On June 28, 2010, Technip, a French engineering and services provider for the oil and gas industry, agreed to pay $338 million to the U.S. government to settle charges under the Foreign Corrupt Practices Act (“FCPA”), a U.S. law that prohibits corrupt payments to foreign officials to obtain or retain business. Earlier this year, another French company, telecommunications giant Alcatel-Lucent, announced that it had reached agreements in principle with U.S. authorities to settle FCPA charges for $137.4 million.
The Technip and Alcatel-Lucent announcements reflect a continuing trend toward expansive use of the FCPA’s jurisdictional provisions to prosecute non-U.S. companies with only tangential ties to the United States. The U.S. Department of Justice (“DOJ”) has also pursued criminal charges against non-U.S. individuals in connection with both matters.
Technip will pay $240 million in criminal penalties to settle DOJ conspiracy and corruption charges. Under a two-year Deferred Prosecution Agreement (“DPA”) with DOJ, Technip will be required to cooperate in ongoing DOJ investigations and to retain an independent compliance monitor.[i] DOJ will dismiss the criminal information upon expiration of the DPA provided that Technip has complied with its terms. Technip also agreed to disgorge $98 million in profits to settle U.S. Securities and Exchange Commission (“SEC”) books and records and internal controls charges.[ii]
The agreements resolved allegations that, between 1995 and 2004, Technip participated in a scheme with its three joint venture partners in TSKJ[iii] to secure contracts to build liquefied natural gas facilities in Nigeria worth $6 billion. The scheme allegedly involved paying over $180 million to Nigerian officials through UK and Japanese intermediaries to obtain the contracts. Participation by KBR, Inc. in the same joint venture formed the basis for a $579 million KBR/Halliburton settlement with U.S. authorities in February 2009. On July 7, 2010, Snamprogetti Netherlands B.V. entered into a deferred prosecution agreement with DOJ and agreed to pay $240 million in criminal penalties and $125 million in disgorgement in connection with the same matter.[iv] Two UK citizens, Jeffrey Tesler and Wojciech Chodan, who were indicted in the United States for their alleged participation in the scheme and arrested in the UK, face potential extradition to the United States.[v] Former KBR Chairman and Chief Executive Officer Albert "Jack" Stanley received a seven-year sentence for his role in the scheme.[vi]
According to SEC’s Complaint, senior Technip executives involved in TSKJ’s steering committee authorized payments to Nigerian officials through two foreign agents -- a Gibraltar (UK) shell entity and a Japanese trading company. Senior personnel from Technip and other joint venture companies met with Nigerian officials to agree on the bribe amounts and conduits. They formed a “cultural committee” that approved sham “consulting” or “services” agreements with the UK and Japanese agents to conceal the payments to Nigerian officials. Agents hand delivered cash to Nigerian officials, bundling $1 million USD in briefcases and loading the bulkier $5 million worth of Nigerian currency into vehicles.
The SEC’s books and records charges rested on certain TSKJ records, maintained by Technip, that falsely characterized bribe payments made through the UK and Japanese agents as “consulting” or “services” fees. The SEC cited Technip’s “perfunctory” due diligence of the UK agent, and failure to conduct due diligence of the Japanese agent, in support of its internal control charges.[vii]
DOJ and SEC asserted FCPA jurisdiction over the French Technip as an “issuer” of securities based on the American Depository Receipts (“ADRs”) that Technip traded on the New York Stock Exchange between August 2001 and November 2007.[viii] The authorities also cited Technip’s routing of payments through New York banks in support of jurisdiction.[ix]
Notably, a tip from French authorities appears to have triggered U.S. investigations into Technip and KBR/Halliburton. French magistrates shared the content of a Technip official’s 2002 testimony in an unrelated French corruption investigation of Elf Aquitaine.[x] In their press releases announcing settlements with Technip, DOJ and SEC acknowledged assistance from authorities in France, Italy, Switzerland, the UK, Africa, and Asia. DOJ also underlined its commitment to “aggressively investigate and prosecute international bribery by U.S. and foreign corporations alike.”
In its February 2010 10-K filing, Alcatel-Lucent reported that it had reached agreements in principle with U.S. authorities in December 2009 to settle FCPA charges arising out of activities in Costa Rica, Taiwan, and Kenya.[xi] Alcatel-Lucent’s proposed agreement with SEC would involve $45.4 million in disgorgement of profits and prejudgment interest. Under the proposed settlement with DOJ, Alcatel-Lucent would enter into a three-year DPA and pay $92 million in criminal fines for accounting and internal controls violations. Both agreements would require Alcatel-Lucent to engage a French compliance monitor for three years. Three non-U.S. Alcatel-Lucent subsidiaries (Alcatel-Lucent France, Alcatel-Lucent Trade, and Alcatel Centroamerica) would plead guilty to anti-bribery, books and records, and internal controls charges.
