Trends In International Litigation : International Business Lawyer & Attorney : Ed Joffe : Joffe & Joffe Law Firm : Miami, Florida Global Customs & Trade Issues

 As reported by David Hechler of Corporate Counsel, the Department of Justice unit that prosecutes Foreign Corrupt Practices Act cases will soon grow "substantially," according to Mark Mendelsohn, deputy chief of the fraud section's criminal division.  Mendelsohn said his section "may grow as much as 50 percent in size in the next year or two." At the same time, he added, he expects companies to play an increasingly aggressive role in thwarting corruption.

"Companies -- individually and collectively and in collaboration with countries -- need to adopt stricter standards," Mendelsohn told a gathering of compliance professionals on February 24  at the Global Ethics Summit 2010 in New York City.

Companies will soon have help on that front. The Organization for Economic Co-operation and Development (OECD) will be publishing best practices guidelines that, unlike those promulgated by the U.S. Sentencing Commission, are specifically tailored to these kinds of cases, and will arrive with the endorsement of the U.S. government, Mendelsohn said.

Mendelsohn began the morning reviewing recent enforcement trends. The big one was the jump in the prosecution of individuals. The number last year was 44 -- up from nine in 2008, 10 in 2007, and six in 2006. When the Justice Department goes after corruption, it isn't myopically focused only on FCPA violations. It's used money laundering, wire fraud and antitrust laws, among others, Mendelsohn noted. "They're all tools to be used against corruption."

He also spoke of increased cooperation with other countries."I don't want to overstate this," he said. "I think the progress is modest and mixed. But there have been pockets." He called the collaboration between U.S. and German authorities in the case against Siemens "the high water mark." He sounded positive about a bribery bill in the U.K. that is widely expected to become law in the coming months. But he reserved his strongest language for the importance of this work to the United States. It even has an impact on the war effort, he observed.

"Corruption is a national security issue," he said, "and an impediment to stability in places like Iraq and Afghanistan."

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A Virginia resident pleaded guilty today in connection with his role in a conspiracy to pay bribes to former Panamanian government officials, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division, US Department of Justice.

John W. Warwick, 64, of Virginia Beach, Va., pleaded guilty before U.S. District Court Judge Henry E. Hudson in Richmond, Va., to a one-count indictment charging him with conspiring to make corrupt payments to foreign government officials for the purpose of securing business for Ports Engineering Consultants Corporation (PECC) in violation of the Foreign Corrupt Practices Act (FCPA). Warwick was indicted on Dec. 15, 2009. PECC, a company incorporated under the laws of Panama, was affiliated with an engineering firm based in Virginia Beach. According to the indictment, PECC was created so that Warwick, co-conspirator Charles Jumet, the engineering firm and others could corruptly obtain certain maritime contracts from the Panamanian government.

According to court documents, Warwick and Jumet participated in a conspiracy to pay money secretly to Panamanian government officials for awarding contracts to PECC to maintain lighthouses and buoys along Panama’s waterway. In December 1997, the Panamanian government awarded PECC a no-bid 20-year concession to perform these duties. Upon receipt of the concession, Warwick, Jumet and others authorized corrupt payments to be made to the Panamanian government officials.

In connection with his guilty plea, Warwick admitted that at least from 1997 through approximately July 2003, he, Jumet and others conspired to make corrupt payments totaling more than $200,000 to the former administrator and deputy administrator of the Panama Maritime Authority and to a former, high-ranking elected executive official of the Republic of Panama.

As part of his plea agreement, Warwick has agreed to forfeit $331,000, which represents the proceeds of this crime. At sentencing, scheduled for May 14, 2010, at 10:30 a.m. before Judge Hudson, Warwick faces a maximum of five years in prison and a fine of the greater of $250,000 or twice the gain or loss.

Jumet pleaded guilty on Nov. 13, 2009, to a two-count criminal information charging him with conspiring to make corrupt payments to foreign government officials for the purpose of securing business for PECC, in violation of the FCPA, and making a false statement. Jumet is scheduled to be sentenced on March 26, 2010.

