The journalists of the Organized Crime and Corruption Reporting Project (OCCRP) risk everything to tell stories about gangsters and graft in Eastern Europe and Central Asia.
Entries in Lowell Bergman (6)
ProPublica and Frontline said the Sands' general counsel and an outside law firm 'warned that the arrangement could violate the Foreign Corrupt Practices Act.'
A seven-man, five-woman federal jury in LA on Friday began deliberating the fate of the husband-and-wife movie producers accused of bribing a Thai official. Gerald Green, 77, and his wife Patricia, 52, were tried for conspiracy to violate the Foreign Corrupt Practices Act and violating the FCPA. Other charges included money laundering and illegally transporting money-laundering proceeds, obstruction, and filing false tax returns. They're facing up to five years in prison for each FCPA charge, up to 10 years for each tax count, and up to 20 years for the money-laundering and obstruction charges.
Prosecutors said the Greens paid the former governor of the Tourism Authority of Thailand Juthamas Siriwan more than $1.8 million in bribes. In return, she allegedly awarded them contracts to stage the Bangkok Film Festival worth about $13.5 million.
View prior posts about the Greens here.
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Plea bargaining in Britain? As noted by PBS / Frontline here, the U.K. Mail reported on September 5 that military equipment supplier BAE has been given until the end of the month by the Serious Fraud Office "to avoid a criminal trial for paying bribes in the Czech Republic, Tanzania, and South Africa." The pressure on BAE is a turnaround for the SFO. It caused an uproar in December 2006 by dropping an investigation into allegations the company bribed members of the Saudi Arabian government in exchange for the sale of Typhoon jet fighters. The SFO said it had to stop the investigation after Saudi Arabia threatened to end anti-terrorism cooperation with the British government.
The U.S. Justice Department, meanwhile, is reportedly still investigating BAE's payments to Saudi Prince Bandar bin Sultan of about $2 billion. He was formerly ambassador to the United States. Some of the payments allegedly passed through U.S. bank accounts he controlled.
In the same deal, BAE also delivered an Airbus 340. When interviewed by Frontline's Lowell Bergman earlier this year, the prince's lawyer, former FBI Director Louis Freeh, said the jetliner was a military aircraft and not his client's private plane. But Frontline said it had been directed to "statements by then British Secretary of State for Defense, Des Brow, who in a written answer to a parliamentary inquiry in June 2007 stated that:
Since 1 July 2006, aircraft HZ 124 has landed 15 times at RAF Brize Norton. The aircraft operated in accordance with the MOD regulations for civil aircraft use of military airfields. The regulations also cover the applicability and level of landing, housing, parking and insurance fees charges. The regulations have been adhered to for each flight."Frontline said Airbus HZ 124 is registered to the Saudi Arabia Ministry of Defense and Aviation and was used for over a decade by Prince Bandar, who had it painted in the colors of his favorite football team, the Dallas Cowboys.
View prior posts about BAE and Prince Bandar here.
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Naming and shaming in Moscow. Most companies try to solve corruption problems in Russia quietly, but not Ikea. Earlier this year, it loudly suspended a store-opening outside Moscow. It said local bureaucrats imposed a last-minute requirement that its new building be able to withstand winds nearly twice as strong as the most powerful gusts ever recorded at the store's location (here). Now, the New York Times' Andrew Kramer has written about another alleged bureaucratic shakedown of the global furniture retailer, this one in 2000 (here).
What's unusual is that the story is based on Ikea's own disclosures "to the New York Times last month, saying that it hoped publicity might compel the Russian authorities to investigate."
Here's an excerpt from Friday's article:
Weeks before the opening of its flagship store outside Moscow in 2000, Ikea was approached by employees of a local utility company. If the Swedish retailer wanted to have electricity for its grand opening, it had to pay a bribe.
Instead, Ikea rented diesel generators large enough to power a shopping mall. The generators roared to life in a loud rebuke to the corrupt executives who thought they had the retailer cornered, and soon the utility turned on the power. . . .
The board of Ikea’s operating company, which is based in the Netherlands, has concluded that the Russian executive hired to manage the generators was taking kickbacks from the rental company to substantially inflate the price of the service. Ikea said that such a fraud could cost it about $196 million over two years.
Ikea canceled the contract and sought redress in Russian civil court. But in rulings over the last two weeks, Ikea has lost another 5 million euros in damages that the judges awarded the generator rental company for breach of contract. . . .
“We have encountered something here that is outside the scope of what we normally encounter,” Mr. Thordson said, describing the global retailer’s situation in Russia. “I have never experienced anything like this. . . . .
