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FCPA Blog Daily News

Entries in Oscar Wyatt (7)

Wednesday
May062009

Iraq's Lawsuit Legacy

In July 2008, the government of Iraq launched a massive FCPA-related federal lawsuit in New York City. We first talked about it here. The complaint named 93 defendants in claims alleging bribery and fraud under the now-defunct United Nations oil-for-food program. Iraq sought more than $10 billion in damages, describing the U.N. program as "the largest financial fraud in human history." (Bernie Madoff hadn't yet reset the scale for measuring financial frauds.)

What's happening in the case today? After nearly a year, Iraq is still trying to serve some of the defendants. A claimant usually has 90 days to effect service of process; in this case, the court's been lenient by granting several extensions. Overseas service can be complicated. So Iraq asked the court to help by issuing letters rogatory (requests for assistance addressed to foreign courts). The non-binding letters are directed at courts in Austria, Jordan, Malaysia, South Africa, and the United Arab Emirates.

According to the federal court's most recent order, anyone not served by July 24, 2009 will be dropped from the suit. Until the deadline passes, none of the defendants have to file answers or raise their defenses.

The post-war Iraqi government alleged that kickbacks were paid to representatives of Saddam Hussein through illegal and undisclosed transportation and port fees, bogus after-sales service fees and overpricing of goods and services. Some of those named have already faced enforcement actions for violating the U.N. regulations or U.S. law, including the Foreign Corrupt Practices Act. Among them are ABB, AB Volvo, Flowserve, Akzo Nobel, Chevron, Siemens, Ingersoll-Rand, York International, Oscar Wyatt, El Paso and Textron.

There's no private right of action under the Foreign Corrupt Practices Act. So Iraq's claims are based on the Racketeer Influenced and Corrupt Organizations Act (RICO), common-law fraud, breach of fiduciary duty and illegal price discrimination.

Here's the full list (which may change after July 24) of everyone named as a defendant in the complaint:

AGCO Denmark A/S, AGCO S.A., Valtra do Brazil, Air Liquide Engineering, Akzo Nobel N.V., N.V. Organon ("Organon"), Intervet International B.V. (Intervet"), Mais Co. for Medical Products, Atlas Copsco CMT, AWB Ltd., B. Braun Medical France, B. Braun Melsungen A.G., B. Braun Medical Industries SDN BHD (Malaysia), Aesculap AG and KG, Aesculap Motric S.A., Aesculap Sugical Instruments SDN, Boston Scientific S.A., BNP Paribas USA, BNP Paribas (Suisse) SA, BNP Paribas Hong Kong, BNP Paribas Paris, BNP Paribas UK Holdings Limited, BNP Paribus London Branch, Buhler Ltd., David B. Chalmers, Jr, Chevron Corp., Daewoo International Corp., Daimler Chrysler AG, Dow Agrosciences, ABB AG, Eastman Kodak S.A., El Paso Corp. (successor to Coastal Corp.), Evapco (Austria), Evapco Europe S.R.L., Avio Flowserve Corp., Flowserve Corp., Flowserve Pompes (Formely Ingersoll-Dresser Pompes), Flowserve B.V.

And some more:

GlaxoSmithKline Walls House, Glaxo Smithkline Egypt SAE, ABB Automation, Glaxo Wellcome SA (South Africa) (PRY) Ltd., SmithKline Beecham International, ABG Allgemeine Baumaschinen-GesellschaftmbH, Dresser international, Ingersoll-Rand Italiana SPA, Thermo King Ireland Limited, Ingersoll-Rand Benelux N.V., Ingersoll-Rand World Trade Ltd., Cilag AG International, Janssen Pharmaceutical, ABB Elektric Sanayi AS, Kia Motors, Liebherr Export AG, Liebher France SA, Seono Pharma International, Merial, Novo Nordisk, Pauwels, Railtech International, ABB Industrie AC Machines, F. Hoffman La Roche, Roche Diagnostics GMBH, Rohm and Haas France S.A., Secalt S.A., Siemens S.A.A. of France, Siemens Sanayi ve Ticaret A.S. of Turkey, Osram Middle East FZE, Solar Turbines Europe,

And the final batch:

St. Jude Medical Export GMBH, ABB Industrie Champagne, Sulzer Buckhardt Engineering Works Ltd., Sulzer Pumpen Deutschland GMBH, Sulzer turbo Ltd., Textron Inc., David Brown Guinard Pumps S.A.S., David Brown Transmissions France S.A., Renault Trucks SAS, ABB Near East Trading Ltd., Renault Agriculture & Sonalika International, Renault V.I, Volvo Construction Equiptment AB, The Weir Group, Oscar S. Wyatt, Jr, Vitol S.A., Woodhouse International, York Air Conditioning and Refrigeration FZE, and ABB Solyvent-Ventec.

