Subscribe to our FinCrimes Update for news about the Foreign Corrupt Practices Act and related prosecutions and enforcement actions.
On November 19, the SEC announced a settlement with Vantage Drilling International (“Vantage”) based on the improper activities of Vantage’s predecessor, Vantage Drilling Company, in connection with the Petrobras bribery scheme. The Administrative Order found that Vantage Drilling Company had “failed to devise a system of internal accounting controls with regard to [its] transactions with [its] former outside director, largest shareholder, and only supplier of drilling assets . . . and failed to properly implement internal accounting controls related to its use of third-party marketing agents,” noting the company’s “ineffective anticorruption compliance program.” According to the Order, these failures permitted payments that “created a risk that [it] was providing or reimbursing funds that [a director] intended to use to make improper payments to [Petrobras],” a Brazilian company at the center of a massive FCPA scheme.
The settlement with the SEC concludes Vantage’s involvement in the Petrobras investigations. According to Vantage, the company received a cooperation letter from the DOJ last year confirming Vantage’s full cooperation in the Petrobras investigation, and that the DOJ would not move forward with any actions against Vantage.
Further coverage of the Petrobras matter is available here.
On September 28, the DOJ announced that a former CEO and a former executive of oil services company SBM Offshore, N.V. (SBM) had been sentenced to prison and fined for their roles in a scheme to bribe foreign government officials in Brazil (at Petrobras), Angola (Sonangol), and Equatorial Guinea (GEPetrol) in exchange for oil-services contracts. In November 2017, the former CEO of SBM, Anthony “Tony” Mace, and a former sales and marketing executive at SBM USA, Robert Zubiate, each had pleaded guilty to one count of conspiracy to violate the FCPA. Mace was sentenced to 36 months in prison and a fine of $150,000 for authorizing payments in furtherance of the bribery scheme, and Zubiate was sentenced to 30 months in prison and a fine of $50,000 for using a third-party sales agent to pay bribes to Petrobras officials.
SBM itself entered into a $238 million three-year deferred prosecution agreement and its subsidiary, SBM USA, pleaded guilty to one count of conspiracy to violate the FCPA.
Prior Scorecard coverage of the company can be found here.
On September 27, 2018, the DOJ announced that Petrobras, the Brazilian state-owned oil company, had entered into a Non-Prosecution Agreement with the DOJ, as well as settlement agreements with the SEC and Brazilian authorities, and agreed to pay a total $853.2 million in penalties to all jurisdictions. Under the terms of the settlement, DOJ and SEC will each receive 10 percent of the penalty amount, with Brazilian authorities receiving the remaining 80 percent.
As part of the settlement, Petrobras admitted that its Executive Board members “were involved in facilitating and directing millions of dollars in corrupt payments to politicians and political parties in Brazil,” while directors were “involved in facilitating bribes that a major Petrobras contractor was paying to Brazilian politicians.” The conduct included bribes related to several refineries, as well as shipyard and drillship contracts, as well as payments to “stop a parliamentary inquiry into Petrobras contracts.”
Petrobras’ penalty reflects a 25 percent discount off the low end of the applicable U.S. Sentencing Guidelines due to its cooperation and remediation. While the company did not voluntary disclose its conduct, it cooperated with authorities by disclosing the findings of its internal investigation, providing document discovery, and facilitating the interview of foreign witnesses. It also took remedial measures by replacing its Board of Directors and Executive Board, as well as implementing reforms in its policies and procedures.
In addition to the criminal penalty, the SEC announced that Petrobras agreed to an administrative order requiring it to pay almost $1 billion in disgorgement and prejudgment interest. However, Petrobras received full credit for payments it already made to resolve a class action for $2.95 billion earlier this year. The net result is that Petrobras will not have to pay any additional funds to the SEC in the separate disgorgement action.
Prior ScoreCard coverage of the Petrobras and related investigations can be found here.
