SEC SAYS THREE OIL SERVICES EXECUTIVES VIOLATED FOREIGN CORRUPT PRACTICES ACT

The following excerpt is from the SEC website:

"Washington, D.C., Feb. 24, 2012 — The Securities and Exchange Commission today charged three oil services executives with violating the Foreign Corrupt Practices Act (FCPA) by participating in a bribery scheme to obtain illicit permits for oil rigs in Nigeria in order to retain business under lucrative drilling contracts.

The SEC alleges that former Noble Corporation CEO Mark A. Jackson along with James J. Ruehlen, who is the current Director and Division Manager of Noble’s subsidiary in Nigeria, bribed customs officials to process false paperwork purporting to show the export and re-import of oil rigs, when in fact the rigs never moved. The scheme was designed to save Noble Corporation from losing business and incurring significant costs associated with exporting rigs from Nigeria and then re-importing them under new permits. B

ribes were paid through a customs agent for Noble’s Nigerian subsidiary with Jackson and Ruehlen’s approval.

The SEC separately charged Thomas F. O’Rourke, who was a former controller and head of internal audit at Noble. The SEC alleges that O’Rourke helped approve the bribe payments and allowed the bribes to be booked improperly as legitimate operating expenses for the company. O’Rourke agreed to settle the SEC’s charges and pay a penalty.

“These executives knowingly authorized and paid foreign officials to process false documents, and they consciously concealed the scheme from Noble’s audit committee,” said Gerald Hodgkins, Associate Director in the SEC’s Division of Enforcement. “When executives bribe government officials overseas, their misconduct puts their companies in legal peril and damages the integrity of foreign markets and the reputation of U.S. companies abroad.”

Noble Corporation was charged with FCPA violations as part of a sweep of the oil services industry in late 2010. The company cooperated with investigators and agreed to pay more than $8 million to settle civil and criminal cases.

According to the SEC’s complaint against Jackson and Ruehlen filed in U.S. District Court for the Southern District of Texas, the executives who perpetrated the scheme worked at Noble Corporation and its Nigerian subsidiary Noble Drilling (Nigeria) Ltd, whose rigs operated in Nigeria on the basis of temporary import permits granted by the Nigeria Customs Service (NCS). These temporary permits allowed the rigs to be in the country for a one-year period. NCS had the discretion to grant up to three extensions lasting six months each, after which the rigs were required to be exported and re-imported under a new temporary permit or be permanently imported with the payment of sizeable duties.

The SEC alleges that Jackson and Ruehlen had a role in arranging, facilitating, approving, making, or concealing the bribe payments to induce Nigerian customs officials to grant new temporary permits illegally and favorably exercise or abuse their discretion to grant permit extensions. Together, Jackson and Ruehlen participated in paying hundreds of thousands of dollars in bribes to obtain about 11 illicit permits and 29 permit extensions. Jackson approved the bribe payments and concealed the payments from Noble’s audit committee and auditors. Ruehlen prepared false documents, sought approval for the bribes, and processed and paid the bribes.

The SEC’s complaint against Jackson and Ruehlen alleges they directly violated the anti-bribery provisions of Section 30A of the Securities Exchange Act and the internal controls and false records provisions at Section 13(b)(5) and Rule 13b2-1 of the Exchange Act. The complaint alleges that they aided and abetted Noble’s violations of Section 30A and the books and records and internal controls provisions at Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act. The complaint further alleges that Jackson directly violated Exchange Act Rule 13b2-2 by misleading auditors and Exchange Act Rule 13a-14 by signing false certifications of Noble’s financial statements. He also is liable as a control person under Section 20(a) of the Exchange Act for violations of the anti-bribery, books and records, and internal controls provisions by Noble, Ruehlen, and O’Rourke.