The pressure these days to comply with the Foreign Corrupt Practices Act and other anti-corruption laws is coming from several directions at once. Last week we mentioned whistleblower hotlines as one example. But there are other reasons why it's harder than ever for companies to cheat and for bride-taking officials to hide their crimes. Here's a quick look at some of what's happening:
The internet. Hundreds of millions of people now have access to uncensored news, chat boards, social sites, blogs, email and short messaging, podcasts and the like. While plenty of the internet's so-called news is gossip, rumor and opinion, there are also some real scoops. Last year in China, for example, someone found a bag on the subway in Shanghai. In it were expense reports from a trip by 23 local officials who'd spent $94,000 of taxpayer money on a three-week USA "study tour. " The receipts showed that the real itinerary included Hawaiian beaches, a sex show in San Francisco, and casinos in Vegas. The finder published them anonymously, a few at a time, on the internet. As reported (here), the details spread "like wildfire across Chinese cyberspace."
The net isn't just for amateur sleuths. Powerful non-traditional news outlets have appeared online, backed by serious money and seasoned professionals. ProPublica is one of them. It's a privately funded, non-profit, independent newsroom led by Paul Steiger, the former managing editor of The Wall Street Journal. Its staff includes some of the best editors and investigative reporters in America. We've featured their work in posts about KBR's Jack Stanley (here) and Siemens (here).
A new virtual newsroom is called The Business of Bribes. It's a ten-week online project from Lowell Bergman and the Investigative Reporting Program at the UC Berkeley Graduate School of Journalism, along with PBS' Frontline. We mentioned Lowell Bergman in a 2007 post (here). He's a Pulitzer Prize-winning former producer of CBS' 60 Minutes. His new online project aims to go deeper into the investigation of international bribery -- how corrupt payments are hidden from sight, how public graft helps destabilize the developing world, and what the U.S. and other countries are doing to combat global corruption.
NGOs and public interest groups. They're able to exert enormous pressure on corporations and governments to be more accountable. Transparency International created the annual Corruption Perception Index, a handy measure of how well countries are doing in the fight against sleaze. You see the CPI everywhere now, and TI's message about it is always clear. Here, for example, is what TI said about crooked courts:
It is difficult to overstate the negative impact of a corrupt judiciary: it erodes the ability of the international community to tackle transnational crime and terrorism; it diminishes trade, economic growth and human development; and most importantly, it denies citizens impartial settlement of disputes with neighbors or the authorities. When the latter occurs, corrupt judiciaries fracture and divide communities by keeping alive the sense of injury created by unjust treatment and mediation.Another NGO working to shine the light on corruption is Global Witness. It concentrates on graft linked to the exploitation of natural resources. In 2003, it was co-nominated for the Nobel Peace Prize for its work on conflict diamonds. Its latest report, Undue Diligence, names some major banks that it says have been complicit with corrupt regimes (Citigroup, Barclays, HSBC, Deutsche Bank). This is from the introduction of the 116-page report:
Now we are going to go on a journey, to the oil-producing countries of the Gulf of Guinea as well as to Central Asia, to witness the corrosive and devastating effects of banks being willing to do business with corrupt regimes. With each story, the effectiveness of the bank’s ethical standards, compliance with due diligence requirements, and regulatory action will be examined, as far as the available evidence permits. Many of the examples in this report raise serious questions about how well a bank really knew its customer, even if it had been able to tick the regulatory box to say it had done its due diligence; and about whether compliance with the letter of regulations that require identification of the customer is sufficient to prevent banks doing business that contributes to corruption.Brave Officials. Perhaps inspired in part by the openness of the internet and the advocacy of the watchdog groups, younger people in developing countries are rejecting the old ways of bribery of corruption. In Nigeria, for example, Nuhu Ribadu, 49, was exposing government graft until he lost his job last year as head of the country's Economic and Financial Crimes Commission. In Kenya, John Githongo, 43, was permanent secretary for ethics and governance in the office of the president until one of his investigations took him too close to the president and his cronies. Githongo combines several modern anti-corruption roles -- journalist, founder and former head of Transparency International's Kenya office, and next-generation government official. We talked about him here. He and Ribadu are both in the U.K. now for their own safety. But it's a sure bet Africa and the world will be hearing more from them.
Add to the above the zeal of the United States, the OECD and others to enforce the anti-corruption laws, and you have a powerful case why companies everywhere should be improving their compliance efforts. Anyone who hasn't yet made it a priority to obey the letter and the spirit of anti-corruption legislation could well end up in tomorrow's spotlight -- for all the wrong reasons.
