SEC Settles FCPA Probe of Texas-Based Construction Company for $5.1 Million

Earlier this week, Texas-based water management, construction and drilling company Layne Christensen Company agreed to pay nearly $5.13 million to the U.S. Securities and Exchange Commission (SEC) to settle allegations of FCPA violations. Without admitting or denying the SEC’s findings, Layne consented to an administrative order requiring the company to pay nearly $3.9 million in disgorgement, $858,720 in prejudgment interest and a penalty of $375,000.

In 2010, Layne self-disclosed that it was conducting an internal investigation into improper payments. In August, Red Notice reported that the U.S. Department of Justice (DOJ) had closed its related FCPA probe of Layne, declining to bring criminal charges against the company. However, the SEC persisted in its investigation, determining that employees of Layne’s African and Australian subsidiaries violated the antibribery provision of the FCPA by making improper payments to government officials in exchange for $3.89 million in financial benefits.

The SEC found that “Layne’s lack of internal controls allowed improper payments to government officials in multiple countries to continue unabated for five years.” The payments were made between 2005 and 2010 to officials in Mali, Guinea, the Democratic Republic of the Congo, Burkina Faso and Tanzania. In exchange for the bribes, the company secured work permits, avoided paying customs duties and realized more than $3.2 million in tax benefits. The SEC found that Layne also violated the books and records provision of the Securities Exchange Act by recording some of these bribes as legal fees.

Initially, Layne accumulated a $10.4 million reserve for financial penalties. However, the SEC credited the company’s self-disclosure, consistent cooperation throughout the investigation and updated FCPA security controls when assessing the final penalty of less than half the reserve amount.

To learn more read the SEC's press release and Reuters coverage.

Global Engineering Firm in Trouble in Multiple Jurisdictions After Top Executives Paid Millions in Bribes

On October 1, 2014, a former top executive at Canada’s largest engineering firm, SNC-Lavalin Group Inc., pled guilty to Swiss corruption charges. The executive admitted that he funneled millions of dollars in improper payments to late Libyan dictator Muammar Gaddafi’s son—payments he made using up to $160 million in stolen corporate funds.

Riadh Ben Aissa, former head of SNC-Lavalin’s global construction group, was found guilty of bribery, dishonest management and money-laundering in Switzerland’s Federal Crime Court earlier this month. SNC-Lavalin allegedly enjoyed a number of lucrative contracts in Libya due in large part to Ben Aissa’s ties to the Gaddafi family. Now, SNC-Lavalin is under scrutiny for its business there, as well as in Algeria, Bangladesh and Canada.

The Swiss court sentenced Ben Aissa to three years in prison, but reduced the sentence by 29 months in acknowledgment of the time he served while detained in connection with the case. The court also ordered Ben Aissa to surrender nearly $50 million of improperly obtained assets.

Ben Aissa was extradited to Canada on October 15, where he now faces additional corruption charges related to a $1.3 billion McGill University Hospital project awarded to SNC-Lavalin under his leadership. SNC-Lavalin officials allegedly paid $22.5 million in bribes to close the deal.

Ben Aissa is one of seven top SNC-Lavalin executives to face corruption and bribery charges in the past two years. Among them, former Executive Vice President Sami Abdellah Bebawi remains at large, wanted by Canadian officials for money-laundering, bribery and obstruction of justice. In February 2013, SNC-Lavalin’s former Chief Executive Pierre Duhamie was also charged with corruption for his role in the McGill University Hospital project.

In response to these scandals, SNC-Lavalin has sought to overhaul its ethics and compliance programs and has replaced most of its executive leadership. Though SNC-Lavalin stands to regain some $16 million stolen by Ben Aissa, the company continues to face ongoing investigations by Canadian federal and provincial authorities and has acknowledged the possibility of additional fines.

See the Huffington Post and The Globe and Mail for additional information.

Onslaught of Bribery Allegations Continues for Pharmaceutical Companies

European pharmaceutical companies are again making headlines with corruption and bribery allegations concerning their foreign-based operations.