The SEC’s complaint against O’Rourke alleges that he aided and abetted Noble’s violations of the anti-bribery, books and records, and internal controls provisions of the Exchange Act, and that he directly violated the internal controls and false records provisions of the Exchange Act. Without admitting or denying the SEC’s allegations, O’Rourke consented to entry of a court order requiring him to pay a $35,000 penalty and permanently enjoining him from further violations of Sections 13(b)(2)(A), 13(b)(2)(B), 13(b)(5) and 30A of the Exchange Act and Rule 13b2-1.

The SEC’s investigation was conducted by Moira T. Roberts, Sharan K.S. Custer, and Colin Rand, and the litigation effort will be led by Kenneth W. Donnelly. The SEC acknowledges the assistance of the U.S. Department of Justice, Fraud Section, and the Federal Bureau of Investigation."

SEC ALLEGES DIAGEO PLC VIOLATED FOREIGN CORRUPT PRACTICES ACT

The following is an excerpt from the SEC website: Washington, D.C., July 27, 2011 — The Securities and Exchange Commission today charged one of the world’s largest producers of premium alcoholic beverages with widespread violations of the Foreign Corrupt Practices Act (FCPA) stemming from more than six years of improper payments to government officials in India, Thailand, and South Korea. The SEC found that London-based Diageo plc paid more than $2.7 million through its subsidiaries to obtain lucrative sales and tax benefits relating to its Johnnie Walker and Windsor Scotch whiskeys, among other brands. Diageo agreed to pay more than $16 million to settle the SEC’s charges. The company also agreed to cease and desist from further violations of the FCPA’s books and records and internal controls provisions. “For years, Diageo’s subsidiaries made hundreds of illicit payments to foreign government officials,” said Scott W. Friestad, Associate Director of the SEC’s Division of Enforcement. “As a result of Diageo’s lax oversight and deficient controls, the subsidiaries routinely used third parties, inflated invoices, and other deceptive devices to disguise the true nature of the payments.” According to the SEC’s order instituting settled administrative proceedings against Diageo, the company made more than $1.7 million in illicit payments to hundreds of government officials in India from 2003 to mid-2009. The officials were responsible for purchasing or authorizing the sale of its beverages in India, and increased sales from these payments yielded more than $11 million in profit for the company. The SEC found that from 2004 to mid-2008, Diageo paid approximately $12,000 per month – totaling nearly $600,000 – to retain the consulting services of a Thai government and political party official. This official lobbied other high-ranking Thai government officials extensively on Diageo’s behalf in connection with pending multi-million dollar tax and customs disputes, contributing to Diageo’s receipt of certain favorable decisions by the Thai government. According to the SEC’s order, Diageo paid 100 million in Korean currency (more than $86,000 in U.S. dollars) to a customs official in South Korea as a reward for his role in the government’s decision to grant Diageo significant tax rebates. Diageo also improperly paid travel and entertainment expenses for South Korean customs and other government officials involved in these tax negotiations. Separately, Diageo routinely made hundreds of gift payments to South Korean military officials in order to obtain and retain liquor business. The SEC’s order found that Diageo and its subsidiaries failed properly to account for these illicit payments in their books and records. Instead, they concealed the payments to government officials by recording them as legitimate expenses for third-party vendors or private customers, or categorizing them in false or overly vague terms or, in some instances, failing to record them at all. Diageo lacked sufficient internal controls to detect and prevent the wrongful payments and improper accounting. The SEC’s order found that Diageo violated Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934. Without admitting or denying the findings, Diageo agreed to cease and desist from further violations and pay $11,306,081 in disgorgement, prejudgment interest of $2,067,739, and a financial penalty of $3 million. Diageo cooperated with the SEC’s investigation and implemented certain remedial measures, including the termination of employees involved in the misconduct and significant enhancements to its FCPA compliance program.”

