Total: The Latest Member of the FCPA Top Ten
With fewer recent cases there has been a lot of speculation suggesting that perhaps enforcement officials were easing-up on the FCPA. That supposition just ended with a new addition to the FCPA Top 10, maintained by the excellent FCPA blog. French oil and gas giant Total S.A. jumped to number four on the list, paying $398 million to settle corruption charges with the DOJ and the SEC. U.S. v. Total, S.A., Criminal No. 1:13 cr 239 (E.D. Va. Filed May 29, 2013); In the Matter of Total, S.A., Adm. Proc. File No. 3-15338 (May 29, 2013). And, the company still has to deal with French authorities.
The charges stem from the efforts of the company to re-enter the Iranian oil market. In 1995 the Total negotiated a development contract with the National Iranian Oil Company or NIOC for the development of the Sirri A and E oil and gas fields. NIOC is a government instrumentality and its employees are foreign officials, according to the charging papers.
Prior to executing the agreement, Total met with an Iranian Official and agreed to enter into a consulting arrangement. That official served as the Chairman of an Iranian state-owned and state-controlled engineering company. He had the ability to influence the decision regarding contract for the Siri fields.
The consulting contracts had no real substance. Rather, they were used as a conduit for corrupt payments over the next two and one half years. The day the ageements were executed $500,000 was paid from an account held at a U.S. bank in New York City to a Swiss bank. The remaining payments were made from accounts in Switzerland to a Swiss bank at the direction of the Iranian official. Those payments totaled about $16 million.
In 1997 the company entered into a second arrangement with NIOC. This agreement was to develop phases 2 and 3 of the South Pars gas field which was a joint venture with a number of other multinational oil and gas companies. Total secured a 40% interest in the project.
As with the initial project, Total entered into a consulting arrangement with the Iranian official. Over the next several years the company made a series of payments under this agreement which totaled about $44 million. The payments, according to the charging papers, were to influence the decision on the award of the contract.
None of the payments were properly recorded in the books and records of the company. The consulting contracts were designed to circumvent the internal controls of the company. Total also “had inadequate systems for reviewing these [the consulting] documents and lacked controls sufficient to provide reasonable assurances . . . “ that they complied with U.S. law, according to the SEC.
Total resolved the criminal charges by entering into a deferred prosecution agreement. The underlying indictment contains three counts: One of conspiracy to violate the anti-bribery provisions of the FCPA; one of violating the internal controls provisions of the FCPA; and one of violating the books and records provisions of the FCPA. The firm also agreed to pay a criminal fine of $245.2 million, retain a monitor for three years, continue to enhance its compliance systems and cooperate with enforcement officials.
To resolve the SEC administrative proceeding the company consented to the entry of a cease and desist order based on Exchange Act Sections 30A, 13(b)(2)(A) and 13(b)(2)(B), and pay disgorgement of $153 million and retain a consultant.
ABA Seminar: Fifth Annual FCPA Update: Protecting Your Business in the Future: Lessons from the New DOJ-SEC FCPA Guide, June 19, 2013 from 1:00 -2:30 p.m. EST. The discussion will focus on building effective compliance systems and conducting M&A due diligence. Co-moderators: Thomas Gorman and Frank Razzano. Panel: John Buretta, Principal Deputy to the Assistant AG, DOJ; Charles Cain, Assistant Director, FCPA Unit, SEC Division of Enforcement; Catherine Razzano, Assistant General Counsel, General Dynamics Corporation; Steve Siegal, Senior Counsel, Northrop Grumman Corporation; Ryan Ong, President, U.S. China Business Counsel. Live in Washington, D.C at 600 14th St. N.W., Penthouse (no charge for ASECA members attending live in Washington who pre-register by sending an e-mail to cvitko.diane@dorsey.com). Webcast Nationally by the ABA. For further information please click here.