Next up in the analysis of CustomsGate enforcement actions is Transocean. This enforcement action involves more Nigerian TIPs and express courier services (yes, you read that right, an FCPA anti-bribery enforcement action involving express courier services).
See here for the prior post on the Tidewater enforcement action here for the prior post on the Noble enforcement action and here for the prior post on the GlobalSantaFe enforcement action.
The Transocean enforcement action involved both a DOJ and SEC component. Total settlement amount was approximately $20.7 million ($13.4 million criminal fine via a DOJ deferred prosecution agreement; $7.2 million in disgorgement and interest via a SEC complaint).
DOJ
The DOJ enforcement action included a criminal information (here) filed against Transocean Inc. ("Transocean") which "was a Cayman Islands corporation with its principal executive offices in the Cayman Islands and in Houston, Texas." Transocean's securities were traded on the New York Stock Exchange. As set forth in the information, "in December 2008, Transocean completed a merger among Transocean Ltd., Transocean Inc., which was the former parent holding company, and Transocean Cayman Ltd. As a result of the merger, Transocean became a wholly-owned subsidiary of Transocean Ltd., a Swiss corporation with principal executive offices in Vernier, Switzerland." (See here).
The criminal charges against Transocean were resolved via a deferred prosecution agreement (here) between the DOJ and Transocean and Transocean Ltd. "on behalf of its wholly-owned subsidiary Transocean."
Criminal Information
Once again, the criminal information concerns Nigeria's rules and regulations relating to temporarily importing vessels and the "temporary importation permit" ("TIP"). For more on the TIP process see here.
Relevant Transocean entities include Sedco Forex Nigeria Limited ("SFNL"), a Nigerian entity 60% owned by Transocean, and Transocean Support Services Nigeria Ltd. ("TSSNL"), a wholly-owned Nigerian subsidiary of Transocean.
According to the information, between February 2002 and January 2003, "on three occasions when a TIP (and related TIP extensions) expired for a rig Nigeria, Customs Agent 1 [a Nigerian entity that provided freight forwarding, customs clearing, haulage and general logistics services to companies doing business in Nigeria and SFNL's customs agent in Nigeria between 2002 - July 2007] and Customs Agent 2 [a Nigerian entity that provided, among other things, customs clearing and freight forwarding and support services to oil and gas services companies operating in Nigeria and one of SFNL and TSSNL's customs agents in Nigeria], with the knowledge of SFNL, engaged in a process of obtaining false paperwork on SFNL's behalf to avoid the time, cost, and risks associated with exporting the rig and re-importing it into Nigerian waters." The information alleges that "Customs Agent 1 and Customs Agent 2, with the knowledge of SFNL, obtained false documents that reflected that the rig had been physically exported and re-imported, when, in fact, the rig had remained in Nigeria."
In addition, the information alleges that between May 2007 and June 2007, "Customs Agent 2, with the knowledge of TSSNL, engaged in a process of obtaining false paperwork on behalf of TSSNL for another rig." According to the information, "Customs Agent 2, with the knowledge of TSSNL, obtained documents that reflected that the rig had been physically exported and re-imported, when, in fact, the rig had remained in Nigeria."
The information alleges, that "SFNL and TSSNL's employees knew or were aware of a high probability that certain bribe payments were made by Customs Agent 1 and Customs Agent 2 to Nigerian Customs Service ("NCS") officials to resolve these issues." The information alleges that "to secure reimbursement for the payments made on behalf of SFNL and TSSNL, these Custom Agents provided invoices to SFNL and TSSNL without supporting documentation" and that "Transocean Nigeria, in turn, reimbursed these Customs Agents for the expenses."
According to the information, payments to Customs Agent 1 and Customs Agent 2 were mischaracterized as "freight and shipping/courier charges" or "crewboat, workboat, tug Hire" (in the case of Agent 1) and "miscellaneous operating expenses" (in the case of Customs Agent 2) in Transocean Nigeria's books and records which then were incorporated into Transocean's year-end financial statements filed with the SEC.
