and implement an enhanced global anti-corruption compliance program.
According to the court documents, Marubeni and its subsidiaries partnered with a French power company to bid on a lucrative contract to provide power-related services in Indonesia. The consortium retained two consultants, allegedly with the primary purpose to use them to pay bribes to Indonesian officials. Two of these officials worked for the state-owned electricity company and another was a member of parliament with influence over the award of the contract. After successfully securing the contract worth approximately USD 118 million, the first consultant allegedly transferred part of its “fees” of the consortium to an Indonesian bank account for the benefit of the member of the parliament.
The plea agreement shows that the failure of Marubeni to initially make use of the opportunity to cooperate with the government’s investigation, the failure to remediate and the lack of voluntary disclosure were considered aggravating factors in reaching this resolution. The lack of an ethics and compliance program was also taken into account.
This is the second criminal penalty for Marubeni in resolving charges related to FCPA violations. In January 2012 Marubeni entered into a deferred prosecution agreement with the DOJ and agreed to pay USD 54.6 million.