Bonny Island Bribery Club Statistics

Bonny Island.

It is located at the southern edge of the Niger delta of Nigeria. (see here).

It is the location featured in several corporate and individual FCPA enforcement actions - actions that have thus far resulted in approximately $1.3 billion in fines, penalties and disgorgement.

This number is sure to grow as one member of the joint venture at the center of bribery scheme - JGC of Japan - has yet to resolve its exposure although (as noted in this post from the FCPA Blog) it has confirmed that it is discussions with the DOJ.

In addition, the DOJ, in its indictments of Jeffrey Tesler and Wojciech Chodan, is seeking forfeiture of $132 million.

Further, as noted in this prior post, Halliburton has disclosed that it faces exposure in the U.K. in connection with a Serious Fraud Office investigation of M.W. Kellogg Company ("MWKL"), a United Kingdom joint venture 55% owned by KBR. In its most recent 10-Q (here) Halliburton stated:

"MWKL is cooperating with the SFO’s investigation. Whether the SFO pursues civil or criminal claims, and the amount of any fines, restitution, confiscation of revenues or other penalties that could be assessed would depend on, among other factors, the SFO’s findings regarding the amount, timing, nature and scope of any improper payments or other activities, whether any such payments or other activities were authorized by or made with knowledge of MWKL, the amount of revenue involved, and the level of cooperation provided to the SFO during the investigations. MWKL has informed the SFO that it intends to self-report corporate liability for corruption-related offenses arising out of the Bonny Island project. MWKL has received confirmation that it has been admitted into the plea negotiation process under the Guidelines on Plea Discussions in Cases of Complex or Serious Fraud, which have been issued by the Attorney General for England and Wales."

While the Bonny Island Bribery Club statistics are not yet final, this post provides a detailed breakdown of the current statistics.

Kellogg Brown & Root LLC / Halliburton Company / KBR Inc. (Feb. 2009)

Attorneys: Paul, Hastings, Janofsky & Walker LLP

DOJ

Entity: Kellogg Brown & Root LLC

Charges: Conspiracy to Violate the FCPA (1 Count), Substantive FCPA Anti-Bribery Violation (4 Counts)

Resolution Vehicle: Criminal Information and Plea Agreement

Benefit Received From Improper Payments: $235.5 Million

Sentencing Guidelines Range: $376.8 Million - $753.6 Million

Amount of Fine: $402 Million

Monitor: Yes - Three Years

SEC

Entity: Halliburton Company, KBR Inc.

Charges: FCPA Books and Records and Internal Controls Violation (Halliburton Company), Substantive FCPA Anti-Bribery Violation, Aiding and Abetting Halliburton's FCPA Books and Records and Internal Controls Violation, Knowingly Falsifying Books and Records and Knowingly Circumventing Internal Controls (KBR Inc.),

Disgorgement Amount: $177 Million

Technip S.A. (June 2010)

Attorneys: Patton Boggs LLP; Wachtell, Lipton, Rosen & Katz

DOJ

Charges: Conspiracy to Violate the FCPA (1 Count), Substantive FCPA Anti-Bribery Violation (1 Count)

Resolution Vehicle: Criminal Information and Deferred Prosecution Agreement (Term - 2 Years, 7 Months)

Value of Benefit Received From Improper Payments: $199 Million

Sentencing Guidelines Range: $318.4 Million - $636.8 Million

Amount of Fine: $240 Million (25% Below Minimum Guidelines Range)

Monitor: Yes - Two Years

SEC

Charges: Substantive FCPA Anti-Bribery Violation, FCPA Books and Records and Internal Controls Violation

Disgorgement Amount: $98 Million

Snamprogetti Netherlands BV, ENI S.p.A (July 2010)

Attorneys: Sullivan & Cromwell LLP

DOJ

Entity: Snamprogetti Netherlands BV

Charges: Conspiracy to Violate the FCPA (1 Count), Aiding and Abetting FCPA Anti-Bribery Violation (1 Count)

Resolution Vehicle: Criminal Information and Deferred Prosecution Agreement (Term 2 Years)

Value of Benefit Received From Improper Payments: $214.3 Million

Sentencing Guidelines Range: $300 Million - $600 Million

Amount of Fine: $240 Million (20% Below Minimum Guidelines Range)

Monitor: No

SEC

Entity: Snamprogetti Netherlands BV, ENI S.p.A.