According to the information, "by corruptly circumventing the TIP requirements in 2002 and 2007, Transocean, through Transocean Nigeria, was able to continue its drilling operations using [certain rigs] that otherwise should have been temporarily removed from Nigerian waters." The information states, "as a consequence, Transocean was able to corruptly gain a net profit of approximately $2,129,839 on its rig operations that [...] otherwise would have been suspended because of the failure to comply with Nigerian TIP requirements."
As to express courier services, the information states that "one of the services provided by [Panalpina] was an express door-to-door courier service that expedited the importation of goods and equipment into Nigeria." According to the information, "the express service involved the payment of bribes by [Panalpina] to NCS officials to avoid the normal customs clearance process and the payment of official duties and taxes."
The information alleges that various Transocean Nigeria employees were aware that the express courier service in Nigeria was not compliant with local law, but that despite this, "SFNL and TSSNL used the express courier service eleven times between August 2005 and September 23, 2005 when they knew or were aware of a high probability that the express courier service would make bribe payments to Nigerian officials to avoid applicable customs duties." According to the information, "as a consequence, SFNL and TSSNL corruptly avoided paying $37,781.73 in applicable customs duties for these element shipments." The information charges that SFNL and TSSNL "falsely recorded the payments to the express courier service as 'air freight' in their books and records" and that these transactions were then incorporated into Transocean's SEC filings.
Based on the above conduct, the DOJ charged Transocean with conspiracy to violate the FCPA's anti-bribery and books and records provisions, FCPA anti-bribery violations, and knowingly violating the FCPA's books and records provisions.
According to the criminal information, "Transocean Nigeria employees knew or were aware of a high probability that the [Panalpina] was making bribe payments to Nigerian Customs Service officials on behalf of SFNL and TSSNL to cause such officials to disregard certain customs regulatory requirements relating to importing goods and materials into Nigeria for use on Transocean's rigs in Nigeria, and sought reimbursement from SFNL and TSSNL for these payments."
According to the information, certain unnamed co-conspirators committed various overt acts in furtherance of the conspiracy including Employee C [manager of Transocean's operations in Nigeria from August 2001 to January 2004 and an agent of an "issuer"], Executive B [a French citizen who was responsible for Transocean's Africa Region, including offshore drilling operations in Nigeria, and an agent of an "issuer"], Senior Executive A [a permanent resident of the U.S. from 2005 until July 2007 and a "domestic concern" as well as agent of an "issuer"].
Deferred Prosecution Agreement
Pursuant to the DPA, Transocean admitted, accepted and acknowledged that it was responsible for the acts of its officers, employees, subsidiaries, and agents as set forth above.
The term of the DPA is three years and seven months and it states that the DOJ entered into the agreement "based on the individual facts and circumstances" of the case and Transocean. Among the factors stated are the following.
"Transocean and Transocean personnel in Nigeria promptly commenced an internal investigation into dealings between Transocean's Nigeria operations and [Panalpina] after becoming aware of information indicating potential issues with [Panalpina]
"Transocean expanded its internal investigation to numerous operations and areas of the world outside Nigeria where no misconduct had been reported or suspected, and reported all relevant findings to thc Dcpartment;"
"A subsidiary of Transocean Ltd., Transocean Offshore Deepwater
Drilling Inc., hired a new chief compliance officer with substantial experience in corporate ethics and anti-corrption compliance policies. The compliance officer, who is an officer of Transocean Ltd., is responsible for the oversight of compliance for Transocean Ltd. and all of its subsidiaries and affiliates, including Transocean;"
"Transocean Ltd. established a specific internal audit team of well-trained auditors to focus on fraud, FCPA compliance, and anti-bribery issues at Transocean Ltd.'s worldwide operations;"
"Transocean Ltd. issued a revised FCPA compliance policy and revised its code of conduct, instituted a worldwide FCP A training program for its companies' employees, and implemented a well-defined due diligence process for retaining third party service providers and business partners that interact with government officials;"
"Transocean and Transocean Ltd. cooperated with the Department's investigation, including sharing all relevant investigation findings and making available numerous current and former employees;"
"Transocean and Transocean Ltd. agreed to undertake further remedial
measures;"
"Transocean and Transocean Ltd. agreed to provide a written report to the Department on their progress and experience in maintaining and, as necessary and appropriate, enhancing their compliance policies and procedures;"
"Transocean and Transocean Ltd. agreed to continue to cooperate with the Department in any ongoing investigation of the conduct of Transocean and its directors, employees, agents, consultants, contractors, subcontractors, subsidiaries, and any affliates it controls relating to violations of the FCPA."
