SFO Flexing It Muscle Even Without the Bribery Act

In previous statements (see here for instance) U.K. officials have said that it would be wrong to assume that the U.K. was ignoring bribery issues prior to passage of the Bribery Act.

Case(s) in point - the recent enforcement actions announced by the Serious Fraud Office against MK Kellogg Ltd. and Mabey & Johnson directors.

MK Kellogg Ltd.

Yesterday, the SFO announced (here) that M.W. Kellogg Limited ("MKWL") has been ordered to pay "just over £7 million [approximately $11.2 million] in recognition of sums it is due to receive which were generated through the criminal activity of third parties."

This SFO enforcement action has been expected for some time, as noted in this previous post from October 2009.

MKWL was the entity that originally formed the TSKJ consortium the focus of the Bonny Island bribery scandal. See this post for current enforcement statistics as to KBR/Halliburton, Technip, and Snamprogetti / ENI.

MKWL is currently a wholly-owned subsidiary of KBR and as noted in this previous post as well as KBR's release (here) Halliburton has indemnification obligations to KBR in connection with the SFO enforcement action of "55% of such penalties, which is KBR’s beneficial ownership interest in MWKL."

According to the SFO release, "the SFO recognized that MKWL took no part in the criminal activity that generated the funds" but that the "funds due to MKWL are share dividends payable from profits and revenues generated by contracts obtained through bribery and corruption undertaken by MWKL's parent company and others." The SFO release notes that "MWKL was used by the parent company and was not a willing participant in the corruption."

As noted in the SFO release, the court order against MKWL was pursuant to the Proceeds of Crime Act 2002. What is the Proceeds of Crime Act? See this piece from John Rupp (Covington & Burling).

Richard Alderman, the Director of the SFO, stated in the release: "our goal is to prevent bribery and corruption or remove any of the benefits generated by such activities - this case demonstrates the range of tools we are prepared to use."

Mabey & Johnson Directors

In July 2009, the SFO brought an enforcement action against Mabey & Johnson Ltd. (a U.K. company that designs and manufacturers steel bridges). The conduct at issue involved allegations (that the company voluntarily disclosed) that it sought to influence decision-makers in public contracts in Jamaica and Ghana between 1993 and 2001. The prosecution also involved breaches of United Nations sanctions in connection with the Iraq Oil for Food program.

It was the first ever prosecution against a U.K. company for overseas corruption. See here and here for the prior post.

On February 10th, the SFO announced (here) that "two former directors ... of Mabey & Johnson Ltd. [Charles Forsyth and David Mabey] have been found guilty of inflating the contract price for the supply of steel bridges in order to provide kickbacks to the Iraqi government of Saddam Hussein."

According to the release, at the time of the offense, Forsyth was the Managing Director of Mabey & Johnson and Mabey was the Sales Director. The release notes that Richard Gledhill, a Sales Manager for contracts in Iraq, previously pleaded guilty. According to the release, all individuals are to be sentenced on February 23rd.

The U.S. has prosecuted numerous companies in connection with Iraqi Oil-For-Food fraud. See here for such allegations in the ABB matter, here for such allegations in the Innospec matter, here for such allegations in the General Electric matter.

However, these prosecutions have generally been corporate only prosecutions with few related enforcement actions against individuals.

In just its single Mabey & Johnson prosecution, the SFO would appear to have prosecuted more individuals than the U.S. has in its approximately 15 Iraqi Oil for Food corporate enforcement actions combined.

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Bonny Island Bribery Developments

As reported elsewhere earlier this week (see here among other places), JGC Corporation of Japan (here) is close to resolving an FCPA enforcement action. JGC is the fourth joint venture partner along with KBR, Technip and Snamprogetti in the TSKJ consortium (a consortium originally formed by M.W. Kellogg) involved in the Bonny Island, Nigeria project.