ProPublica is a privately-funded, non-profit, independent newsroom located in Manhattan. It's led by Paul Steiger, the former managing editor of The Wall Street Journal, and its staff includes some of the best editors and reporters in the business. Its mission is to save investigative journalism, which is going the way of the dodo in commercial newrooms across America.
One story ProPublica is now chasing is the guilty plea a few days ago by Albert "Jack" Stanley, the former chairman and CEO of KBR. He admitted violating the Foreign Corrupt Practices Act by helping arrange and hide more than $182 million in illegal payments to Nigerian government officials. When news about the plea broke, we knew right away the story would be too big for blogs or even most traditional news organizations. The scale of the bribery is enormous, the companies involved are powerhouses, and the cast of characters is daunting. But it's the most important FCPA story around, and maybe the most important one ever. So it needs some special handling.
Enter ProPublica. Its first look at the Stanley plea appeared yesterday, in an article written by T. Christian Miller. He and four others reported the story, including the legendary Lowell Bergman, who's no stranger to the FCPA. This story appeared first in MSN Money, and then on ProPublica's site under what's called a Creative Commons Attribution- Noncommercial- No Derivative Works 3.0 United States License. That means we can republish it with attribution to ProPublica and without any changes.
While this post exceeds our typical word count, we doubt any readers will object.
A former Halliburton exec has pleaded guilty to being in cahoots with crooked foreign officials. He's now helping US investigators, and a much wider crackdown is expected to unfold.
By ProPublica and PBS' "Frontline"
In the world of Big Oil, Albert "Jack" Stanley was legendary for winning billion-dollar contracts in Third World countries as the Halliburton executive who knew all the secrets of deals in places like Malaysia, Egypt and Yemen.
In the wake of his admission in a guilty plea last week that he had resorted to bribes, kickbacks and high-level corruption to secure deals in Nigeria, however, Stanley now lies at the center of a widening scandal in the oil industry that has implications for corporations and governments across the globe.
Stanley's case is the first in what federal officials believe will be a string of indictments in coming months against U.S. corporate executives who have participated in bribing foreign officials in recent years.
By agreeing to cooperate with prosecutors, Stanley, who ran KBR when it was a subsidiary to Halliburton, promises to become a hammer for federal investigators seeking to crack open additional cases under a 30-year-old statute designed to halt overseas corporate corruption. About 80 cases involving major corporations accused of overseas bribery were under investigation as of last year, a high-level Justice Department official said.
In addition, Stanley's cooperation may provide a new tool for encouraging industrial countries in Europe and Asia to get more serious about enforcing anti-bribery laws against corporations based there. The $182 million in bribes were allegedly paid not just by Halliburton but by its partners, an international consortium of engineering companies from France, Italy and Japan. The United Kingdom has jurisdiction, too, because much of the bribery scheme was, according to court documents, hatched in London, where Stanley maintained a sumptuous home.
"We are very pleased to see that there has been an uptick in enforcement not only in the U.S. but in other countries as well,'' said Patrick McCormick, a spokesman for Transparency International-USA, an anti-corruption group funded by donations from government development agencies and private businesses and foundations. "We are hoping that (this case) is a sign of things to come."
A nightmare unfolding
The intensifying level of this government effort, pushed by a Republican administration normally friendly to business, cuts two ways for American business executives.
For those who may have been involved in bribery to secure construction contracts or equipment sales in developing countries around the world, it represents a nightmare.
The active involvement of the FBI is particularly worrisome to such people. In contrast to white-collar investigations handled by the Justice Department and the Securities and Exchange Commission, the FBI is believed to be prepared to use techniques more familiar to investigations of organized crime, including wiretapping and undercover agents.
Stanley's high profile and punishment -- he faces a potential seven-year sentence, the longest in the history of the federal statute outlawing the bribing of foreign officials -- also signal the federal government's willingness to seek long prison terms rather than fines and court injunctions.
For those who fret that they have been losing out to foreign competitors in jurisdictions less likely to prosecute bribery, it offers hope that the playing field will soon be leveled.
Stanley has already acknowledged paying bribes to unnamed senior Nigerian officials, although reports have identified the primary recipient as Nigeria’s late president, Sani Abacha. Stanley also has admitted receiving kickbacks of $10.8 million from contracts that Halliburton and predecessor companies signed with governments in Nigeria, Malaysia, Egypt and Yemen. Government officials in those countries, with the exception of Abacha, have not yet been implicated, according to a person familiar with the investigation.
Stanley's testimony may also pose concerns for Vice President Dick Cheney, who ran Halliburton between 1995 and 2000, when Stanley was appointed as KBR's chief executive officer. Cheney has consistently denied wrongdoing.