As stated in the DPA, the fine range for the above describe conduct under the U.S. Sentencing Guidelines was $16.8 million to $33.6 million. Pursuant to the DPA, Transocean and Transocean agreed that Transocean shall pay a monetary penalty of $13.44 million - 20% below the minimum guideline amount.
As is standard in FCPA DPAs, Transocean and Transocean Ltd. agreed not to make any public statement "contradicting the acceptance of responsibility by Transocean and Transocean Ltd. as set forth" in the DPA and Transocean and Transocean Ltd. further agreed to only issue a press release in connection with the DPA if the DOJ does not object to the release.
SEC
The SEC's complaint (here) concerns the same core set of facts as set forth in the DOJ's DPA, plus a few additional allegations.
In summary fashion, the SEC alleged "from at least 2002 through 2007, Transocean made illicit payments through its customs agents to Nigerian government officials to extend the temporary importation status of its drilling rigs, to obtain false paperwork associated with its drilling rigs, and obtain inward clearance authorizations for its rigs and a bond registration."
The SEC further alleged as follows. "Transocean made illicit payments through Panalpina World Transport Holding Ltd.'s Pancourier express courier service to Nigerian government officials to expedite the import of various goods, equipment and materials into Nigeria. In most instances, customs duties for these items were not paid by either Panalpina or Transocean. In addition, Transocean made illicit payments through Panalpina to Nigerian government officials to expedite the delivery of medicine and other materials into Nigeria. Transocean's total gains from the conduct were approximately $5,981,693."
According to the complaint, Pancourier, is "an express door to door courier service operated by Panalpina" and the complaint alleges that Transocean used Panalpina and Pancourier "to expedite the delivery of goods and to import goods into Nigeria without always paying applicable duties to the Nigerian government."
As to the TIPs and movement of rigs, the complaint allegess that Transocean's illicit payments through its customs agents to Nigerian government officials avoided "moving costs of approximately $1,088,985 and gain profits of approximately $3,172,378."
The SEC complaint also alleges that "Transocean made illicit payments totaling $207,170 to Customs Agent 2 for what were described on invoices as "customs intervention" charges related to six rigs." According to the complaint, the payments ensured that "Transocean could operate its rigs in Nigerian waters without proper paperwork and without compliance with local law requirements."
As to Panalpina and Pancourier, the SEC complaint states that "from January 2002 to September 2005, Transocean used Pancourier 404 times to import various goods and materials into Nigeria without paying any customs duties to the Nigerian government." According to the complaint, "the total customs duties that Transocean avoided through its use of Pancourier for the 404 shipments to Nigeria were approximately $1,480,419."
Finally, the SEC complaint alleges that "aside from its use of Pancourier, Transocean also used Panalpina to expedite delivery of medicine and other goods into Nigeria." The complaint states that "Transocean made illict payments through Panalpina to Nigerian government officials for the importation of these goods totaling $32,741."
Based on the above conduct, the SEC charged Tidewater with violating the FCPA's anti-bribery and books and records and internal control provisions.
As to the company's internal controls, the SEC complaint simply states as follows. "... [A]s evidenced by the extent and duration of the improper payments to Nigerian officials, the improper recording of these payments in Transocean's books and records, the failure of Transocean's management to detect these irregularities, and the actual involvement of certain members of senior management, Transocean failed to devise and maintain an effective system ofinternal controls to prevent or detect these violations."
Without admitting or denying the SEC's allegations, Transocean agreed to pay disgorgement and prejudgment interest of $7,265,080. .
