by T. GormanPosted on Posted in SECActions

The TSKJ joint venture is the gift that just keeps on giving, at least for FCPA prosecutors. The most recent involves Marubeni Corporation which admitted to being an agent of the venture and agreed to settle FCPA charges. The company entered into a two year deferred prosecution agreement with the Department of Justice and agreed to pay a criminal fine of $54.6 million. Marubeni also agreed to retain a corporate compliance consultant, to install new procedures and improve others and to cooperate with the DOJ’s on-going investigation. The underlying information charges the company with one count of conspiracy and one count of aiding and abetting FCPA violations. At the end of the two year term the information will be dismissed if the company complies with its obligations. U.S. v. Marubeni Corporation, (S.D.Tx.).

The TSKJ joint venture was formed in 1990 by Technip S.A., Snamprogetti Netherlands B.V, Kellogg Brown & Root, Inc. and JGC Corporation. The purpose of the venture was to secure contracts from Nigeria LNG, Ltd., a company created by the Nigerian government to capture and sell natural gas associated with oil production in that country. The government retained a 49% interest in Nigeria LNG.

The joint venture determined that bribes had to be paid to secure business. As part of its efforts, the venture retained two agents, according to the court documents. One was Jeffrey Tesler, a U.K. solicitor. The other was Marubeni, a Japanese trading company headquartered in Tokyo. Mr. Tesler served as a consultant to the venture and paid bribes to high-level Nigerian government officials. Those included top level executive branch officials. Marubeni was retained to pay bribes to lower level government officials. At key points, a number of the co-conspirators, including employees of Marubeni, met with senior executive level government officials to determine with whom they should meet to negotiate bribes in connection with the awarding of contacts, according to the court papers. The joint venture is alleged to have paid about $132 million to a Gibraltar corporation controlled by Mr. Tesler and $51 million to Marubeni during the course of the scheme. The payments were intended to be used at least in part to bribe Nigerian government officials.

Previously, each member of the TSKG joint venture resolved FCPA charges with the DOJ:

  • Technip entered into a deferred prosecution agreement in 2010. As part of that agreement the company paid a $240 million criminal fine and retained an independent compliance monitor for two years. Technip also settled with the SEC. The company paid a total of $338 million to settle criminal and civil FCPA related charges.
  • Snamprogetti also entered into a deferred prosecution agreement with the DOJ in 2010. The company agreed to pay a criminal fine of $210 million. Snamprogetti also settled with the SEC, along with its former parent ENI, S.p.A., despite the fact that neither an issuer or a domestic concern. In total, $365 million was paid to resolve the inquiries.
  • KBR pleading guilty to FCPA related charges and agreed to pay a criminal fine of $402 million and to retain an independent compliance monitor for a period of three years in 2009. The company, along with its parent Halliburton Company, also settled with the SEC. In total it paid $579 million to resolve the criminal and civil inquiry.
  • JGC Corporation also entered into a deferred prosecution agreement to resolve the DOJ criminal inquiry. In 2011 the company agreed to pay $218.8 million in connection with that agreement.

The settlements with the four members of the TSKJ joint venture are among the largest in FCPA history. Indeed, each is part of the current “top ten” largest FCPA settlements.

Finally, three individuals have pleaded guilty in connection with the activities of the venture. Mr. Tesler was extradited from the UK. Subsequently, he pleaded guilty to conspiring to, and violating, the FCPA. As part of that plea agreement he agreed to forfeit $148,964,568. Wojeiech J. Chodan, a former sales person and consultant of the UK subsidiary of KBR, was also extradited and pleaded guilty to conspiring to violate the FCPA. He agreed to forfeit $726,885. Albert Stanley, the former head of KBR, pleaded guilty to conspiracy to violate the FCPA and a count of wire fraud.

Tagged with: , ,

by T. GormanPosted on Posted in SECActions

The Madoff and Stanford debacles seems to never fade away for the Commission. Madoff of course is in prison but the litigation goes on. The failures of the Commission and others such as FINRA continue to linger. The Stanford case appears to be finally heading for trial. Again however the memory of the Commission’s failure continues to linger, tarnishing its reputation despite much work to overcome the scandal.

Last week another chapter in the sad saga of these matters came to a partial end. Former SEC staff member Spencer Barasch, one time head of Enforcement for the SEC’s Forth Worth office, entered into a civil settlement of ethics and conflict of interest charges with the Department of Justice stemming from his supervisory role regarding Stanford matters while on the staff and his subsequent representation of Mr. Stanford’s company, Stanford Financial Group. No settlement was reached with the SEC.

The civil settlement with the DOJ is based on 18 U.S. C. § 207. That statute restricts the right of federal employees to handle certain matters following the termination of their government service. Under the terms of the settlement Mr. Barasch agreed to pay a $50,000 civil fine, the maximum permitted for a violation of the statute. Mr. Barasch did not admit the factual assertions on which the DOJ predicated its claim.

The positions of the DOJ and Mr. Barasch contrast sharply. According to the DOJ:

  • Mr. Barasch was the head of Enforcement for the SEC’s Fort Worth Office from 1998 through April 2005;
  • During that period the Stanford Financial Group made materially false statements to investors which caused significant injury;
  • In August 1998 Mr. Barasch directed that a preliminary investigation into the activities of Stanford Financial Group be closed;
  • In December 2002 Mr. Barasch declined a referral regarding Stanford Financial Group from the SEC examination staff;
  • In the Fall of 2003 Mr. Barasch declined to open an investigation into the Stanford Financial Group;
  • Once in private practice Mr. Barasch was orally advised by the Commission staff that he could not represent the Stanford Financial Group; and
  • Mr. Barasch represented the Stanford Financial Group from September 29, 2006 through December 18, 2006 and appeared before the Commission, communicating with the SEC in an effort to influence.

These facts constitute a violation of Section 207, according to the DOJ.

Mr. Barasch denies the claims asserted by the Department of Justice. He contends that:

  • His representation of the Stanford Financial Group did not constitute a violation of Section 207;
  • He never personally and/or substantially participated in the SEC’s investigation of Mr. Stanford and his company;
  • While the head of Enforcement for the SEC’s Forth Worth office he referred the Stanford matter to other agencies based on pressure from his superiors in Washington to devote the resources of the office to other matters;
  • He was not told that he was permanently barred from representing Stanford;
  • He only had a telephone call on November 27, 2006 with the SEC staff to determine whether he could work on the case; and
  • He only settled with the DOJ in an effort to bring the matter to an end.

Mr. Barasch reportedly attempted to settle the matter with the SEC, offering to be barred from practicing before the Commission for a period of six months. The proposal also provided for his automatic readmission to practice, in contrast to the usual time consuming readmission process. The Commission reportedly rejected the proposed settlement.

This is the second ethics case referred to the Justice Department by the SEC Inspector General in recent months. Earlier, the SEC IG made a criminal referred of a matter regarding a former SEC General Counsel arising out of his work as a staff member on matters related to Mr. Madoff. The Department of Justice declined to prosecute. The Commission did not take any action.

Tagged with: , , , , , , ,