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On January 19,2010 the Justice Department announced that twenty-two executives and employees of companies in the military and law enforcement products industry have been indicted for engaging in schemes to bribe foreign government officials to obtain and retain business, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Channing Phillips for the District of Columbia; and Assistant Director Kevin Perkins of the FBI’s Criminal Investigative Division. Twenty-one defendants were arrested in Las Vegas yesterday. One defendant was arrested in Miami. The indictments stem from an FBI undercover operation that focused on allegations of foreign bribery in the military and law enforcement products industry.
The 16 indictments unsealed today represent the largest single investigation and prosecution against individuals in the history of DOJ’s enforcement of the Foreign Corrupt Practices Act (FCPA), a law that prohibits U.S. persons and companies, and foreign persons and companies acting in the United States, from bribing foreign government officials for the purpose of obtaining or retaining business. The indictments unsealed today were returned on Dec. 11, 2009, by a grand jury in Washington, D.C.

In connection with these indictments, approximately 150 FBI agents executed 14 search warrants in locations across the country, including Bull Shoals, Ark.; San Francisco; Miami; Ponte Vedra Beach, Fla.; Sarasota, Fla.; St. Petersburg, Fla.; Sunrise, Fla.; University Park, Fla.; Decatur, Ga.; Stearns, Ky.; Upper Darby, Penn.; and Woodbridge, Va. Additionally, the United Kingdom’s City of London Police executed seven search warrants in connection with their own investigations into companies involved in the foreign bribery conduct that formed the basis for the indictments.

These cases are being prosecuted by Assistant Chief Hank Bond Walther and Trial Attorney Laura N. Perkins of the Criminal Division’s Fraud Section, and Matthew C. Solomon of the U.S. Attorney’s Office for the District of Columbia.

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  Thomas L. Gallagher  of the Journal of Commerce reports that Panalpina is in discussions  with the U.S. Justice Department to settle allegations that it violated American anti-bribery laws in Nigeria.

Panalpina began the talks last week and said the process may take several months. Since 2007, the company has conducted its own investigation, coordinated with the DOJ, into allegations that it had bribed Nigerian officials in violation of the Foreign Corrupt Practices Act.

The DOJ has received updates on the company’s compliance programs and their implementation, including the decision to close Panalpina’s Nigerian organization and restructure its operations in West Africa.

In July 2007, the Justice Department’s criminal fraud unit made known its concerns about alleged payments to Nigerian customs agents made by Panalpina. The Securities and Exchange Commission also launched a related civil investigation.

The company lost millions in profits and spent another $15 million-plus on legal and consulting fees. In December 2008, Nigeria-based investing group Worldwide Premier Logistics Solution took over Panalpina’s operations in the country.
 

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Even foreign companies are vulnerable to the tentacles of The Foreign Corrupt Practices Act (FCPA). After three years of satisfying obligations under a deferred prosecution agreement, the charges against Statoil ASA for violating the anti-bribery and accounting provisions of the Foreign Corrupt Practices Act (FCPA) have been dismissed with prejudice. Statoil is an international oil company headquartered in Norway and listed on the New York Stock Exchange.

On Oct. 13, 2006, the Department of Justice filed a criminal information charging that in 2001 and 2002, Statoil sought to expand its business internationally and focused specifically on Iran as a country in which to secure oil and gas development rights. At the time, Iran was awarding contracts for the development of the South Pars field, one of the world’s largest natural gas fields. In 2001, Statoil developed contacts with and began negotiating with an Iranian government official who could influence the award of oil and gas contracts in Iran. Statoil then entered into a "consulting contract" with an offshore intermediary company. The purpose of that "consulting contract" – which called for the payment of more than $15 million over 11 years – was to induce the Iranian official to use his influence to help Statoil obtain a contract to develop portions of the South Pars field, and to open doors to future Iranian oil and gas projects. Two bribe payments totaling more than $5 million were made by wire transfer, and Statoil was awarded a South Pars development contract that was expected to yield millions of dollars in profit. The criminal information charged that Statoil violated the FCPA by making the corrupt payments, and also committed securities fraud by falsifying its books and records in characterizing the bribe payments as "consulting fees."