On September 4, Ensco PLC, a London-based offshore drilling company, announced in its Form 8-K filing that the DOJ and the SEC will not take action against the company, ending their investigations into alleged corruption related to a drilling services agreement between Pride International LLC (“Pride”), an acquired subsidiary, and Petrobras, the Brazilian state-owned oil company. According to the filing, the SEC letter stated that the agency “did not intend to recommend any enforcement action” related to the alleged irregularities. The DOJ letter acknowledged Ensco’s full cooperation in the investigation.
On December 22, 2017, Singapore-based shipyard operator and shipping vessel repair company Keppel Offshore & Marine Ltd. (KOM), and its wholly owned U.S. subsidiary, agreed to pay a combined total penalty of $422 million to resolve foreign bribery charges by the DOJ. Authorities in the United States, Brazil, and Singapore alleged that the companies engaged in a decade-long scheme to pay tens of millions of dollars in bribes to officials in Brazil, including those of state-owned oil company Petrobras. As part of the resolution, KOM entered into a deferred prosecution agreement while its U.S. subsidiary, KOM USA, pleaded guilty, as did a former senior member of KOM’s legal department. The settlement is one of the largest FCPA enforcement penalties and also represents DOJ’s first coordinated FCPA resolution with Singapore. The settlement represents a 25 percent reduction off the bottom of the applicable U.S. Sentencing Guidelines fine range due to substantial cooperation by the companies with the investigation and the taking of remedial measures, including disciplining employees and implementing an enhanced compliance system.
On January 3, 2018, Petrobras announced that it has agreed to pay $2.95 billion to resolve the securities class action pending in the U.S. District Court for the Southern District of New York regarding the company’s well-known corruption scandal in Brazil. The class action claimed that investors were harmed by alleged corruption when contractors overcharged Petrobras and kicked back some of the overcharges through bribes to Petrobras officials. Under the proposed settlement, Petrobras has agreed to pay the funds in three installments. The agreement does not constitute any admission of wrongdoing or misconduct by Petrobras and Petrobras claims that this reflects its status as a victim of the acts uncovered in Operation Car Wash, as the corruption investigation in Brazil is known. The settlement agreement is still subject to approval by the District Court.
Past ScoreCard coverage related to the Petrobras corruption allegations and investigation can be found here.
On September 14, Braskem SA, a Brazilian petrochemical company, agreed to pay its U.S. investors $10 million for concealing its role in a corruption scandal involving Petrobras. The settlement resolves a 2015 lawsuit brought by U.S. investors against Braskem, which alleged the company had misled investors into believing its operations were legitimate. The settlement follows the December 2016 guilty plea by the company and its affiliated construction firm Odebrecht SA to violating the Foreign Corrupt Practices Act. Together, the companies agreed to pay $3.5 billion in a combined global settlement with U.S., Brazilian, and Swiss authorities.
On December 21, Brazilian construction company Odebrecht S.A. and its petrochemical affiliate, Braskem S.A., reached a $3.5 billion combined global settlement with U.S., Brazilian, and Swiss authorities to resolve FCPA allegations, in which both companies agreed to plead guilty in the U.S. to conspiracy to violate the FCPA. The DOJ alleged that the companies operated an extremely broad and profitable global bribery scheme, including creating an internal bribery department to systematically pay hundreds of millions of dollars to corrupt government officials around the world from 2001 to 2016. The companies attempted to conceal the bribes by disguising the source and disbursement of bribe payments by passing funds through a series of shell companies and by using off-shore bank accounts. While the scheme in large part involved bribes paid to Petrobras and Brazilian officials, it also included government officials in numerous other South and Central American countries, and in Africa.