On October 6, 2014, French pharmaceutical company Sanofi S.A. announced that it is investigating claims that its employees offered improper perks to healthcare professionals in East Africa and the Middle East in order to boost sales of Sanofi’s products. The investigation began after an anonymous tipster alleged that employees of the company’s Kenyan subsidiary paid for prominent medical professionals to attend international conferences and provided them with gifts and cash. Sanofi self-disclosed the accusations to the DOJ and the SEC. The French drugmaker hired outside counsel to conduct an internal investigation. Last year, Sanofi faced regulatory scrutiny after a whistleblower came forward with allegations of bribes to medical professionals in China, covered by the September 2013 issue.

As reported in our September 2014 issue, British pharmaceutical giant GlaxoSmithKline PLC (GSK) is also grappling with serious corruption charges. In September, GSK was fined a record three billion yuan ($488.5 million) for bribing doctors in China. On October 7, 2014, GSK confirmed that, as part of an ongoing internal probe, it is investigating employees for possible corruption in the United Arab Emirates (UAE) as well. The investigation was sparked by a whistleblower email thought to have come from a UAE regional sales manager. GSK is also investigating allegations of bribes to medical officials in Jordan and Lebanon.

Read more at the New York Times and the International Business Times.

Former Executives of Austrian Banknote Printer Sentenced in Kickback Scheme

On October 3, 2014, two former executive directors of Austria’s central bank were sentenced for their role in a conspiracy to bribe officials in Syria and Azerbaijan. Johannes Miller and Michael Wolf, former executive directors of the banknote-printing unit of Austria’s central bank, were each sentenced by Vienna’s criminal court to a two-year suspended jail sentence.

Miller and Wolf were charged along with seven other co-conspirators after an 18-month investigation revealed bribes of at least 14 million euros (US $17.5 million) paid between 2005 to 2011 to officials in Syria and Azerbaijan. Wolf, the former managing director of the central bank, admitted knowledge of the bribes at the start of the trial. Miller ultimately pled guilty during the trial as well. A third defendant, Wolfgang Duchatczek, former chairman of the Oesterreichische Banknoten und Sicherheitsdruck GmbH (OeBS), a subsidiary of Austria’s central bank, was acquitted.

The investigation began after internal auditors identified payments made without any corresponding services rendered. According to the 83-page indictment, the defendants overcharged the Azeri and Syrian governments for money-printing services and then used the additional fees to pay kickbacks to foreign officials, including governors of those countries’ central banks.

To learn more, see coverage at Bloomberg and the FCPA Blog.

Chinese Authorities Investigate Real Estate Company’s Dealings and Executive Is Held Under House Arrest

Chinese real estate developer Agile Property Holdings Ltd. confirmed on October 11, 2014, that its chairman and president, Chen Zhuo Lin, has been held under house arrest since September 30, 2014. China’s antigraft investigators have reportedly uncovered evidence that Agile paid bribes to a former Chinese official in the Yunnan province. The company has been pursuing large tourist facilities in the region for several years, secured in part by investment agreements with local governments. The bribery allegations emerged shortly after the detention of Zhang Tianxin, a former Communist-party secretary in the Yunnan capital of Kunming.

During Chairman Zhuo Lin’s detention, the company appointed Zhuo Lin’s wife and younger brother, Fion Luk and Chan Cheuk Yin, respectively, to serve as acting co-chairpersons and co-presidents. The company also has lost contact with Vice President and Executive Director Huang Fengchao, who appears to have been taken into custody by Chinese authorities. Fengchao managed Agile’s real estate developments in China’s Hainan and Yunnan provinces. On October 11, 2014, Fengchao asked a colleague for assistance in handing questions from China’s anticorruption agency. Since then, the company has not been able to reach Fengchao.

Prior to the chairman’s detention, Agile faced allegations of corruption from the Chinese and Hong Kong press, alleging that the company assisted its former chief of security, Zhou Yongkang, in a money-laundering scheme.

The corruption allegations have taken a toll on the company’s financial health. Moody’s recently downgraded the company’s corporate credit rating, and Standard & Poor’s put the company on a negative credit watch.

Read more at the South China Morning Post and the Wall Street Journal.