In a disclosure earlier this week (here) the company stated:

"JGC and DOJ have been engaged in discussions about a potential resolution of the investigation relating to JGC. It was confirmed at the meeting of JGC's board of directors held on January 31, 2011 that the Board has approved a potential resolution of the investigation. Based on this approval, JGC recognized a provision for the cost estimated for such a resolution, which will be appropriated as a financial loss in the 3rd Quarter Financial Result. The amount of such loss is 17.8 billion Japanese yen [approximately $218 million]".

The expected JGC settlement would thus fall in the Top Ten FCPA enforcement actions of all time (see here for the FCPA Blog's current list) and would bump the total amount of corporate fines and penalties U.S. authorities have collected in Bonny Island bribery cases to approximately $1.52 billion.

See here for my current Bonny Island bribery statistics.

How will JGC's expected settlement affect KBR (a company, along with its current or former affiliated entities, that has already paid $579 million in U.S. fines and penalties in connection with Bonny Island)?

In early January, KBR announced (here) that it "completed the acquisition of the 44.94 percent share interest in M.W. Kellogg Limited (MWKL) previously held by JGC Corporation. With the completion of the transaction, MWKL, which was previously an affiliate of both companies since 1992, is again a wholly-owned KBR subsidiary."

During a January 13th earnings call, Sue Carter (KBR - Senior VP and CFO) stated as follows:

"Also in regards to MWKL, included in the transaction is an estimate of JGC’s share of the ongoing [Serious Fraud Office] investigation. Any potential liabilities at this point are only estimated. Therefore any financial impact pending an actual outcome in the investigation will be trued up positive or negative."

During the Q&A, William Utt (KBR - Chairman, President and CEO) was asked "can you tell us what kind of risks are structured in the MWKL deal? I mean, you have indemnification clauses for FCPA from Halliburton on your original stake. Do you have a similar clause with JGC?" He responded as follows: "Well I think the indemnification from Halliburton goes towards any financial penalties associated with the SFO investigation and as Sue commented, we've already factored that into the purchase price with JGC subject to a true-up."

As Halliburton disclosed in its Oct. 22, 2010 10-Q filing, its indemnification obligations to KBR in connection with the SFO investigation "is limited to 55% of such penalties, which is KBR’s beneficial ownership interest in MWKL."

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Friday Roundup

Save the date, Halliburton speaks on Nigeria, and the SEC's first non-prosecution agreement ... it's all here in the Friday roundup.

Save the Date

FCPA enforcement 2010 is coming to a close. The three most significant events from 2010? The three most interesting events from 2010? And a bold prediction?

That is my task on December 29th when I participate in Securities Docket's annual "Year in Review" webcast slated for 1 p.m. EST. The webcast is free and you can sign up here.

Other participants who address the same questions as to their area of expertise include Compliance Week editor Matt Kelly, Francine McKenna (re: The Auditors), Francis Pileggi (Delaware corporate law guru), Kevin LaCroix (The D&O Diary), Tracy Coenen (The Fraud Files), Lyle Roberts (The 10b-5 Daily) and Securities Docket’s Bruce Carton.

Halliburton Statement on Nigeria Charges

In last week's Friday roundup, it was noted that Nigeria dropped charges against Dick Cheney after his former employer, Halliburton, reportedly agreed to pay a $250 million fine. According to various media reports, the sum consisted of $120 million in penalties and the repatriation of $130 million.

A Halliburton spokesman was quoted as saying "we have no comment to make on this."

Halliburton has now spoken and its statement (here) contradicts the widely reported $250 million figure. The statement reads, in full, as follows:

"Halliburton announced today the resolution of the previously disclosed investigation by the Federal Government of Nigeria (FGN) arising out of allegations of improper payments to government officials in Nigeria in connection with the construction and subsequent expansion by a joint venture known as TSKJ of a natural gas liquefaction project on Bonny Island, Nigeria, in which Halliburton's former subsidiary KBR, Inc. had an approximate 25 percent interest. Pursuant to this agreement, all lawsuits and charges against KBR and Halliburton corporate entities and associated persons have been withdrawn, the FGN agreed not to bring any further criminal charges or civil claims against those entities or persons, and Halliburton agreed to pay US$32.5 million to the FGN and to pay an additional US$2.5 million for FGN’s attorneys’ fees and other expenses. Among other provisions, Halliburton agreed to provide reasonable assistance in the FGN’s effort to recover amounts frozen in a Swiss bank account of a former TSKJ agent and affirmed a continuing commitment with regard to corporate governance. Any charges related to this settlement will be reflected in discontinued operations."