Charges: Substantive FCPA Anti-Bribery Violation, Knowingly Falsifying Books and Records and Knowingly Circumventing Internal Controls (Snamprogetti Netherlands BV), FCPA Books and Records and Internal Controls Violation (ENI S.p.A.)

Disgorgement Amount: $125 Million

[Note in all three of the above corporate actions, the entity received a -2 reduction in the culpability score for cooperation. Snamprogetti's total culpability score (and thus base fine multiplier) was below that of Kellogg, Brown & Root LLC, and Technip given that the company has fewer employees].

Albert Jackson Stanley (August 2008)

Attorney: Larry Veselka (Smyser, Kaplan & Veselka LLP)

DOJ

Charges: Conspiracy to Violate the FCPA (1 Count), Conspiracy to Commit Mail and Wire Fraud (1 Count)

Resolution Vehicle: Criminal Information and Plea Agreement

Plea Agreement Contemplates an $10.8 Million Restitution Order (the amount Stanley agreed the victim - his former employer - incurred as a monetary loss because of his conduct)

Plea Agreement Contemplates a Sentence of 84 months (subject to a downward departure for cooperation)

SEC

Charges: Substantive FCPA Anti-Bribery Violation, Knowingly Falsifying Books and Records and Knowingly Circumventing Internal Controls

Permanent Injunction

Jeffrey Tesler (March 2009)

Indictment Charges: Conspiracy to Violate the FCPA (1 Count), Substantive FCPA Anti-Bribery Violations (10 Counts)

Indictment Seeks Forfeiture $132 Million

Wojciech Chodan (March 2009)

Indictment Charges: Conspiracy to Violate the FCPA (1 Count), Substantive FCPA Anti-Bribery Violations (10 Counts)

Indictment Seeks Forfeiture $132 Million

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More on Snamprogetti, ENI

Yesterday's post (see here) provided a high-level overview of the joint DOJ / SEC FCPA enforcement action.

Today's post provides a summary of the DOJ criminal information (here), deferred prosecution agreement (here), and SEC civil complaint (here).

For starters, the conduct at issue focuses on Snamprogetti Netherlands BV ("Snamprogetti"), a Dutch company headquartered in Amsterdam. Snamprogetti was a wholly-owned subsidiary of Snamprogetti, S.p.A., an Italian company, which in turn was a wholly-owned subsidiary of ENI, S.p.A., an Italian company headquartered in Rome that has been an issuer since 1995 and currently has common stock and American Depository Shares listed on the New York Stock Exchange. In February 2006, ENI sold Snamprogetti to Saipem, S.p.A., an Italian company. As indicated in this Saipem press release, even though Snamprogetti is a current subsidiary of Saipem, "in connection with the sale of Snamprogetti to Saipem, Eni agreed to indemnify Saipem for losses resulting" from the Bonny Island bribery investigation and accordingly neither the DOJ or SEC penalty "will impact Saipem's consolidated income statement and balance sheet." According to the SEC, "ENI owns 43% of, and exercises control over" Saipem.

With that out of the way, back to Snamprogetti.

Information

Not surprisingly, the Snamprogetti information largely mirrors the criminal informations previously filed last week against Technip (see here) and in February 2009 against the Kellogg Brown & Root (see here) - entities also part of the joint venture engaged in the Bonny Island bribery scheme.

The Snamprogetti information charges conspiracy to violate the FCPA and aiding and abetting violations of the FCPA's antibribery provisions and alleges that Snamprogetti was part of a joint venture ("JV") in Nigeria to design, build and expand LNG facilities on Bonny Island. According to the information, JV profits, revenues, and expenses were equally shared among the four JV partners. The JV's Steering Committee consisted of high-level executives from each of the four companies and the Steering Committee made major decisions on behalf of the JV, including whether to hire agents to assist the JV in winning contracts, who to hire as agents, and how much to pay the agents.

The information charges that the JV operated through three Portuguese special purpose corporations, including a corporation (#3), 25% owned by Snamprogetti, specifically used to enter into consulting agreements with JV agents.

The criminal conduct charged centers on two agents hired by the JV.