JOHNSON AND JOHNSON PAYS OVER $70 MILLION TO SETTLE BRIBERY CHARGES

The following case from the SEC web site details the settlement in a case which involved the Foreign Corrupt Practices act:

“The Securities and Exchange Commission today announced a settlement with Johnson and Johnson (“J&J”) to resolve SEC charges that the New Brunswick, NJ-based global pharmaceutical, consumer product, and medical device company violated the Foreign Corrupt Practices Act (FCPA) by bribing public doctors in several European countries and paying kickbacks to Iraq to illegally obtain business.
The SEC alleges that, since at least 1998, J&J’s subsidiaries paid bribes to public doctors in Greece who selected J&J surgical implants, paid bribes to public doctors and hospital administrators in Poland who awarded tenders to J&J, and paid bribes to public doctors in Romania to prescribe J&J pharmaceutical products. J&J also paid kickbacks to Iraq in order to obtain contracts under the United Nations Oil for Food Program (“Program”).
J&J has agreed to pay more than $48.6 million in disgorgement and prejudgment interest to settle the SEC’s charges and to pay a $21.4 million fine to the U.S. Department of Justice to settle criminal charges. A resolution of a related investigation by the United Kingdom Serious Fraud Office is anticipated.
The SEC’s complaint alleges that J&J subsidiaries, employees, and agents paid bribes to public doctors and administrators in Greece, Poland, and Romania. Doctors who ordered or prescribed J&J products were rewarded in a variety of ways, including cash and inappropriate travel. A variety of schemes were used to carry-out the bribery, including the use of slush funds, sham civil contracts with doctors, and off-shore companies in the Isle of Man. A J&J executive was involved in the Greek conduct, and MD&D Poland executives running three business lines oversaw the creation of sham contracts, travel documents, and the creation of slush funds in Poland. The SEC’s complaint also alleges that J&J’s agent paid secret kickbacks to Iraq to obtain nineteen Oil for Food contracts.
Without admitting or denying the SEC’s allegations, J&J has consented to the entry of a court order permanently enjoining it from future violations of Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934; ordering it to pay $38,227,826 in disgorgement and $10,438,490 in prejudgment interest; and ordering it to comply with certain undertakings regarding its FCPA compliance program.
J&J voluntarily disclosed some of the violations by its employees, and conducted a thorough internal investigation to determine the scope of the bribery and other violations, including proactive investigations in more than a dozen countries by both its internal auditors and outside counsel. J&J’s internal investigation and its ongoing compliance programs were essential in gathering facts regarding the full extent of J&J’s FCPA violations.
Kelly G. Kilroy and Tracy L. Price of the Enforcement Division’s FCPA Unit and Brent S. Mitchell and Reid A. Muoio conducted the SEC’s investigation. The SEC acknowledges the assistance of the U.S. Department of Justice, Fraud Section; the Federal Bureau of Investigation; the Serious Fraud Office in the United Kingdom; and 5th Investigation Department of the Regional Prosecutor’s Office in Radom, Poland. The SEC's investigation is continuing.”

SEC ALLEGES FORMER EXECUTIVE WITH BRIBING IRAQI OFFICIAL'S

The following is another case involving alleged bribery of foreign governments by an official working for a U. S. corporation. The charges are based upon the violation of the Foreign Corrupt Practices Act. For details please read the excerpt from the SEC web site:


The SEC “charged a former chief executive officer at Innospec, Inc., with violating the Foreign Corrupt Practices Act (FCPA) by approving bribes to government officials to obtain and retain business.
The SEC alleges that Paul W. Jennings learned of the company's longstanding practice of paying bribes to win orders for sales of tetraethyl lead (TEL) in mid- to late 2004 while serving as the CFO. After becoming CEO in 2005, Jennings and others in Innospec's management approved bribery payments to officials at the Iraqi Ministry of Oil (MoO) in order to sell the fuel additive to Iraq refineries. Innospec used its third-party agent in Iraq to funnel payments to Iraqi officials.