SEC's First Non-Prosecution Agreement

In January 2010, the SEC announced a series of measures (see here) "to further strengthen its enforcement program by encouraging greater cooperation from individuals and companies in the agency's investigations and enforcement actions."

"New cooperation tools" not previously available to the SEC, include, among other things:

* "Cooperation Agreements — Formal written agreements in which the Enforcement Division agrees to recommend to the Commission that a cooperator receive credit for cooperating in investigations or related enforcement actions if the cooperator provides substantial assistance such as full and truthful information and testimony."

* "Deferred Prosecution Agreements — Formal written agreements in which the Commission agrees to forego an enforcement action against a cooperator if the individual or company agrees, among other things, to cooperate fully and truthfully and to comply with express prohibitions and undertakings during a period of deferred prosecution."

and

* "Non-prosecution Agreements — Formal written agreements, entered into under limited and appropriate circumstances, in which the Commission agrees not to pursue an enforcement action against a cooperator if the individual or company agrees, among other things, to cooperate fully and truthfully and comply with express undertakings."

The SEC release noted that "similar cooperation tools have been regularly and successfully used by the Justice Department in its criminal investigations and prosecutions."

Earlier this week, the SEC announced (here) its first non-prosecution agreement against Carter's Inc. related to enforcement action against its former Executive Vice President (Joseph M. Elles) for engaging in financial fraud and insider trading.

The SEC's announcement states as follows:

"The SEC also announced that it has entered a non-prosecution agreement with Carter's under which the Atlanta-based company will not be charged with any violations of the federal securities laws relating to Elles's unlawful conduct. The non-prosecution agreement reflects the relatively isolated nature of the unlawful conduct, Carter's prompt and complete self-reporting of the misconduct to the SEC, its exemplary and extensive cooperation in the investigation, including undertaking a thorough and comprehensive internal investigation, and Carter's extensive and substantial remedial actions. This marks the first non-prosecution agreement entered by the SEC since the announcement of the SEC's new cooperation initiative earlier this year."

The NPA (here) is similar to DOJ NPAs and DPAs in the FCPA context. Carter's agreed to cooperate in the investigation of its former employee and any other related enforcement action and Carter's is prohibited from making any public statement contrary to the factual basis of the agreement (notwithstanding that the NPA does not contain a factual basis or a statement of facts). The NPA specifically states that the agreement should not "be deemed exoneration of [Carter's] or be construed as a finding by the Commission that no violation of the federal securities laws have occurred."

Although the Carter NPA is not in an FCPA enforcement action, it is likely that NPAs (and DPAs) will be frequently used by the SEC (as they are by the DOJ) in the FCPA context.

As I note in the "Facade of FCPA Enforcement" (here), DOJ NPAs and DPAs have exploded in recent years and the "lions share" of these agreements are used to resolve FCPA enforcement actions. Many observers believe that NPAs and DPAs have taken the place of declinations and that companies are pressured to enter into such agreements prematurely even before each element of the relevant charge is established.

With the SEC now using such alternative resolution vehicles, the end result will be even less judicial scrutiny (not that there is much judicial scrutiny at present) as to SEC interpretations of the FCPA and whether factual evidence actually exists to support each element of an FCPA charge.

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Friday Roundup

Nigeria drops charges against Dick Cheney after Halliburton reportedly pays $250 million; James Giffen is sad, though not bitter; an Iraqi Oil for Food prosecution ... in Scotland; International Anti-Corruption Day is "marred"; and another voice joins "the FCPA simply means what the enforcement agencies say it means" chorus ... it's all here in the Friday Roundup.