The first agent, Jeffrey Tesler was a citizen of the United Kingdom who used a Gibraltar-based company as a vehicle to enter into agent contracts and receive payments from the JV. The information charges that the JV paid the company over $130 million to bribe high-ranking Nigerian government officials. According to the information, Tesler was an agent of the JV and each of the JV companies.

The second agent was a global trading company headquartered in Tokyo (the "Japanese Agent"), which was hired by the JV to help it obtain business in Nigeria, including by paying bribes to Nigerian officials. The information charges that the JV paid the consulting company over $50 million to bribe Nigerian government officials. According to the information, the Japanese Agent was an agent of the JV and each of the JV companies.

According to the information, between 1995 and 2004, the JV was awarded four contracts (collectively valued at over $6 billion) to build the Bonny Island Project and alleges that Snamprogetti, Technhip, Kellogg Brown & Root, Tesler, the Japanese Agent, and others, were engaged in a conspiracy to obtain and retain the contracts "through the promise and payment of tens of millions in bribes to officials of the Executive Branch of Nigeria, officials of Nigeria National Petroleum Corporation (NNPC), officials of Nigeria LNG Limited (NLNG) and others."

[According to the information, NNPC was a Nigerian government-owned company and an entity and instrumentality of the Government of Nigeria whose officers and employees were "foreign officials" under the FCPA. According to the information, NLNG was also an entity and instrumentality of the Government of Nigeria whose officers and employees were "foreign officials" under the FCPA, notwithstanding the fact that NLNG was 51% owned by multinational oil companies. Why? Presumably because, as the information alleges, "through the NLNG board members appointed by NNPC, among other means, the Nigerian government exercised control over NLNG, including but not limited to the abilty to block the award" of the relevant contracts.]

Among other means of the conspiracy, the information alleges that:

"officers, employees, and agents of Snamprogetti and their co-conspirators caused wire transfers totaling approximately $132 million to be sent from [#3's] bank account in Amsterdam, The Netherlands, to bank accounts in New York, New York, to be further credited to bank accounts in Switzerland and Monaco controlled by Tesler for Tesler to use to bribe Nigerian government officials."

"officers and employees of Snamprogetti and their co-conspirators caused wire transfers totaling over $50 million to be sent from [#3's] bank account in Amsterdam, The Netherlands to [Japanese Agent's] bank account in Japan for [the Japanese Agent to use to bribe Nigerian government officials."

Based on the same core conduct, the information also charges Snamprogetti with aiding and abetting violations of the FCPA's antibribery provisions and alleges that "Snamprogetti aided and abetted Kellogg, Brown and Root in causing [...] corrupt U.S. dollar payments to be wire transferred from [#3's] bank account in Amsterdam, The Netherlands, via correspondent bank accounts in New York, New York, to bank accounts of [Tesler's Gibraltar based company] in Switzerland for use in part to bribe Nigerian government officials."

DPA

The DPA has a term of two years. Parties to the DPA include Snamprogetti, Saipem and ENI.

Pursuant to the DPA, Snamprogetti admitted, accepted, and acknowledged that it is responsible for the acts of its employees, subsidiaries, and agents as detailed in the above criminal information.

According to the DPA, the DOJ agreed to enter into the agreement with the parties based on the following factors: "(a) Snamprogetti, Saipem, and ENI cooperated with the DOJ's investigation of Snamprogetti and others; (b)Snamprogetti, Saipem, and ENI undertook remedial measures, including the implementation of an enhanced compliance program; and (c) Snamprogetti, Saipem, and ENI agreed to continue to cooperate with the DOJ in any ongoing investigation of the conduct of Snamprogetti and its present and former employees, agents, consultants, contractors, subcontractors, subsidiaries, and others relating to violations of the FCPA."

According to the DPA, the fine range under the advisory U.S. Sentencing Guidelines for Snamprogetti's conduct is $300 million - $600 million. Snamprogetti agreed to pay a criminal penalty of $240 million or approximately 20% below the bottom of the fine range. Thus another example of the DOJ allowing a corporation to settle significant bribery allegations for an amount below even the bottom range of fines available under the advisory Sentencing Guidelines.

The DPA, unlike the recent Technip DPA, does require the engagement of a corporate compliance monitor.

Representing Snamprogetti, Saipem, and ENI in the FCPA enforcement action was Karen Patton Seymour (here) and Nicolas Bourtin (here) of Sullivan & Cromwell LLP.

