On November 22, 2019, the U.S. Department of Justice (“DOJ”) announced that it had entered into a three-year deferred prosecution agreement (“DPA”) with a Korean engineering company (“SHI”) to settle allegations of Foreign Corrupt Practices Act (“FCPA”) violations in Brazil. Brazilian prosecutors entered a simultaneous resolution with the company, thus providing another example of U.S. and foreign prosecutors working together and coordinating on these types of cross-border prosecutions.
SHI is an engineering company headquartered in the Republic of Korea, which provides shipbuilding, offshore platform construction, and other construction and engineering services. SHI maintains offices around the world, including a branch office in Houston, Texas. According to the DOJ, from 2007 until about 2013, SHI and its co-conspirators paid approximately $20 million in commission payments to a Brazilian intermediary, which DOJ alleged SHI knew would be paid as bribes to officials at the Brazilian state-owned energy company. The DOJ alleges these bribes were paid in order to secure improper business advantages and to cause the state-owned energy company to enter into a contract to facilitate SHI’s sale of an oil-drilling ship to a Houston-based offshore drilling company. The DOJ also alleged SHI took actions in furtherance of the bribery conspiracy from its branch office located in the United States.
As part of the DPA, SHI admitted to the DOJ’s allegations and agreed to pay a total criminal fine of approximately $75 million. This fine reflected a 20 percent reduction from the sentencing guidelines to account for SHI’s remediation and cooperation. Notably, SHI did not receive full credit for its cooperation, because the DOJ claimed that it failed to meet reasonable deadlines imposed by the DOJ, resulting in delays in reaching a resolution, but without more facts, it is impossible to know which party was acting unreasonably.
The DPA provides that SHI will pay the United States $37,740,800, which is 50% of the total assessed criminal penalty. The remaining 50% of the total criminal penalty will be credited by the DOJ, so long as SHI pays that amount within 12 months to Brazil under the separate resolution with Brazilian authorities. In addition to the monetary component of the DPA, SHI agreed to hire additional compliance personnel, implement a corporate compliance and ethics program, and will submit annual compliance reports to DOJ. SHI has also agreed to continue to cooperate with the DOJ and Brazilian authorities in any ongoing investigations and prosecutions relating to the underlying conduct, including of individuals. In this respect, SHI entered into a memorandum of understanding with three Brazilian enforcement agencies—the Controladoria-Geral da União, the Advogado-Geral da União, and the Ministério Público Federal.
Notably, the SEC did not enter into a separate resolution with SHI, and there is no indication that individuals will be charged, but given the ongoing cooperation obligation it remains a possibility.