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It's been quite a week on the FCPA enforcement front.
On Monday, the DOJ announced (here)
criminal obstruction of justice charges against "Frederic Cilins a French
citizen [for] attempting to obstruct an ongoing investigation into whether
a mining company paid bribes to win lucrative mining rights in the Republic of
Yesterday, it was reported (here)
that former Siemens executive Uriel Sharef had, as expected, settled the SEC
enforcement action against him by agreeing, without admitting or denying
the SEC's allegations, to pay a $275,000 penalty. (See here for
the prior post discussing the DOJ's and SEC's December 2011 charges against
Sharef and others).
Yesterday, the DOJ announced (here) that
criminal charges "have been unsealed against one current and one former
executive of the U.S. subsidiary of a French power and transportation company
for their alleged participation in a scheme to pay bribes to foreign government
officials." The individuals are:
Frederic Pierucci ("a current company executive who
previously held the position of vice president of global sales for the
Connecticut-based U.S. subsidiary) "who was charged in an indictment unsealed
in the District of Connecticut with conspiring to violate the Foreign Corrupt
Practices Act (FCPA) and to launder money, as well as substantive charges of
violating the FCPA and money laundering." According to the
DOJ, Pierucci, a French national, was arrested Sunday night at John F.
Kennedy International Airport.
David Rothschild ("a former vice president of sales for
the Connecticut-based U.S. subsidiary") who pleaded guilty on Nov. 2,
2012, to a criminal information charging one count of conspiracy to violate the
FCPA. The charges against Rothschild and his guilty plea were recently
Future posts will explore in more detail each of the
Today's post is about yesterday's other FCPA
development - the announcement of the long-expected enforcement action
against Parker Drilling (a Houston-based oil drilling services company) for
conduct in Nigeria.
As indicated in this DOJ
release, the Parker Drilling action "stemmed from the DOJ's Panalpina-related
As detailed in this prior
post, in November 2010, the DOJ and SEC announced coordinated
FCPA enforcement actions against Swiss-based freight
forwarder Panalpina and six oil and gas companies that utilized its
services in connection with business in Nigeria. The November 2010
enforcement action resulted in approximately $237 million in combined DOJ/SEC
settlement amounts. (For additional reading on these actions, please
visit the CustomsGate tab under the search feature of this site or see here where all the
prior actions are linked). As noted in this prior
statistical post, Panalpina-related enforcement actions are one, of just a
few unique events, that have given rise to the majority of
FCPA enforcements since 2007, and Panalpina-related enforcement
actions significantly contributed to the "spike" in FCPA enforcement
actions in 2010.
Total fines and penalties in the Parker Drilling
enforcement action were approximately $15.9 million (approximately $11.8
million in the DOJ enforcement action and approximately $4.1 million in the SEC
This post summarizes the DOJ's and SEC's allegations
and resolution documents.
The DOJ enforcement action involved a criminal
against Parker Drilling resolved through a deferred prosecution
Parker Drilling operated oil-drilling rigs in Nigeria
owned by Parker Drilling (Nigeria Limited), a Nigerian entity and
wholly-owned subsidiary of Parker Drilling Offshore International, Inc.,
(a Cayman Islands corporation wholly-owned by Parker Drilling). According
to the information, "Parker Drilling ceased drilling operations in Nigeria in
2006″ and the conduct at issues focused on two issues or events that occurred
between 8 to 12 years ago.
First, the information, like the prior
Panalpina-related enforcement actions, alleged conduct in connection
with obtaining temporary importation permits (TIPs) in Nigeria for
oil-drilling rigs. The information alleges that in 2001, Parker Drilling
retained Panalpina to "obtain TIPs and TIP extensions on Parker Drilling's
behalf. According to the information, between 2001 and 2002:
"Panalpina obtained new TIPs for Parker Drilling's
rigs by submitting false paperwork on Parker Drilling's behalf to avoid the
time, cost, and risk associated with exporting the rigs and re-importing them
into Nigerian waters (a process that Panalpina referred to as the 'paper
process' or 'recycling.'). Panalpina created and caused to be
presented to Nigerian officials documents that reflected that the rigs had been
physically exported and re-imported. In reality, the drilling rigs never
left Nigerian waters."