According to the deferred prosecution agreement, Statoil acknowledged making the corrupt payments, agreed to pay a $10.5 million penalty, and agreed to the appointment of an independent compliance consultant for a three-year period to review and periodically report on the company’s compliance with the deferred prosecution agreement and to conduct a comprehensive review of the controls, policies and procedures of Statoil related to compliance with the FCPA. Under the terms of the deferred prosecution agreement, the criminal information was to remain pending until it was either dismissed or prosecuted in order to allow Statoil to demonstrate its good conduct.
The Department of Justice has received the final report of the compliance consultant,  F. Joseph Warin of Gibson, Dunn & Crutcher) and determined that Statoil has fully complied with all of its obligations under the deferred prosecution agreement, including the obligation to adopt the compliance-related recommendations of the compliance consultant. Accordingly, on Nov. 18, 2009, the Department filed a motion with the court to dismiss with prejudice the criminal information against Statoil. U.S. District Judge Richard J. Holwell granted that motion and has dismissed the charges.

This case was handled by Deputy Chief Mark F. Mendelsohn of the Fraud Section as well as Assistant U.S. Attorney Ray Lohier and former Assistant U.S. Attorney Deborah Landis of the Southern District of New York. Fraud Section Trial Attorney Joseph Capone also provided assistance on this case.
 

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The Foreign Corrupt Practices Act (FCPA) is alive and well.   A former consultant for Willbros International Inc. (WII), a subsidiary of Houston-based Willbros Group Inc. (Willbros), pleaded guilty today to engaging in a conspiracy to pay more than $6 million in bribes to government officials of the Federal Republic of Nigeria and officials from a Nigerian political party, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and Assistant Director Joseph Persichini Jr., of the FBI’s Washington Field Office.

Paul G. Novak, 43, pleaded guilty before U.S. District Judge Simeon T. Lake III in Houston to one count of conspiracy to violate the  and one substantive count of violating the FCPA. Sentencing has been scheduled for Feb. 19, 2010.

"The use of intermediaries to pay bribes will not escape prosecution under the FCPA," said Assistant Attorney General Lanny A. Breuer. "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."

"The FBI is committed to investigating and weeding out corruption that inhibits honest business practices around the globe," said Assistant Director Persichini.

 In his plea, Novak admitted that from approximately late-2003 to March 2005, he conspired with others to make a series of corrupt payments totaling more than $6 million to various Nigerian government officials and officials from a Nigerian political party to assist Willbros in obtaining and retaining the Eastern Gas Gathering System (EGGS) Project, which was valued at approximately $387 million. The EGGS project was a natural gas pipeline system in the Niger Delta designed to relieve existing pipeline capacity constraints.

According to information contained in plea documents, Novak, along with alleged co-conspirators Kenneth Tillery, Jason Steph, Jim Bob Brown, three employees from a German construction company based in Mannheim, Germany agreed to make the corrupt payments to, among others, government officials from the Nigerian National Petroleum Corporation (NNPC), the National Petroleum Investment Management Services (NAPIMS), a senior official in the executive branch of the federal government of Nigeria, members of a Nigerian political party and officials from the Shell Petroleum Development Company of Nigeria Ltd. (SPDC). According to court documents, the bribes were paid to assist in obtaining and retaining the EGGS project and additional optional scopes of work.

According to information contained in plea documents, to secure the funds for those corrupt payments, Steph and others caused Willbros West Africa Inc. (WWA), a subsidiary of Willbros, to enter into so-called "consultancy agreements" with two consulting companies Novak represented in exchange for purportedly legitimate consultancy services. In reality, those consulting companies were used to facilitate the payment of bribes. Specifically, the consulting companies would invoice WWA for purported consulting services and would receive payment from WII’s bank account in Houston to the consulting companies’ bank accounts in Lebanon. Novak would then use money from the Lebanese bank accounts to pay bribes to the various Nigerian officials.

This case is being prosecuted by Assistant Chief Hank Bond Walther and Trial Attorney Laura N. Perkins of the Criminal Division’s Fraud Section and investigated by the FBI’s Washington Field Office.
 

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