Former DOJ fraud section attorney Richard Smith (here) (Fulbright & Jaworski LLP) represented Transocean.
See here for the prior post on the Tidewater enforcement action here for the prior post on the Noble enforcement action and here for the prior post on the GlobalSantaFe enforcement action.
The Transocean enforcement action involved both a DOJ and SEC component. Total settlement amount was approximately $20.7 million ($13.4 million criminal fine via a DOJ deferred prosecution agreement; $7.2 million in disgorgement and interest via a SEC complaint).
DOJ
The DOJ enforcement action included a criminal information (here) filed against Transocean Inc. ("Transocean") which "was a Cayman Islands corporation with its principal executive offices in the Cayman Islands and in Houston, Texas." Transocean's securities were traded on the New York Stock Exchange. As set forth in the information, "in December 2008, Transocean completed a merger among Transocean Ltd., Transocean Inc., which was the former parent holding company, and Transocean Cayman Ltd. As a result of the merger, Transocean became a wholly-owned subsidiary of Transocean Ltd., a Swiss corporation with principal executive offices in Vernier, Switzerland." (See here).
The criminal charges against Transocean were resolved via a deferred prosecution agreement (here) between the DOJ and Transocean and Transocean Ltd. "on behalf of its wholly-owned subsidiary Transocean."
Criminal Information
Once again, the criminal information concerns Nigeria's rules and regulations relating to temporarily importing vessels and the "temporary importation permit" ("TIP"). For more on the TIP process see here.
Relevant Transocean entities include Sedco Forex Nigeria Limited ("SFNL"), a Nigerian entity 60% owned by Transocean, and Transocean Support Services Nigeria Ltd. ("TSSNL"), a wholly-owned Nigerian subsidiary of Transocean.
According to the information, between February 2002 and January 2003, "on three occasions when a TIP (and related TIP extensions) expired for a rig Nigeria, Customs Agent 1 [a Nigerian entity that provided freight forwarding, customs clearing, haulage and general logistics services to companies doing business in Nigeria and SFNL's customs agent in Nigeria between 2002 - July 2007] and Customs Agent 2 [a Nigerian entity that provided, among other things, customs clearing and freight forwarding and support services to oil and gas services companies operating in Nigeria and one of SFNL and TSSNL's customs agents in Nigeria], with the knowledge of SFNL, engaged in a process of obtaining false paperwork on SFNL's behalf to avoid the time, cost, and risks associated with exporting the rig and re-importing it into Nigerian waters." The information alleges that "Customs Agent 1 and Customs Agent 2, with the knowledge of SFNL, obtained false documents that reflected that the rig had been physically exported and re-imported, when, in fact, the rig had remained in Nigeria."
In addition, the information alleges that between May 2007 and June 2007, "Customs Agent 2, with the knowledge of TSSNL, engaged in a process of obtaining false paperwork on behalf of TSSNL for another rig." According to the information, "Customs Agent 2, with the knowledge of TSSNL, obtained documents that reflected that the rig had been physically exported and re-imported, when, in fact, the rig had remained in Nigeria."
The information alleges, that "SFNL and TSSNL's employees knew or were aware of a high probability that certain bribe payments were made by Customs Agent 1 and Customs Agent 2 to Nigerian Customs Service ("NCS") officials to resolve these issues." The information alleges that "to secure reimbursement for the payments made on behalf of SFNL and TSSNL, these Custom Agents provided invoices to SFNL and TSSNL without supporting documentation" and that "Transocean Nigeria, in turn, reimbursed these Customs Agents for the expenses."
According to the information, payments to Customs Agent 1 and Customs Agent 2 were mischaracterized as "freight and shipping/courier charges" or "crewboat, workboat, tug Hire" (in the case of Agent 1) and "miscellaneous operating expenses" (in the case of Customs Agent 2) in Transocean Nigeria's books and records which then were incorporated into Transocean's year-end financial statements filed with the SEC.