Second, and more significant in terms of the conduct
alleged in the information, the DOJ alleges conduct in relation to the
Nigerian "Panel of Inquiry for the Investigation of All Cases of
Temporary Import Permits Issued Between 1984 to Year 2000″ (the "TI
Panel"). According to the information, the TI Panel was "presidentially
appointed, operated under the auspices of the Nigerian President's Office,
and possessed the power to issue subpoenas and levy fines" in connection with
certain duties and tariffs that the Nigerian Customs Service ("NCS") collected
or failed to collect between 1984 and 2000.
As to the TI Panel, the information alleges
that beginning in 2002 the TI Panel began reviewing Parker Drilling.
According to the information, thereafter Parker Drilling engaged Nigeria
Outside Counsel (a Nigerian citizen based in Nigeria who advised Parker
Drilling on customs and other matters in Nigeria) and a Nigeria Agent (a
Nigerian and British citizen based in the U.K. to assist Parker Drilling in
connection with customs matters in Nigeria) who represented Parker Drilling
before the TI Panel.
The information alleges that in 2004 "the TI Panel
concluded that Parker Drilling had violated [Nigerian law] with respect to
several of its TIPS" and that the "TI Panel assessed a fine of $3.8 million
against Parker Drilling." The information then outlines a "bribery
scheme," that resulted in the TI Panel reducing Parking Drilling's fine "to
In connection with this "bribery scheme," the
information alleges conduct as to Employee A (a U.S. citizen based in Nigeria
who, during the relevant time period, was the General Manager of Parker
Drilling's operations in Nigeria); Employee B (a U.S. citizen based in Nigeria
who also was a General Manager of Parker Drilling's Operations in
Nigeria); Executive A (a U.S. citizen based in Houston who performed financial
and compliance functions for Parker Drilling between 2002 through 2005);
Executive B (a U.S. citizen based in Houston who performed a legal function for
Parker Drilling); U.S. Outside Counsel (a U.S. citizen and partner in a U.S.
law firm who served as Parker Drilling's outside counsel who provided
legal and business advice to Parker Drilling on customs and other issues in
Specifically, the information alleges that U.S Outside
Counsel suggested that Parker Drilling retain the Nigeria Agent to resolve its
Nigerian customs issues even though Nigeria Agent's "resume, which U.S. Outside
Counsel provided to Parker Drilling, did not reflect any past experience in
Nigeria or handling customs issues." According to the information, Parker
Drilling "conducted no additional due diligence into Nigeria Agent's
The information alleges that "with one exception,
Parking Drilling paid Nigeria agent indirectly through the U.S.-based law firm"
and that "Executives A and B paid and caused to be paid all of Nigeria Agent's
expenses without receiving any invoices particularly describing the
expenditures' purposes." According to the information, many of
expenses related to food, entertainment, social events and the like and the
information alleges various meetings the Nigeria Agent had with various
Nigerian foreign officials.
The information further alleges that Parker Drilling's
treasurer informed Executive B "that the lack of invoices could raise an issue
in Parker Drilling's ongoing Sarbanes Oxley audit." Thereafter, the
information alleges, the Nigeria Agent sent an invoice and that Executive B
"accepted the invoice and retained it in Parker Drilling's files, knowing that
the invoice did not accurately reflect the true purpose of Parker's Drillings"
prior payments to the Nigeria Agent.
The information then states as follows. "All told,
Parker Drilling transferred and caused to be transferred to Nigeria Agent
approximately $1.25 million to address Parker Drilling's TI Panel issues" and
that "Nigeria Agent succeeded in reducing Parker Drilling's TI Panel Fines."
Based on the above conduct, the information charges one
count of violating the FCPA's anti-bribery provisions. Although the
above Panalpina-related allegations are incorporated by reference into the
paragraphs charging the FCPA violation, the information specifically identifies
only the TI Panel conduct and states as follows. "Parker Drilling
made and cause to be made from the United States ... a series of payments
totaling approximately $1.25 million to Nigeria Agent, knowing that all or a
portion of those payments would be given or used to procure goods and services
that were to be given to a foreign government official in return for the
diminution of a lawfully assessed fine."
Deferred Prosecution Agreement
The above charge against Parker Drilling was
resolved via a DPA in which Parker Drilling admitted, accepted, and
acknowledged that it was responsible for the acts of its officers, directors,
employees and agents as charged in the information.
The DPA has a term of three years and under the
heading "relevant considerations" it states as follows.
