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UK-Based Company and Seven Individuals Charged in the UK With Bribery Surrounding Angola Operations
On July 13, the UK Serious Fraud Office (SFO) charged a UK-based logistics and freight operations company, along with seven current and former executives, with making corrupt payments in violation of Section 1 of the Prevention of Corruption Act 1906. The company is a subsidiary of a privately-owned company headquartered in Hamburg, Germany. The conduct at issue is alleged to have occurred between January 2005 and December 2006, and involves an alleged conspiracy to bribe an agent of an Angolan state oil company to bolster the subsidiary company’s business in the Republic of Angola.
Among other things, Section 1 of the Prevention of Corruption Act 1906 criminalizes the act of offering any gift or consideration to induce an agent to take action in relation to the agent’s principal. Notably, the Prevention of Corruption Act 1906, and, collectively, the Prevention of Corruption Acts 1889-1916, were repealed and replaced by the Bribery Act 2010, which took effect on July 1, 2011. The conduct at issue, however, occurred prior to the enactment of the Bribery Act and, although the Prevention of Corruption Acts were repealed, the government can still use them to prosecute offenses committed before the repeal.
The SFO accepted the case for investigation in September 2014. The subsidiary company and the charged individuals are now scheduled to appear before the Westminster Magistrate’s Court on August 4, 2016.
Businessman Pleads Guilty to Foreign Bribery Charges in Connection with Venezuela's State-Owned Oil Company
On June 16, the DOJ announced that the owner of several U.S.-based energy companies had pleaded guilty to bribery charges related to a scheme to corruptly secure energy contracts from Venezuela’s state-owned oil company. This stems from the previously reported December 2015 charges against the energy companies’ owner and the owner of an oil-field supply company.
According to admissions made by the energy companies’ owner, he worked with the oil-field supply company’s owner to submit bids for equipment and services to Venezuela’s state-owned oil company. Beginning in 2009, the two individuals agreed to pay bribes to purchasing analysts of the state-owned oil company to ensure that their companies were placed on the state-owned oil company’s bidding panels, which enabled the companies to secure lucrative energy contracts. The energy companies’ owner also admitted to making bribe payments to other officials of the state-owned oil company to ensure that his companies were placed on vendor lists approved by the state-owned oil company and given payment priority over other vendors with outstanding invoices. Previous FCPA Scorecard coverage on these investigations can be found here.
Monaco-Based Company Alleges Extortion Following Media Reports of Mass Bribery
On May 16, a Monaco-based industrial solutions company released a statement denying claims made in a media report that linked the company to allegations of bribing foreign government officials to secure contracts within the oil and gas industry. The company stated it has “been the victim of a four-month extortion attempt by criminals,” and that it is currently engaged with UK authorities.
Separately, an Amsterdam-based oil services company disclosed in a May 11 S-3 filing that it has been subject of DOJ questioning in relation to the investigation of the Monaco-based industrial solutions company. The company stated that it is cooperating with the DOJ’s inquiries. The Amsterdam-based company is the third company to disclose DOJ inquires as a result of the investigation surrounding the Monaco-based company and the companies that used its services. For additional coverage on the investigations, visit BuckleySandler’s FCPA Scorecard website.
Illinois Department of Financial and Professional Regulation Proposes Amendments to the Illinois Residential Mortgage License Act
On April 1, the Illinois Department of Financial and Professional Regulation proposed amendments to the Illinois Residential Mortgage License Act of 1987. The proposed amendments would implement uniform state test standards for mortgage loan originators (MLO) and their employees. Implementing the uniform state test standards would bring the Illinois licensing regime closer to uniformity with the majority of other states who already have adopted the same or similar standards. The amendments provide that MLOs must pass a written test developed by the Nationwide Mortgage Licensing System and Registry prior to issuance of their state license. Previously, Illinois required employees to take a separate state test. Under the proposed amendments, pre-licensing and continuing education requirements for MLOs would be expanded to include new Illinois state law courses. Some industry groups are recommending that such courses be designed to overlap with existing federal continuing education requirements under the SAFE Act. The comment period will remain open through May 16, 2016.
Oil and Gas Company Discloses SEC Investigation into Potential FCPA Violations
On March 15, an Ohio-based provider of sand products used in the oil and gas industry disclosed that in December 2015, the SEC notified it of an investigation of potential violations of the FCPA and other securities laws related to its international operations. The company had previously retained outside counsel to conduct an investigation and determined that no further action was necessary. The company did not estimate the potential costs of the SEC investigation or any potential penalties or fines that could result.
DOJ Reopens Bribery Probe into Dutch Oilfield Company
On February 10, a Dutch oilfield company announced that the U.S. DOJ has now re-opened its investigation into allegations that the company paid bribes to secure contracts in various countries around the world. The company stated that the DOJ has made “information requests” in connection with the bribery investigation and that the company is “seeking further clarification about the scope of the inquiry.”