Law enforcement officials familiar with the investigation said that in previous interviews, Stanley repeatedly said that then-CEO Cheney had no knowledge of the bribes. At the time, however, Stanley was not a cooperating witness, a stance that changed in June when he was confronted with evidence of his involvement in the bribery scheme.
The vice president's office declined to comment, citing the continuing litigation.
Larry Veselka, Stanley's lawyer, said his client will cooperate fully in any investigation. A judge will determine Stanley's final sentence depending on his compliance with the plea agreement.
"He's going to cooperate with wherever they want to go and whatever they want him to do,'' Veselka said Thursday.
When oil mixes with greed
Stanley's rise and fall, detailed in U.S. and leaked French court documents, show what can happen when corporate greed mixes with the autocratic governments that control valuable natural resources such as oil and copper in lawless corners of the globe.
Now 65, Stanley spent nearly his entire career in the oil business, a globe-trotting high-level roustabout who made a specialty of dealing with governments in resource-rich, accountability-poor countries. He owned a million-dollar home in Texas and a residence in one of London's swankest neighborhoods -- a property that he will now have to sell under his plea agreement.
A fearsome competitor, Stanley had a reputation as a hard drinker. At his hearing in Texas, Stanley held himself up by gripping the podium, and he looked frail. He appeared to wince at references to alcoholism as a mitigating factor for his actions and to statements by the government prosecutor William Stuckwisch, who characterized Stanley's behavior as "egregious."
"Jack was . . . extremely capable, smart and totally dedicated to the company,'' said one former colleague, who did not want to be identified because of the continuing investigation. "I was shocked like everyone else when we heard about the bribes."
Others expressed less surprise that Halliburton was involved. Walter Carrington was the U.S. ambassador to Nigeria in 1994, when Stanley acknowledged making the first bribe payments to the Nigerian government.
"I used to brag that because of our Foreign Corrupt Practices Act, Americans weren't involved as other countries were. American businessmen would complain that it wasn't fair -- (that) other countries really ought to be doing more to keep people from doing this. It was a competitive disadvantage,'' said Carrington, who did not recall meeting Stanley. "Halliburton was a different kettle of fish. There were always stories going on about the way in which their people operated."
Stanley began his rise up the corporate ladder with M.W. Kellogg, an oil infrastructure company then owned by Dresser Industries. Dresser would later merge with Halliburton, and Kellogg would become KBR.
Stanley was working as a senior executive at Kellogg in the 1990s when the company formed a joint venture called TSKJ to pursue contracts to construct a liquefied-natural-gas plant on Bonny Island off Nigeria's oil-rich coast. Besides Kellogg, the TSKJ companies were France's Technip; Snamprogetti Netherlands, an affiliate of Italy's Eni.
As Nigerian officials weighed the consortium's bid against a competing group led by San Francisco-based Bechtel Engineering, Stanley decided to improve the chances of winning by offering bribes, according to court documents filed by the Justice Department and the SEC.
He hatched a plan to hire consultants who could direct the money to Nigerian officials, the court documents said. A consultant from the United Kingdom would pay off higher-level Nigerian officials, while a second, from Japan, would be responsible for bribing lower-ranking officials. In November 1994, the U.K. consultant, who was not identified, allegedly told an associate that it would take $60 million to secure the contract, the court documents said. Of that money, $40 million to $45 million would go to the "first top-level executive branch" of Nigerian officials, while an additional $15 million to $20 million would go to other Nigerian officials.
Later that month, Stanley traveled to the Nigerian capital to meet with senior officials and confirm that the U.K. consultant would serve as a go-between, according to court documents and officials familiar with the investigation.
Over the next year, TSKJ, operating through subsidiary companies in Madeira, Portugal, in the Portuguese offshore tax haven of Madeira Island, signed agreements to transfer millions of dollars to the U.K. consultant, according to court documents and people familiar with the investigation.
In December 1995, the Nigerian government awarded the first of the gas plant contracts to TSKJ. Over the next decade, the government awarded TSKJ four contracts worth a total of $6 billion to build and expand the plant.
Throughout that time, Stanley continued traveling to Nigeria to meet with senior officials and continued arranging payments through the U.K. and Japanese consultant firms, according to the court documents.
Abacha died suddenly in 1998. According to Nigerian press accounts, his death was either the result of a marathon Viagra-fueled orgy with four prostitutes or a conspiracy among his closest confidantes to poison him. No autopsy was ever performed. In the decade since Abacha's death, Switzerland alone has returned at least $500 million in his bank accounts to the government of Nigeria.