According to the information, "by corruptly circumventing the TIP requirements in 2002 and 2007, Transocean, through Transocean Nigeria, was able to continue its drilling operations using [certain rigs] that otherwise should have been temporarily removed from Nigerian waters." The information states, "as a consequence, Transocean was able to corruptly gain a net profit of approximately $2,129,839 on its rig operations that [...] otherwise would have been suspended because of the failure to comply with Nigerian TIP requirements."
As to express courier services, the information states that "one of the services provided by [Panalpina] was an express door-to-door courier service that expedited the importation of goods and equipment into Nigeria." According to the information, "the express service involved the payment of bribes by [Panalpina] to NCS officials to avoid the normal customs clearance process and the payment of official duties and taxes."
The information alleges that various Transocean Nigeria employees were aware that the express courier service in Nigeria was not compliant with local law, but that despite this, "SFNL and TSSNL used the express courier service eleven times between August 2005 and September 23, 2005 when they knew or were aware of a high probability that the express courier service would make bribe payments to Nigerian officials to avoid applicable customs duties." According to the information, "as a consequence, SFNL and TSSNL corruptly avoided paying $37,781.73 in applicable customs duties for these element shipments." The information charges that SFNL and TSSNL "falsely recorded the payments to the express courier service as 'air freight' in their books and records" and that these transactions were then incorporated into Transocean's SEC filings.
Based on the above conduct, the DOJ charged Transocean with conspiracy to violate the FCPA's anti-bribery and books and records provisions, FCPA anti-bribery violations, and knowingly violating the FCPA's books and records provisions.
According to the criminal information, "Transocean Nigeria employees knew or were aware of a high probability that the [Panalpina] was making bribe payments to Nigerian Customs Service officials on behalf of SFNL and TSSNL to cause such officials to disregard certain customs regulatory requirements relating to importing goods and materials into Nigeria for use on Transocean's rigs in Nigeria, and sought reimbursement from SFNL and TSSNL for these payments."
According to the information, certain unnamed co-conspirators committed various overt acts in furtherance of the conspiracy including Employee C [manager of Transocean's operations in Nigeria from August 2001 to January 2004 and an agent of an "issuer"], Executive B [a French citizen who was responsible for Transocean's Africa Region, including offshore drilling operations in Nigeria, and an agent of an "issuer"], Senior Executive A [a permanent resident of the U.S. from 2005 until July 2007 and a "domestic concern" as well as agent of an "issuer"].
Deferred Prosecution Agreement
Pursuant to the DPA, Transocean admitted, accepted and acknowledged that it was responsible for the acts of its officers, employees, subsidiaries, and agents as set forth above.
The term of the DPA is three years and seven months and it states that the DOJ entered into the agreement "based on the individual facts and circumstances" of the case and Transocean. Among the factors stated are the following.
"Transocean and Transocean personnel in Nigeria promptly commenced an internal investigation into dealings between Transocean's Nigeria operations and [Panalpina] after becoming aware of information indicating potential issues with [Panalpina]
"Transocean expanded its internal investigation to numerous operations and areas of the world outside Nigeria where no misconduct had been reported or suspected, and reported all relevant findings to thc Dcpartment;"
"A subsidiary of Transocean Ltd., Transocean Offshore Deepwater
Drilling Inc., hired a new chief compliance officer with substantial experience in corporate ethics and anti-corrption compliance policies. The compliance officer, who is an officer of Transocean Ltd., is responsible for the oversight of compliance for Transocean Ltd. and all of its subsidiaries and affiliates, including Transocean;"
"Transocean Ltd. established a specific internal audit team of well-trained auditors to focus on fraud, FCPA compliance, and anti-bribery issues at Transocean Ltd.'s worldwide operations;"
"Transocean Ltd. issued a revised FCPA compliance policy and revised its code of conduct, instituted a worldwide FCP A training program for its companies' employees, and implemented a well-defined due diligence process for retaining third party service providers and business partners that interact with government officials;"
"Transocean and Transocean Ltd. cooperated with the Department's investigation, including sharing all relevant investigation findings and making available numerous current and former employees;"
"Transocean and Transocean Ltd. agreed to undertake further remedial
measures;"
"Transocean and Transocean Ltd. agreed to provide a written report to the Department on their progress and experience in maintaining and, as necessary and appropriate, enhancing their compliance policies and procedures;"
"Transocean and Transocean Ltd. agreed to continue to cooperate with the Department in any ongoing investigation of the conduct of Transocean and its directors, employees, agents, consultants, contractors, subcontractors, subsidiaries, and any affliates it controls relating to violations of the FCPA."