The company previously 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, the company 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.
The company 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 the company’s CEO and a member of the company’s supervisory board apparently tied to the ongoing Petrobras scandal in Brazil.
Oil and Gas Company Files Lawsuit Against Drilling Partners Challenging Post-FCPA Settlement Reticence
On January 11, a Houston-based oil and gas company filed suit in the U.S. District Court for the Southern District of Texas against its drilling partners in the company’s Guinean operations. The company claims that the drilling partners have unjustly delayed performing the work called for by their operating agreement because of uncertainty over whether the government of Guinea would terminate its drilling agreement with the company in light of the FCPA investigation into the company. That investigation was resolved by a declination letter issued by DOJ in May 2015 and a settlement with the SEC in October 2015. (See previous InfoBytes coverage of that investigation here and here.) The company is seeking a ruling that the drilling partners are in violation of the operating agreement and an order forcing them to fulfill their obligations.
In a November 2015 SEC filing, the company reported a complete lack of operating revenue and warned that further delays in fulfilling requirements imposed by the government of Guinea could result in a loss of the company’s concession to drill in the country. This case illustrates the potential business risks posed by an FCPA investigation—even if it is resolved on relatively favorable terms.
Hyperdynamics Resolves FCPA Investigation with SEC Settlement
On September 29, Hyperdynamics Corp. announced a settlement with the SEC, fully resolving the SEC’s FCPA investigation into the Houston-based oil and gas company’s operations in the Republic of Guinea. The SEC proceeded via an administrative cease and desist order. Hyperdynamics consented to the SEC’s order without admitting or denying the findings, and agreed to pay a $75,000 penalty. The SEC’s order describes books and records and internal control offenses based on the lack of supporting documentation related to $130,000 the company paid for public relations and lobbying services in the Republic of Guinea during 2007 and 2008.
Hyperdynamics first disclosed that the DOJ was investigating alleged FCPA violations by the company in the Republic of Guinea in 2013. In May of this year, the company announced that the DOJ’s investigation had concluded without enforcement action, and released the DOJ’s declination letter, which noted Hyperdynamics’s cooperation with the investigation. At that time, the company acknowledged that a parallel SEC investigation was ongoing. Previous BuckleySandler coverage of this investigation can be found here.
Two Additional Former PetroTiger Employees Sentenced Following FCPA Conspiracy Guilty Pleas
On September 10, Gregory Weisman, former general counsel of oil and gas services company PetroTiger, and Knut Hammarskjold, PetroTiger’s co-founder, were each sentenced to two years’ probation stemming from their prior guilty pleas to conspiring to violate the FCPA and commit wire fraud in connection with a bribe paid to an employee of Colombia’s state-run oil company in order to win a $45 million oil-services contract.
Both Mr. Weisman and Hammarskjold were ordered to pay restitution as well as fines of $30,000 and $15,000, respectively. Mr. Weisman’s and Mr. Hammarskjold’s sentencing occurred almost three months after the third PetroTiger co-conspirator, former CEO Joseph Sigelman, received a three-year probation sentence in connection with the same bribes. Mr. Weisman had been the key witness against Mr. Sigelman at Mr. Sigelman’s June 2015 trial, but the trial abruptly ended after Mr. Sigelman entered a plea deal. The DOJ announced the plea after Mr. Weisman informed the court that he gave false testimony regarding the terms of his cooperation agreement. At Mr. Weisman’s sentencing, the District Judge referred to the abrupt turn of events at Mr. Sigelman’s trial as “the elephant in the room” but noted that misstatements by Mr. Weisman were “peripheral” to the charged offenses.
PetroChina Class Action Dismissed
On August 3, a federal district court in New York dismissed with prejudice a securities class action suit filed against Chinese oil and gas company PetroChina Co. Ltd. The suit alleged that statements in the company’s 2011 and 2012 financial statements claiming the company was in compliance with its internal rules and securities regulations were false or misleading. The plaintiffs filed the suit after the Chinese government announced that it was investigating four of the company’s top executives for corruption.
The court dismissed the complaint in its entirety, finding that the plaintiffs failed to allege any acts of bribery or corruption that predated the filing of the 2011 and 2012 financial statements. The court wrote: “[T]his Court is not requiring that Plaintiffs allege a detailed account of the particular illicit deals that PetroChina officials were allegedly engaged in. Plaintiffs are required, nonetheless, to establish—at a bare minimum—that the underlying fraud took place during the time period covered by the purportedly false public statements and that someone at PetroChina knew or had reason to know about it.”
Similar class action suits against Wal-Mart and Avon have also been dismissed in the past year.