Charges Against Cheney in Nigeria Dropped

On December 7th, Nigerian authorities apparently filed criminal charges against Dick Cheney, and others, in connection with the Bonny Island bribery scheme. As discussed in this prior post, Cheney was CEO of Halliburton from 1995 until 2000. In February 2009, Halliburton, Kellogg Brown & Root LLC, and KBR Inc. agreed to pay $579 million in combined DOJ/SEC FCPA enforcement action to resolve charges related to Bonny Island. According to the DOJ, the improper conduct took place between 1994 and 2004. The case remains the largest ever FCPA enforcement action against a U.S. company.

Farida Mzamber Waziri, the executive chairwomen of Nigeria's Economic and Financial Crimes Commission stated, "Dick Cheney was head of Halliburton" "There's no way such amount of money would've been moved to bribe Nigeria without his approval and without his knowledge, this is what we're saying." (See here for a video).

In a swift conclusion to the matter, it is been reported (see here among other places) that Nigeria has dropped charges against Cheney after his former employer, Halliburton, agreed to pay a $250 million fine. According to the report, the sum consists of $120 million in penalties and the repatriation of $130 million.

According to this report in the U.K. Telegraph, former U.S. President George H.W. Bush and former Secretary of State James Baker helped in the negotiations.

A Halliburton spokesman is quoted as saying "we have no comment to make on this."

Sad, But Not Bitter

David Glovin (Bloomberg) recently sat down with James Giffen and penned this article. For more on the Giffen enforcement action and its mysterious conclusion see here for numerous prior posts.

Giffen is sad, though not bitter about what he terms the DOJ's "selective" prosecution of him and he asks "in whose interest was the investigation in the first place." Given Giffen's "public authority" defense, much of the case focused on classified documents. Not even Giffen's lawyer, William Schwartz (here) had access to many of the documents - one person did and that was Judge William Pauley (S.D.N.Y.) "who made his feelings known." (see here).

Wehr Group

Glasgow, Scotland based engineering firm Wehr Group plc (here) recently pleaded guilty to two charges of breaching UN sanctions in connection with a number of UN sanctioned Iraqi Oil for Food contracts awarded between 2000 and 2002. As noted in the company's release (here), "following the guilty plea, Weir has been subject to a confiscation order in the sum of £13,945,962. In addition it has been fined £3 million." For more see here.

International Anti-Corruption Day "Marred"

Raymond Baker (here), the Director of Global Financial Integrity, says here that "this year's International Anti-Corruption Day [was] marred by a U.S. Chamber of Commerce attempt to weaken the Foreign Corrupt Practices Act." In November, the Chamber released a paper (here) authored by Andrew Weissman and Alixandra Smith titled "Restoring Balance - Proposed Amendments to the Foreign Corrupt Practices Act."

According to Baker, "the short answer" to various issues raised by the current era of FCPA enforcement is simple: "don't bribe anyone, whether she/he is a public official, a private citizen, or someone in between."

Gee, thanks for that guidance, problem solved!

The FCPA's Big Lesson

Richard Cassin, creator of the FCPA Blog and a pioneer of the FCPA's blogosphere, hit the ball out of the park with this recent column for Ethisphere.

Among other things, Cassin writes as follows: "I know there’s practically no FCPA-related case law, no precedent to follow, no stare decisis to light the way. So the FCPA is pretty much what the enforcement agencies say it is. And that’s what’s so very different and difficult about it. It’s what I call the FCPA’s Big Lesson."

*****

A good weekend to all.

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Cheney Reportedly To Be Charged By Nigerian Authorities In Connection With Bonny Island

During Tuesday's Senate subcommittee FCPA hearing, Senator Christopher Coons noted, in connection with other nations ramping up enforcement of their own bribery laws, that "today we are the only nation that is extending extraterritorial reach and going after the citizens of other countries, we may some day find ourselves on the receiving end of such transnational actions."

