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Prepared by:

Thomas O. Gorman,
Dorsey and Whitney LLP
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Gorman.tom@Dorsey.com

 
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    THE FCPA: A KEY FOCUS OF SECURITIES REGULATORS

    While insider trading has been dominating the news, the Foreign Corrupt Practices Act remains a key focus of securities regulators. The Department of Justice continued to unwind a years long conspiracy to violate the FCPA with the guilty plea yesterday of Wojciech J. Chodan, a former commercial vice president and consultant to the U.K. subsidiary of Kellogg, Brown & Root, Inc., now a subsidiary of Halliburton Company. Mr. Chodan pleaded guilty to conspiring to violate the FCPA. The date for sentencing has not been set.

    The conduct on which Mr. Chodan’s plea is based traces to 1990 and continued over the next fourteen years. At that time KBR, Snamprogetti Netherlands B.V., Technip S.A. and another company formed a joint venture to secure contracts from Nigeria LNG, Ltd., a company formed by the Nigerian government which held a 49% interest. The government created the company to capture and sell natural gas associated with oil production in the country. The joint venture partners determined that bribes had to be paid to acquire business.

    From 1995 through 2004, the joint venture was awarded four EPC contracts by Nigeria LNG Ltd. to build facilities on Bonny Island. KBR CEO Albert Stanley and others met with a designated representative of the government and negotiated the agreements and bribes. Mr. Chodan recommended that the joint venture hire two agents to pay the bribes. One was a Gibraltar corporation controlled by Jeffrey Tesler. The other was a Japanese trading company. About $132 million was paid to the Gibraltar company. Another $50 million was paid to the Japanese trading company. At various points during the venture, Messrs. Stanley, Chodan and others met with government officials to secure the appointment of a representative with whom they could deal.

    Previously, KBR, Snamprogetti, Technip and Mr. Stanley resolved their cases:

    • KBR pleaded guilty to conspiring to violate the FCPA. The company agreed to pay a $402 million criminal fine which is at the lower end of the sentencing guideline range and to retain a monitor for three years. U.S. v. Kellogg Brown & Root LLC, Case No. H-09-071 (S.D. Tex. Filed Feb. 11, 2009) (here). The company and its parent also settled with the SEC, consenting to the entry of a permanent injunction prohibiting future violations of the anti-bribery and books and records and internal control provisions of the FCPA and to pay disgorgement of $177 million. SEC v. Halliburton Co., Case No. 4:09-CV-399 (S.D. Tex. Filed Feb. 11, 2009) (also discussed here).

    • Snamprogetti settled with DOJ, entering into a deferred prosecution agreement and agreeing to pay a criminal fine of $240 million. The fine is about 20% below the guideline range, reflecting the full cooperation of the company. U.S. v. Snamprogetti Netherlands B.V., Case No. H-10-460 (S.D. Tex. Filed July 7, 2010). The parent company and the subsidiary settled with the SEC, consenting to the entry of a permanent injunction prohibiting future violations of the anti-bribery and books and records provisions and to pay a civil penalty of $125 million. SEC v. ENI, S.p.A., Case No. 4:10-cv-0214 (S.D. Tex. Filed July 7, 2010) (here).

    • Technip entered into a deferred prosecution agreement with DOJ and to pay a $240 million criminal fine which is about 25% below the guideline calculation reflecting its cooperation. The company also agreed to install a compliance monitor. U.S. v. Technip, H-10-439 (S.D. Tex. Filed June 28, 2010). To settle with the SEC, Technip consented to the entry of a permanent injunction prohibiting future violations of the anti-bribery and books and records provisions of the FCPA. The company also agreed to disgorge $98 million in profits from the scheme along with prejudgment interest. SEC v. Technip, Case No. 4:10-cv-02289 (S.D. Tex. Filed June 28, 2010) (here).

    • Mr. Stanley pleaded guilty to a two count information charging conspiracy to violate the FCPA and conspiracy to commit wire and mail fraud. U.S. v. Stanley, H-08-597 (S.D. Tex. Filed Sept. 3, 2008).

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