Jennings agreed to settle the SEC's charges against him. The SEC previously charged Innospec as well as its former TEL business director and its agent in Iraq with FCPA violations.
"This is the third enforcement action against an individual responsible for the widespread bribery that occurred at Innospec," said Cheryl J. Scarboro, Chief of the SEC's Foreign Corrupt Practices Act Unit. "We will vigorously hold accountable those individuals who approve such bribery and who sign false SOX certifications and other documents to cover up the wrongdoing."
According to the SEC's complaint filed in U.S. District Court for the District of Columbia, Jennings played a key role in Innospec's bribery activities in Iraq and Indonesia. Innospec, a manufacturer and distributor of fuel additives and other specialty chemicals, was charged last year for making illicit payments of approximately $6.3 million and promised an additional $2.8 million in illicit payments to Iraqi ministries and government officials as well as Indonesian government officials in exchange for contracts worth approximately $176 million.
The SEC alleges that Innospec made payments totaling more than $1.6 million and promised an additional $884,480 to MoO officials. For example, in an October 2005 e-mail copying Jennings, the agent said that Iraqi officials were demanding a 2 percent kickback and that "[w]e are sharing most of our profits with Iraqi officials. Otherwise, our business will stop and we will lose the market. We have to change our strategy and do more compensation to get the rewards." The kickback and later payments were paid by increasing the agent's commission, which Jennings approved. The SEC's complaint also alleges that Jennings was aware of the scheme to pay an official at the Trade Bank of Iraq in exchange for a favorable exchange rate on letters of credit. Another scheme involved a bribe to ensure the failure of a field test of a competitor product. A confidential MoO report for the field trial test was shared with Jennings. Bribes were offered to secure a 2008 Long Term Purchase Agreement that would have caused approximately $850,000 to be shared with Iraqi officials. The agreement, however, did not go forward due to the investigation and ultimate discovery by U.S. regulators of widespread bribery by Innospec.
According to the SEC's complaint, Innospec also paid bribes to Indonesian government officials from at least 2000 to 2005 in order to win contracts worth more than $48 million from state-owned oil and gas companies in Indonesia. Jennings became aware of and approved payments beginning in mid to late 2004. Various euphemisms to refer to the bribery were commonly used in e-mails and in discussions with Jennings and others at Innospec, including "the Indonesian Way," "the Lead Defense Fund," and "TEL optimization." Bribery discussions were held on a flight in the U.S. and even discussed at Jennings' performance review in 2005. In one bribery scheme with Pertamina, an Indonesian state owned oil and gas company, Innospec agreed, with approval by Jennings, to a "one off payment" of $300,000 to their Indonesian Agent with the understanding that it would be passed on to an Indonesian official.
The SEC's complaint also alleges that from 2004 to February 2009, Jennings signed annual certifications that were provided to auditors where he falsely stated that he had complied with Innospec's Code of Ethics incorporating the Company's FCPA policy. Jennings also signed annual and quarterly personal certifications pursuant to the Sarbanes-Oxley Act of 2002 in which he made false certifications concerning the company's books and records and internal controls.
Jennings has consented, without admitting or denying the SEC's allegations, to the entry of a final judgment that permanently enjoins him from violating Sections 30A and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 13a-14, 13b2-1 and 13b2-2 thereunder, and from aiding and abetting Innospec's violations of Exchange Act Sections 30A, 13(b)(2)(A) and13(b)(2)(B). Jennings will disgorge $116,092 plus prejudgment interest of $12,945, and pay a penalty of $100,000 that takes into consideration Jennings's cooperation in this matter.
The SEC appreciates the assistance of the U.S. Department of Justice's Fraud Section, the Federal Bureau of Investigation, and the U.K.'s SFO in this matter. The SEC's investigation is continuing.”

It is good to see that there was cooperation between agencies in the investigation of this case. There have been many cases of bribery which violated the Foreign Corrupt Practices Act. It might be to the advantage of The United States if the State Department would seek severe punitive actions against nations that allow officials to seek out bribes.