Prescient statement.

Bloomberg is reporting (here) that Nigeria's Economic and Financial Crimes Commission will soon files charges against former Vice President Dick Cheney and officials from five foreign companies, including Halliburton Co., in connection with the Bonny Island bribery scheme.

Bloomberg reports that indictments will be filed in a Nigeria court and that an arrest warrant for Cheney “will be issued and transmitted through Interpol” for enforcement. As noted by Bloomberg, Cheney was CEO of Halliburton from 1995 until 2000.

In February 2009, Halliburton, Kellogg Brown & Root LLC, and KBR Inc. agreed to pay $579 million in combined DOJ/SEC FCPA enforcement action to resolve charges related to Bonny Island. According to the DOJ, the improper conduct took place between 1994 and 2004. The case remains the largest ever FCPA enforcement action against a U.S. company.

See here for the DOJ resolution and here for the SEC resolution.

The DOJ's press release (here) states that the "successful prosecution of KBR [...] demonstrates that no one is above the law" and that the FBI "will continue to investigate these matters by working in partnership with other law enforcement agencies, both foreign and domestic, to ensure that corporate executives who have been found guilty of bribing foreign officials in return for lucrative business contracts, are punished to the full extent of the law."

Over the summer, Technip and Snamprogetti/Eni, joint venture partners with KBR, also agreed to settle FCPA enforcement actions in connection with Bonny Island.

Technip agreed to pay $338 million in a joint DOJ / SEC enforcement action (see here and here).

Snamprogetti/ENI agreed to pay $365 million in a joint DOJ / SEC enforcement action (see here and here).

The fourth joint venture partner, JGC of Japan, has yet to resolve its exposure although it has been reported that it is settlement discussions with the DOJ.

For a complete run-down of "Bonny Island Bribery Club Statistics" see here.

The only individual charged thus far has been Albert Jack Stanley (see here). Stanley pleaded guilty and was originally scheduled to be sentenced in May 2009, but has not yet been sentenced.

Two joint venture agents, Jeffrey Tesler and Wojciech Chodan (both U.K. citizens) have also been charged (see here). Tesler and Chodan have been fighting extradition.

Yesterday, the U.K. Guardian (here) reported that Chodan, who had given up his extradition battle, is to arrive in the U.S. in the next 10 days to stand trial. The Guardian reports that Tesler will seek to overturn his extradition today.

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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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Friday Roundup

Some FCPA news to pass along on this Friday.

SFO Defends BAE Settlement

Richard Alderman, the Director of the U.K. Serious Fraud Office ("SFO") recently defended the SFO settlement with BAE (see here).

Among other things, Alderman argued that any suggestion BAE "got off lightly" ignores "London's contribution in enabling the U.S. to impose a $400 million fine."

Point taken.

Alderman then says that the DOJ "would not have achieved what they achieved without [the SFO] and [the SFO] would not have achieved what [the SFO] achieved without [the DOJ]."

Point not taken.

What actually did the DOJ and SFO achieve in the BAE matter? What is achieved when a company settles a case invovling allegations of worldwide bribery, per the allegations in the public documents, WITHOUT being held accountable bribery?

What is achieved when you charge BAE's agent (presumably based on evidence that the following did occur) for "conspiracy to corrupt" and for "conspiring with others to give or agree to give corrupt payments [...] to unknown officials and other agents of certain Eastern and Central European governments, including the Czech Republic, Hungary and Austria as inducements to secure, or as rewards for having secured, contracts from those governments for the supply of goods to them, namely SAAB/Gripen fighter jets, by BAE Systems Plc" and then a few days later withdraw the charges and state "[t]his decision brings to an end the SFO's investigations into BAE's defence contracts."

As to this issue, Alderman stated that "the public interet lay in drawing a line under the whole investigation."