All told, Stanley traveled to Nigeria to meet with top officials on four occasions between 1994 and 2001 as part of the bribery scheme. TSKJ paid out $130 million in bribes through the U.K. consultant and $50 million through the Japanese firm, according to the court documents.
French and Nigerian investigators have identified the primary consultant to the consortium as Jeffrey Tesler, a London attorney who worked with Nigerian immigrants, according a transcript of testimony from the French case.
Tesler was not identified in U.S. court documents. He has been investigated by British and French authorities but has never been charged with wrongdoing. Last year, British authorities conducted a search of his London office at the urging of U.S. officials. A woman who answered the phone at Tesler's law office Thursday said the attorney could not be reached and would have no comment.
The Cheney connection
In the middle of the bribery and plant construction, Kellogg changed hands. In 1998, Kellogg's parent company, Dresser Industries, merged with Halliburton.
Cheney, then CEO of Halliburton, arranged the merger during a quail-hunting trip. Afterward, Cheney appointed Stanley to head KBR, a newly formed construction and logistics subsidiary that grew out of the merger.
In a 1999 article in Middle East Economic Digest, Cheney praised Stanley: "We took Jack Stanley (and a colleague) . . . to head up the organization, and that has helped tremendously."
As allegations of corruption mounted, however, Halliburton conducted an internal investigation into the charges. In June 2004, the oil services company publicly fired Stanley, who was working as a consultant, for improper personal enrichment. The company also severed all relations with Tesler's firm, Tri-Star Investments.
The bribery scandal is one of many involving Halliburton's KBR subsidiary in the past several years. KBR has repeatedly been criticized for overbilling the U.S. government for providing food, fuel and other services to U.S. soldiers in Iraq. Last year, Halliburton spun off KBR into a separate corporation. KBR spokeswoman Heather Browne said the company has not yet reviewed the plea agreement. "KBR does not in any way condone or tolerate illegal or unethical behavior. The company stands firm in its unwavering commitment to conduct business with the utmost integrity,'' Browne said in a prepared statement.
Halliburton spokeswoman Cathy Mann declined to comment, saying the company had not yet reviewed the plea agreement. Earlier this year, Halliburton reported that the SEC was dramatically widening the scope of the investigation to cover projects built during the past 20 years in multiple countries.
Those investigations may focus on Stanley's activities in other countries. Court documents show that Stanley worked with another consultant, identified as a dual-national Lebanese and American citizen, in an elaborate kickback scheme.
Under the scheme, Stanley hired the consultant to help Halliburton and its predecessor firms arrange deals to build liquefied-natural-gas projects not only in Nigeria but also in Egypt, Yemen and Malaysia. From 1991 to 2004, the consultant directed $10.8 million of the proceeds back to Stanley through a Swiss bank account. These deals involved Stanley's original employer, M.W. Kellogg, as well as KBR.
This story is part of a joint reporting project by PBS's Frontline and ProPublica on international bribery, the subject of an upcoming documentary. Marlena Telvick and Oriana Zill de Granados reported from Houston. Additional reporting was contributed by Lowell Bergman, Jake Bernstein and T. Christian Miller. The story was written by Miller.
Visitors to this blog -- if they haven't done so already -- will want to read an outstanding article from the November 25, 2007 edition of the New York Times. It's called "Payload: Taking Aim at Corporate Bribery." The lengthy piece about the U.S. Foreign Corrupt Practices Act is by Nelson D. Schwartz, one of America's best business journalists, and legendary investigative producer / reporter Lowell Bergman. In the movie The Insider, Al Pacino played Mr. Bergman. That's impressive.
The article can be found here.
It's a great read and, we believe, a milestone for the FCPA. It signals a new level of interest, triggered by record-numbers of high-profile prosecutions and pending investigations. Companies involved now include Siemens, Halliburton, Schlumberger, BAE and dozens of others. The oil services-related cases have strategic implications for U.S. energy policy in Nigeria, the Middle East and the Caspian, and the BAE case could eventually test the special relationships the United States has with Britain and Saudi Arabia. At the same time, prosecutors around the globe are now cooperating more and have better resources for their fight against public corruption. Without doubt, the importance of the FCPA is set to soar.
Our favorite quote among many good ones in "Payload" is this, from Alice Fisher, the U.S. Justice Department's Assistant Attorney General of the Criminal Division: “Corruption undercuts democracy, stifles economic growth and creates an uneven playing field for U.S. companies overseas,” Ms. Fisher says. “We are facing transnational crime all over the place.”
We're grateful for the great reporting and analysis by Messrs. Schwartz and Bergman. They've given a big boost to the growing public discussion about our favorite subject.