In the DOJ release (here) Principal Deputy Assistant Attorney General Mythili Raman stated: "the resolutions in this investigation demonstrate the U.S. government’s commitment to identifying and holding accountable all companies and individuals who scheme to bribe foreign government officials to win business;" "Snamprogetti and its joint-venture partners conspired to pursue lucrative contracts through a massive bribery scheme – a scheme that has led to more than $1.28 billion in criminal and civil penalties to date. The monetary penalties and enforcement actions that have resulted from this investigation should send a clear message to companies and their employees that using foreign bribery as a means of winning contracts abroad will be punished." Kevin L. Perkins, assistant director of the FBI’s Criminal Investigative Division added: this "resolution is yet another example of the FBI’s willingness to aggressively investigate individuals and businesses that engage in corrupt conduct around the globe;" "those who elect to expand or protect their business interests through the payment of illegal bribes to foreign public officials should know that they are not beyond the reach of the FBI. Together, with our law enforcement partners around the world, we will identify these bad actors and work with the Justice Department to prosecute them under the Foreign Corrupt Practices Act and other appropriate federal statutes."

SEC Complaint

The SEC complaint "arises from multiple violations of the Foreign Corrupt Practices Act" by ENI and its former indirect subsidiary Snamprogetti. According to the complaint: "between at least 1995 and 2004, senior executives at Snamprogetti, among others, devised and implemented a scheme to bribe Nigerian government officials to assist in obtaining multiple contracts worth over $6 billion to build liquefied natural gas production facilities on Bonny Island, Nigeria" that a four-company JV, of which Snamprogetti was a member, won the contracts to build.

Specifically, the SEC complaint alleges that "to conceal the illicit payments, Snamprogetti and others, through the JV, entered into sham 'consulting' or 'services' agreements" with Tesler and the Japanese Agent "who would then funnel their purportedly legitimate fees to Nigerian government officials."

According to the SEC, "as a result of the scheme, numerous books and records of Snamprogetti and ENI contained false information relating to, among other things" Tesler and the Japanese Agent "and the payments made to them." Specifically, the SEC alleged that "Snamprogetti's business records [...] contained the contracts with [Tesler] and the Japanese Agent, which falsely described the purpose of the contracts in order to make it appear that the agents would perform legitimate services." According to the SEC, "these documents were part of Snamprogetti's business records and supported Snampogetti's financial statements, which were consolidated into ENI's financial statements."

The SEC alleges that "Snamprogetti did not conduct due diligence" on Tesler or the Japanese Agent and "ENI failed to ensure that Snamprogetti complied with ENI's policies regarding the use of agents." Specifically, the SEC alleged that "ENI's policies and procedures governed Snamprogetti's use of agents" but that "ENI failed to ensure that Snamprogetti conducted due diligence on agents hired through JV's in which Snamprogetti participated." "As a result," the complaint alleged, "ENI's internal controls failed to detect, deter or prevent the decades-long bribery scheme."

Based on the above allegations, the SEC charged Snamprogetti, as "an agent of a U.S. issuer" with violating the FCPA's antibribery provisions and knowingly falsifying books and records that supported the financial statements of ENI and knowingly circumventing ENI's internal accounting controls. The SEC charged ENI with violating the FCPA's books and records and internal control provisions. According to the SEC, "ENI exercised control and supervision of [...] Snamprogetti during the relevant time and on certain of its business decisions, such as Snamprogetti's entry into the JV."

Without admitting or denying the SEC's allegations, Snamprogetti and ENI consented to court orders permanently enjoining the companies from future violations of the FCPA and court orders requiring the companies, jointly and severally, to pay $125 million in disgorgement.

In a press release (see here) with the grabbing line "SEC charges Italian Company and Dutch Subsidiary in Scheme Bribing Nigerian Officials With Carloads of Cash," Robert Khuzami, Director of the SEC's Division of Enforcement stated: "this elaborate bribery scheme featured sham intermediaries, Swiss bank accounts, and carloads of cash as everyone involved made a concerted effort to cover their tracks" ... "but the billion-plus dollars in sanctions paid by these companies show that ultimately there is no hiding or profiting from bribery."