The article notes that "two campaigning groups said they would launch a legal challenge to Mr. Alderman's decision, saying it failed to reflect the scale and scope of the bribery allegations relating to BAE's network of hundreds of agents on four continents." If anyone knows who these groups are, or the legal framework (including standing) under U.K. law to allow such a challenge, please do share.

For prior posts on BAE, includng the DOJ's non-bribery, bribery allegations see here.

Alderman did also suggest that additional joints DOJ/SEC settlements are being negotiated.

The Pipes May Soon Burst

Ocassionaly, I have covered "cases" reportedly in the FCPA pipeline (see here). Set forth below is some "pre-news" about some coming attractions.

Given the above, it seems fitting to start with KBR, Inc.

KBR, Inc.

Here's what Halliburton had to say earlier this week regarding its exposure via M.W. Kellogg / KBR for the SFO piece of the investigation into Bonney Island (Nigeria)(pgs. 35-36, 63-64). For a prior post see here.

Pride International Inc.

Earlier this week, Pride disclosed (here) that:

"it has accrued $56.2 million in the fourth quarter of 2009 in anticipation of a possible resolution with the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) of potential liability under the U.S. Foreign Corrupt Practices Act. {...] The accrual in the fourth quarter 2009 represents the company's best estimate of potential fines, penalties and disgorgement related to settlement of the matter with the DOJ and SEC. The monetary sanctions ultimately paid by the company to resolve these issues, whether imposed on the company or agreed to by settlement, may exceed the amount of the accrual."

For prior posts about Pride see here.

Innospec, Inc.

Here is what Innospec had to say about its on-going FCPA matter:

""We have made substantial progress, but not yet completed, negotiations of final settlements of the Oil for Food Program and FCPA investigations, in either the U.S. or United Kingdom. However, we have charged a further $21.9 million in the quarter, based on the status of ongoing discussions, to bring the total amount accrued to $40.2 million. The Company will make no further comments on the ongoing proceedings."

Alcatel-Lucent

Alcatel-Lucent recently provided (here) details (see pg. 112) on its FCPA (and other) exposure concerning conduct in Costa Rica and other places. In pertinent part the company stated:

"As previously disclosed in its public filings, Alcatel-Lucent has engaged in settlement discussions with the DOJ and the SEC with regard to the ongoing FCPA investigations. These discussions have resulted in December 2009 in agreements in principle with the staffs of each of the agencies. There can be no assurances, however, that final agreements will be reached with the agencies or accepted in court. If finalized, the agreements would relate to alleged violations of the FCPA involving several countries, including Costa Rica, Taiwan, and Kenya. Under the agreement in principle with the SEC, Alcatel-Lucent would enter into a consent decree under which Alcatel-Lucent would neither admit nor deny violations of the antibribery, internal controls and books and records provisions of the FCPA and would be enjoined from future violations of U.S. securities laws, pay U.S.
$45.4 million in disgorgement of profits and prejudgment interest and agree to a three-year French anticorruption compliance monitor to evaluate in accordance with the provisions of the consent decree (unless any specific provision therein is expressly determined by the French Ministry of Justice to violate French law)
the effectiveness of Alcatel-Lucent's internal controls, record-keeping and financial reporting policies and procedures. Under the agreement in principle with the DOJ, Alcatel-Lucent would enter into a three-year deferred prosecution agreement (DPA), charging Alcatel-Lucent with violations of the internal controls and
books and records provisions of the FCPA, and Alcatel-Lucent would pay a total criminal fine of U.S. $ 92 million—payable in four installments over the course of three years. In addition, three Alcatel-Lucent subsidiaries—Alcatel-Lucent France, Alcatel-Lucent Trade and Alcatel Centroamerica—would each plead guilty to
violations of the FCPA’s antibribery, books and records and internal accounting controls provisions. The agreement with the DOJ would also contain provisions relating to a three-year French anticorruption compliance monitor. If Alcatel-Lucent fully complies with the terms of the DPA, the DOJ would dismiss the charges upon
conclusion of the three-year term."