"The Department enters into this Agreement based on the
individual facts and circumstances presented by this case and the
Company. Among the facts considered were the following: (a) the
Company's cooperation, including conducting an extensive internal investigation
and collecting, analyzing, and organizing voluminous evidence and information
for the Department; (b) the Company has engaged in extensive remediation,
including ending its business relationships with officers, employees or agents
primarily responsible for the corrupt payments, enhancing its due diligence
protocol for third-party agents and consultants, increasing training and
testing requirements, and instituting heightened review of proposals and other
transactional documents for all the Company's contracts; (c) the Company has
retained a full-time Chief Compliance Officer and Counsel who reports to the
Chief Executive Officer and Audit Committee, as well as staff to assist the
Chief Compliance Officer and Counsel; (d) the Company has already significantly
enhanced and is committed to continue to enhance its compliance program and
internal controls, including ensuring that its compliance program satisfies the
minimum elements set forth [elsewhere in the DPA]; (e) the Company has
implemented a compliance-awareness improvement initiative and program that
includes issuance of periodic anti-bribery compliance alerts; (f) the Company
has already implemented many of the elements described [elsewhere in the DPA];
and (g) the Company has agreed to continue to cooperate with the Department in
any ongoing investigation ...".
Pursuant to the DPA, the advisory Sentencing Guidelines
range for the conduct at issue was $14.7 million to $29.4 million.
The DPA then states as follows.
"The Company agrees to pay a monetary penalty in the
amount of $11,760,000, an approximately 20% reduction off the bottom of the
fine range [...]. The Company and the Department agree that this fine is
appropriate given the facts and circumstances of this case, including the
Company's cooperation, extensive remediation, committment to continue to
enhance its compliance program, and culpability relative to other companies
examined in this investigation."
During the period of the DPA, Parker Drilling will have
annual reporting obligations to the DOJ concerning its remediation and
implementation of various compliance measures. As is typical in
FCPA DPAs, Parker Drilling also agreed to a "muzzle clause" (see
this prior post
for more information).
In a related enforcement action based on the same core
conduct, the SEC brought a civil complaint (here)
against Parking Drilling.
The introductory paragraph of the complaint states as
"This matter involves violations of the Foreign Corrupt
Practices Act ("FCPA") by Defendant Parker Drilling Company. In 2004,
through its outside counsel, Parker Drilling retained a Nigerian agent to
assist the company with customs disputes related to the importation of its
drilling rigs into Nigeria. During the course of the agent's work, two Parker
Drilling executives knowingly paid the agent large sums of money through its
outside counsel for, among other things, the "entertainment" of Nigerian
foreign officials in an effort to obtain their influence in resolving the
The SEC complaint also contains a paragraph with
the same general Panalpina-related allegations as alleged in the DOJ's
Under the heading "Remedial Efforts" the complaint states
"Parker Drilling demonstrated significant cooperation and
conducted an extensive internal investigation. Since the time of the conduct
noted in this Complaint, Parker Drilling has made significant enhancements to
its global anti-corruption compliance program, including: retaining a full-time
Chief Compliance Officer and Counsel who reports to the Chief Executive Officer
and Audit Committee and full-time staff to assist him; enhancing
anti-corruption due diligence requirements for relationships with third
parties; increasing compliance monitoring and corporate auditing specifically
tailored to anti-corruption; implementing a compliance awareness initiative
that includes issuance of periodic anti-bribery compliance alerts; enhancing
financial controls and governance; and expanding anti-corruption training
throughout the organization."
Based on the above conduct, the SEC charged
an FCPA anti-bribery violation and an FCPA books and records and
internal controls violation. Other than restating the language
of the books and records and internal controls provisions, the
SEC complaint does not contain any specific allegations concerning these
As noted in this SEC
release, Parker Drilling agreed to pay disgorgement of 3,050,00 plus
pre-judgment interest of $1,040,818, and consented to the entry of a final
judgment permanently enjoining it from future FCPA violations.
Pilchen and Stephanie
Cherny (Skadden, Arps) represented Parker Drilling.
Parker Drilling in this
release stated as follows.
"After an extensive investigation, with which we fully
cooperated, we are pleased to have reached agreement with the DOJ and the SEC,
and we will continue to maintain a vigorous FCPA compliance program, to
emphasize the importance of compliance and ethical business conduct, and to
enhance our compliance efforts."
Parker Drilling had previously disclosed that the DOJ and
SEC's investigations concerned "certain of our operations relating to
countries in which we currently operate or formerly operated, including
Kazakhstan and Nigeria."
Read more articles on the FCPA by Mike
Koehler at FCPA
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