With respect to the Costa Rica matter, Alcatel-Lucent learned in 2004 that Costa Rican authorities were investigating allegations that Alcatel-Lucent France, through local consultants, paid bribes to secure contracts to develop cellular networks in Costa Rica. Bribe recipients allegedly included various Costa Rican political parties and public officials, including then-President Miguel Angel Rodriguez and representatives of the state-owned Costa-Rican Institute of Electricity (ICE).[xii] The scheme involved more than $2.5 million in payments through a purported Costa Rican consulting firm, Servicios Notariales, Q.C., to secure a $149 million contract.[xiii]
In addition to Alcatel-Lucent’s own internal investigation, U.S., French, and Costa Rican authorities have investigated the matter. U.S. authorities also requested information regarding Alcatel-Lucent’s operations in other countries and, along with French authorities, investigated payments Alcatel-France made to a consultant in connection with a supply contract in Kenya.[xiv]
As in the Technip case, it appears that U.S. authorities would assert jurisdiction over Alcatel-Lucent in the Costa Rican matter based on payments the company routed through U.S. banks while an “issuer” under the FCPA. Even before merging with Lucent in 2006, Alcatel traded ADRs on U.S. exchanges.[xv] The basis for jurisdiction over the three non-U.S. Alcatel-Lucent subsidiaries is not clear from the company’s announcement.[xvi] If the proposed settlement is finalized, DOJ and SEC court filings should shed further light on this issue, as well as the allegations involved in the Kenyan and Taiwanese matters.
Facts underlying the Costa Rican matter are well publicized due to DOJ’s prior prosecution of two individuals, Edgar Valverde Acosta, a Costa Rican citizen and former Alcatel Senior Country Officer in Costa Rica, and Christian Sapsizian, a French national and former Deputy Vice-President of Alcatel for Latin America. Acosta was indicted in 2007 but remains a fugitive. Sapsizian, who was apprehended in a Miami airport, was indicted in December 2006 on corruption, money laundering and conspiracy charges. FCPA jurisdiction over Sapsizian was grounded on his status as an officer and agent of an “issuer” who caused payments to be made through U.S. banks. Sapsizian pleaded guilty to FCPA antibribery and conspiracy charges in June 2007, and was sentenced in September 2007 to 30-months imprisonment and forfeiture of $261,500.[xvii]
In January 2010, Alcatel-Lucent settled claims for “social damages” with Costa-Rican prosecutors, agreeing to pay approximately $10 million. This agreement is pending court approval,[xviii] however, and will not resolve all claims with Costa Rican authorities. ICE, which did not participate in Alcatel-Lucent’s agreement with Costa-Rican prosecutors, filed suit in a Florida court in May 2010 seeking treble damages under civil racketeering laws.[xix] Meanwhile, Alcatel-Lucent has announced various changes to its business practices. In March 2008, the company signed the World Economic Forum’s Partnering Against Corruption Initiative (PACI).[xx] In November 2008, the company announced plans to dramatically cut its reliance on agents and consultants.[xxi]
Transnational Cooperation and Parallel Investigations. As noted above, both the Technip and Alcatel-Lucent matters involved cooperation among U.S. and foreign authorities. In February 2010, new agreements between the U.S. and EU countries went into effect that will facilitate information exchanges for criminal investigations and trials as well extradition.[xxii] DOJ has touted these new tools at recent events.[xxiii] Multinational companies will increasingly face parallel investigations and prosecutions by U.S. authorities and their foreign counterparts under the FCPA and analogous laws in other countries.
Prosecution of Individuals, Including Non-U.S. Persons. The prosecutions of Chodan, Tesler, Stanley, Sapsizian, and Acosta in connection with the Technip/KBR and Alcatel matters highlight the increasing focus by DOJ on the prosecution of individuals, including non-U.S. persons, in FCPA matters. Between 2008 and 2009, the number of individual prosecutions has more than tripled (from nine in 2008 to 28 in 2009, or from 39% of FCPA prosecutions in 2008 to 61% in 2009). [xxiv] In remarks delivered at the OECD in June 2010, U.S. Attorney General Eric Holder described individual prosecutions as “a cornerstone of [U.S. FCPA] enforcement strategy.”[xxv]
Third-Party Risks. The Technip and Alcatel-Lucent matters – like recent settlements with Siemens AG, BAE Systems plc, and others -- involved indirect payments through third-party agents or consultants. These matters reinforce the need to implement compliance programs involving appropriate due diligence, contractual provisions, and other compliance safeguards in dealings with third parties.
Other Causes of Action. Facts giving rise to FCPA liability often create exposure under other laws. Class action and shareholder derivative suits, sovereign damages actions, and U.S. prosecutions for other crimes – money laundering, false records and statements, racketeering, export control violations – are on the rise. Consequences can be severe, including substantial civil damages, criminal fines and convictions, and debarment from contracting with governments and international organizations.