For the trials and tribulations on both sides of this corporate hyphen see here and here.

Thirsty for more? OK, here is the last one.

Maxwell Technologies Inc.

Here is what the company's CEO had to say about its $9.3 million accural for a potential FCPA settlement:

"Unfortunately, all this good news is tempered by the GAAP required $9.3 million accrual we recorded in Q4 for the potential settlement of FCPA violations in connection with the sale of high-voltage capacitor products in China by our Swiss subsidiary. As we reported previously, after we became aware of questionable payments made to an independent sales agent in China, we disclosed that discovery and initiated an internal review and we have been voluntarily sharing information with the SEC and the Justice Department."

See also here.

*****

A good weekend to all.

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An FCPA Triangle

First it was the company - Willsbros Group Inc. (see here).

Then, it was the company's employees - Jim Bob Brown (see here) and Jason Steph (see here).

Finally, it is the company's consultant - Paul Novak (see here).

An FCPA triangle of sorts.

Don't hold your breath waiting for an FCPA square because, as has been noted in previous posts, the final piece of the puzzle ... the "foreign official" will not be happening anytime soon as the FCPA only applies to the "briber-giver" not the "bribe-taker."

As noted in the DOJ release, Novak (a former consultant for Willbros International Inc. - a subsidiary of Willbros Group Inc.) pleaded guilty to one count of conspiracy to violate the FCPA and one substantive count of violating the FCPA in connection with payments to Nigerian "foreign officials."

Assistant Attorney General Breuer (the blog's "person of the week" given his frequent mention here in the last few days) had this to say:

"The use of intermediaries to pay bribes will not escape prosecution under the FCPA. The Department will continue to hold accountable all the players in an FCPA scheme - from the companies and their executives who hatch the scheme, to the consultant they retain to carry it out."

Of course, there still must be jurisdiction over the consultant, but this was not a problem in the Novak matter as he is a U.S. citizen and thus subject both to territorial jurisdiction (i.e. U.S. nexus - see 78dd-2(a)) or nationality jurisdiction (see 78dd-2(i)).

This isn't the first time the DOJ has gone after consultants or agents. In March 2009, the DOJ unsealed indictments against U.K. citizens Jeffrey Tesler and Wojciech Chodan for their alleged roles in the KBR/Halliburton Nigeria bribery scheme. (see here for the DOJ release, here for the indictment).

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Halliburton / KBR ... The Sequel

In February 2009, Halliburton Co., KBR Inc., and Kellogg Brown & Root LLC agreed to resolve parallel DOJ and SEC FCPA enforcement actions concerning improper payments to Nigerian officials in connection with the Bonny Island liquefied natural gas project. (see here, here, and here).

The combined $579 million in fines and penalties remains the most ever against a U.S. company for FCPA violations.

Included in the web of companies involved in the Nigeria conduct was M.W. Kellogg Company ("MWKL"), a United Kingdom joint venture 55% owned by KBR. MWKL is mentioned in the linked DOJ and SEC materials above.

It looks like Halliburton's exposure via M.W. Kellogg is not over.

Today, in a 10-Q filing (see here - p. 10), Halliburton stated as follows:

"In the United Kingdom, the Serious Fraud Office (SFO) is considering civil claims or criminal prosecution under various United Kingdom laws and appears to be focused on the actions of MWKL, among others. Violations of these laws could result in fines, restitution and confiscation of revenues, among other penalties, some of which could be subject to our indemnification obligations under the master separation agreement. Our indemnity for penalties under the master separation agreement with respect to MWKL is limited to 55% of such penalties, which is KBR’s beneficial ownership interest in MWKL. 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."

It used to be that companies with FCPA exposure could get a good night's sleep after resolving DOJ and (if an issuer) SEC enforcement actions.

As this action (and others in recent years) demonstrate, the landscape has changed and "tag-a-long" FCPA-like enforcement actions or inquiries in other countries I think will become the new norm.

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