As stated in the DPA, the fine range for the above describe conduct under the U.S. Sentencing Guidelines was $16.8 million to $33.6 million. Pursuant to the DPA, Transocean and Transocean agreed that Transocean shall pay a monetary penalty of $13.44 million - 20% below the minimum guideline amount.
As is standard in FCPA DPAs, Transocean and Transocean Ltd. agreed not to make any public statement "contradicting the acceptance of responsibility by Transocean and Transocean Ltd. as set forth" in the DPA and Transocean and Transocean Ltd. further agreed to only issue a press release in connection with the DPA if the DOJ does not object to the release.
SEC
The SEC's complaint (here) concerns the same core set of facts as set forth in the DOJ's DPA, plus a few additional allegations.
In summary fashion, the SEC alleged "from at least 2002 through 2007, Transocean made illicit payments through its customs agents to Nigerian government officials to extend the temporary importation status of its drilling rigs, to obtain false paperwork associated with its drilling rigs, and obtain inward clearance authorizations for its rigs and a bond registration."
The SEC further alleged as follows. "Transocean made illicit payments through Panalpina World Transport Holding Ltd.'s Pancourier express courier service to Nigerian government officials to expedite the import of various goods, equipment and materials into Nigeria. In most instances, customs duties for these items were not paid by either Panalpina or Transocean. In addition, Transocean made illicit payments through Panalpina to Nigerian government officials to expedite the delivery of medicine and other materials into Nigeria. Transocean's total gains from the conduct were approximately $5,981,693."
According to the complaint, Pancourier, is "an express door to door courier service operated by Panalpina" and the complaint alleges that Transocean used Panalpina and Pancourier "to expedite the delivery of goods and to import goods into Nigeria without always paying applicable duties to the Nigerian government."
As to the TIPs and movement of rigs, the complaint allegess that Transocean's illicit payments through its customs agents to Nigerian government officials avoided "moving costs of approximately $1,088,985 and gain profits of approximately $3,172,378."
The SEC complaint also alleges that "Transocean made illicit payments totaling $207,170 to Customs Agent 2 for what were described on invoices as "customs intervention" charges related to six rigs." According to the complaint, the payments ensured that "Transocean could operate its rigs in Nigerian waters without proper paperwork and without compliance with local law requirements."
As to Panalpina and Pancourier, the SEC complaint states that "from January 2002 to September 2005, Transocean used Pancourier 404 times to import various goods and materials into Nigeria without paying any customs duties to the Nigerian government." According to the complaint, "the total customs duties that Transocean avoided through its use of Pancourier for the 404 shipments to Nigeria were approximately $1,480,419."
Finally, the SEC complaint alleges that "aside from its use of Pancourier, Transocean also used Panalpina to expedite delivery of medicine and other goods into Nigeria." The complaint states that "Transocean made illict payments through Panalpina to Nigerian government officials for the importation of these goods totaling $32,741."
Based on the above conduct, the SEC charged Tidewater with violating the FCPA's anti-bribery and books and records and internal control provisions.
As to the company's internal controls, the SEC complaint simply states as follows. "... [A]s evidenced by the extent and duration of the improper payments to Nigerian officials, the improper recording of these payments in Transocean's books and records, the failure of Transocean's management to detect these irregularities, and the actual involvement of certain members of senior management, Transocean failed to devise and maintain an effective system ofinternal controls to prevent or detect these violations."
Without admitting or denying the SEC's allegations, Transocean agreed to pay disgorgement and prejudgment interest of $7,265,080. .
Former DOJ fraud section attorney Richard Smith (here) (Fulbright & Jaworski LLP) represented Transocean.
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