[As to the carload of cash, the SEC complaint alleges that the joint venture in which Snamprogetti participated in, paid Tesler (the UK agent) $40 million under a sham consulting agreement, and that Tesler then used a subcontractor to transfer $5 million to a Nigerian government official for the benefit of a Nigerian political party. According to the SEC complaint, "on several occassions, the Subcontractor personally delivered hand-delivered $1 million in U.S. currency in a brief case to the Nigerian official in a hotel room in Abuja, Nigeria." The complaint alleges that the "Subcontractor delivered the remainder of the $5 million to the Nigerian official in local Nigerian currency," but that because the currency "was too bulky to deliver by hand, the Subcontractor loaded the cash into vehicles, which were delivered to the Nigerian official."

In a press release (see here) ENI stated, among other things, as follows:

"As the U.S. authorities' court filings indicate, the criminal activity with which Snamprogetti Netherlands B.V. was charged ceased by June 15, 2004. Eni, Saipem, and Snamprogetti cooperated with the U.S. authorities' investigations. In the agreements, the SEC and DOJ did not require the implementation of any independent compliance monitor. Since the conduct at issue, Eni, Saipem, and Snamprogetti Netherlands B.V. have made substantial enhancements to their anti-corruption compliance programs, which monitor Eni and its subsidiaries' compliance systems. Eni and its subsidiaries are committed to continuous improvements to their internal compliance program and policies."

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Snamprogetti The Latest to Join The Bonny Island Bribery Club

Last week (see here and here), it was French company Technip that admitted to bribing Nigerian foreign officials with the end result being $338 million paid into the United States treasury.

This week its a Dutch company and its former Italian parent company that admitted to bribing Nigerian foreign officials with the end result being an additional $365 million paid into the United States treasury.

As indicated in this DOJ release: "Snamprogetti Netherlands B.V., (Snamprogetti) has agreed to pay a $240 million criminal penalty to resolve charges related to the Foreign Corrupt Practices Act (FCPA) for its participation in a decade-long scheme to bribe Nigerian government officials to obtain engineering, procurement and construction contracts" to build liquefied natural gas facilities on Bonny Island, Nigeria."

According to the release, the DOJ "filed a deferred prosecution agreement [DPA] and a criminal information today against Snamprogetti [a Dutch corporation headquartered in Amsterdam, The Netherlands, which was a wholly owned subsidiary of Snamprogetti S.p.A., an Italian company headquartered in Milan, Italy] charging Snamprogetti with one count of conspiracy and one count of aiding and abetting violations of the FCPA." The release further states that pursuant to the two-year DPA "Snamprogetti, its current parent company, Saipem S.p.A., and its former parent company, ENI S.p.A. (ENI), agreed to ensure that their compliance programs satisfied certain standards and to cooperate with the department in ongoing investigations."

In addition, the release notes that:

"Today, Snamprogetti and ENI also reached a settlement of a related civil complaint filed by the U.S. Securities and Exchange Commission (SEC), charging Snamprogetti with violating the FCPA’s anti-bribery provisions, falsifying books and records, and circumventing internal controls and charging ENI with violating the FCPA’s books and records and internal controls provisions. As part of that settlement, Snamprogetti and ENI agreed jointly to pay $125 million in disgorgement of profits relating to those violations."

For a copy of the SEC release and complaint (see here and here).

Stay tuned for analysis of the DOJ deferred prosecution agreement, criminal information, and SEC complaint.

In the meantime, some questions to ponder.

For those scoring at home, the current U.S. treasury deposit slip, because a joint venture largely comprised of foreign companies bribed Nigerian officials, stands at $1.28 billion given the related February 2009 enforcement action against Kellogg Brown & Root entities as well as Halliburton Company - an enforcement action that was settled for $579 million in combined fines and penalties.

Bribery and corruption, the conventional wisdom goes, is not a victimless crime. Accordingly, the Bonny Island bribery scheme resulted in victims. Surely those victims were not U.S. taxpayers, but the U.S. Treasury is where the entire $1.28 billion has gone.

The Bonny Island bribery scheme, which now stands as the largest collective FCPA enforcement action in history, begs the question - where should the fines and penalties resulting from an FCPA enforcement action go? Solely to U.S. taxpayers? To the "victims" of the alleged crime? If to the "victims" who are the "victims" and how best does one get the money to the "victims?" Are the enforcement agencies willing to sacrifice portions of their current FCPA cash cow? (see here for more).

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