Odebrecht agreed to an overall criminal fine of $4.5 billion, but based on its representation of its ability to pay, may end up paying only $2.6 billion. Ten percent of the criminal fine was earmarked for the U.S., with the remainder to Brazil (80%) and Switzerland (10%). The DOJ faulted Odebrecht for failing to voluntarily disclose the conduct, but granted full cooperation credit based on Odebrecht’s actions once it started to deal with the government. As part of its own related resolution, Braskem agreed to pay over $632 million in criminal fines, with the vast majority ($443 million) going to Brazil, and 15%, or $94.8 million, to each of the DOJ and Switzerland. Braskem also agreed to disgorge $325 million, with $65 million going to the SEC and the rest to Brazil. The DOJ noted Braskem’s failure to voluntarily disclose the conduct, and granted only partial cooperation credit due to Braskem’s failure to turn over any evidence from its internal investigation until seven months after it first talked to the DOJ. Both Odebrecht and Braskem agreed to engage independent compliance monitors for at least three years
The resolution is, by far, the largest FCPA resolution ever, with the bulk of the money going to Brazil in apparent recognition of the heavy lifting done by Brazilian prosecutors.
Prior Scorecard coverage of the ongoing Petrobras investigations can be found here.
On February 10, 2016, Dutch oilfield company SBM Offshore announced that the U.S. DOJ has now re-opened its investigation into allegations that SBM paid bribes to secure contracts in various countries around the world. SBM stated that the DOJ has made "information requests" in connection with the bribery investigation and that SBM is "seeking further clarification about the scope of the inquiry." SBM previously had reached a $240 million settlement with Dutch authorities in November 2014 to resolve allegations involving bribes to government officials in Angola, Brazil, and Equatorial Guinea between 2007 and 2011. At the time, SBM announced that the DOJ had simultaneously closed its investigation into the same matter. Its most recent announcement, however, shows that the U.S. government has rekindled its inquiry. SBM also announced that it has reserved $245 million to cover a possible settlement with Brazilian authorities. This announcement comes on the heels of a January 2016 settlement between the Ministerio Publico Federal (MPF), Brazil's Public Prosecutor's Office, and SBM's CEO and a member of SBM's supervisory board apparently tied to the ongoing Petrobras scandal in Brazil. Click here to view previous FCPA Scorecard coverage of the SBM investigation.
On January 22, 2016, the Ministerio Publico Federal (MPF), Brazil's Public Prosecutor's Office, reportedly entered into a settlement with Dutch drilling company SBM Offshore's CEO and a member of its supervisory board, resolving misdemeanor allegations apparently tied to the ongoing Petrobras probe in Brazil. If the settlement is approved by the Brazilian judge handling the case, both individuals will be fined approximately $60,000 each, with no admission of guilt. SBM Offshore stated in response that while it "believes that accepting the settlement offers a pragmatic opportunity to expeditiously resolve this matter that avoids long and costly legal proceedings," it remains of the opinion that the accusations are without merit and that it stands behind both individuals. While SBM Offshore declined to comment on the specific accusations of misconduct in this case, the settlement comes a little over a year after SBM Offshore resolved an enforcement action in the Netherlands involving alleged bribes in Angola, Brazil, and Equatorial Guinea between 2007 and 2011. Click here to view previous FCPA Scorecard coverage of SBM Offshore and Brazil's Petrobras investigation.
- Kathryn L. Ryan to discuss "State licensing and NMLS challenges" at MBA’s Legal Issues and Regulatory Compliance Conference
- Jonice Gray Tucker to discuss “Fair lending and equal opportunity laws” at the MBA Legal Issues and Regulatory Compliance Conference
- Jeffrey P. Naimon to discuss “Contemplating the boundaries of UDAAP” at the MBA Legal Issues and Regulatory Compliance Conference
- Steven vonBerg to speak at closing “super session“ on compliance topics at MBA Legal Issues and Regulatory Compliance Conference
- Buckley Webcast: Fifth Circuit muddles CFPB’s plans to use in-house judges in enforcement proceedings
- Jeffrey P. Naimon to discuss “Understanding the ESG impact on compliance” at the ABA’s Regulatory Compliance Conference