Download Iraq's June 27, 2008 complaint here.
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Thursday
Sep182008

The Tally, Part 2

Following yesterday's post, several readers suggested that we mention any other FCPA-related cases, appeals, sentencings and enforcement actions during the past year involving individuals. It's a good idea, and our thanks go out to Marc and our other correspondents.

_______________


Our post Kozeny's Co-Defendant Wins Appeal (September 1, 2008) discusses Victor Kozeny, Frederic Bourke and David Pinkerton. They were indicted in May 2005 under the FCPA over an alleged plan to bribe officials from Azerbaijan. In June 2007 the trial court dismissed the charges, saying the government failed to indict within the FCPA's five-year statute of limitations. In October 2007, the Bahamas Supreme Court refused to order Kozeny's return to the U.S. to face trial. Pinkerton was dropped from the U.S. case in July 2008 after the government withdrew all charges against him. The Second Circuit then affirmed Bourke's dismissal because of the statute of limitations.

# # #

On May 15, 2008, Jason Edward Steph consented to entry of a permanent injunction with the SEC with a possible civil penalty to be determined. Gerald Jansen, another former Willbros executive in Nigeria, received a permanent injunction and a civil fine of $30,000, while Lloyd Biggers, a former Willbros employee in Nigeria, received a permanent injunction. Our post Willbros Resolves FCPA Offenses (May 15, 2008) said, "Also named in the SEC's complaint were Gerald Jansen, a former administrative supervisor in Nigeria; Lloyd Biggers, a former employee in Nigeria; and Carlos Galvez, a former accounting employee in Bolivia. The allegations included a scheme to pay $300,000 to officials of an Ecuadorean state-owned oil and gas company and to avoid paying taxes in Bolivia."

# # #

On January 10, 2008, the United States Court of Appeals for the Fifth Circuit denied a petition for rehearing en banc from David Kay and Douglas Murphy. The former executives of American Rice, Inc., were indicted under the FCPA in 2002 for bribing Haitian officials. The U.S. District Court in Houston dismissed the indictments, finding that the FCPA did not apply to their conduct -- i.e., paying bribes to reduce their company's taxes. In 2004, the Fifth Circuit held that the bribes alleged in the indictment could fall within the scope of the FCPA and remanded. At trial, Kay and Murphy were convicted of violating the FCPA. Kay was sentenced to 37 months in prison and Murphy to 63 months. They appealed, and in October 2007 the Fifth Circuit affirmed their convictions. They then filed a petition for rehearing en banc, which the Fifth Circuit denied. See our post U.S. v. Kay: Once More To The Courts (February 28, 2008).

On April 9, 2008, Kay and Murphy filed a petition for cert with the U.S. Supreme Court (available at scotusblog.com here). They're arguing among other things that the text, structure, and legislative history of the FCPA are all ambiguous with respect to the criminalization of the type of payments involved in the case. Therefore, they should have the benefit of the rule of lenity -- i.e., that any ambiguity in the FCPA should be construed against the government and in favor of the accused.

On May 12, 2008, two amicus briefs were filed in the case on behalf of the U.S. Chamber of Commerce and the National Association of Criminal Defense Lawyers. They're available from scotusblog.com here.

# # #

On October 1, 2007, Oscar Wyatt Jr., 83, pleaded guilty to one count of conspiracy to commit wire fraud in connection with the U.N. oil-for-food program. The U.S. Government accused him of paying millions in illegal surcharges directly to Iraqi officials in return for oil allocations from 2000 to 2002. He faces 18 to 24 months in prison under a plea agreement and will forfeit $11 million. He founded and ran Coastal Corporation, which he sold to El Paso Corporation in 2001. Though he wasn't charged under the FCPA, in February 2007, El Paso settled FCPA allegations related to illegal surcharges it paid to Iraqi officials under the oil-for-food program. See our post Oscar Wyatt, Founder Of Coastal Corporation, Pleads Guilty To Iraq Bribes (October 2, 2007).

# # #

On September 28, 2007, Steven Head, the former president of Titan Corporation’s Africa business, was sentenced to six months’ in prison, three years’ supervised release, and a fine of $5,000. He pleaded guilty in June 2006 to one count of falsifying a financial document. He was originally charged with paying $3.5 million in bribes to foreign officials in Benin. Titan pleaded guilty in March 2005 to violating the FCPA and aiding and abetting the filing of a false tax return.

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Wednesday
Sep172008

What's The Tally?

The Justice Department says it plans to prosecute more individuals under the Foreign Corrupt Practices Act -- and send them to jail. We looked through our posts to see how men and women fared over the past year. Below are excerpts from posts dealing with those who've been criminally charged or sentenced under the FCPA, or settled enforcement actions with the SEC, or both, during the past twelve months. The titles link to the original posts.

More Individuals Indicted For FCPA Violations (September 8, 2008)

The Justice Department said it arrested four people last week on charges that they and their company bribed Vietnamese officials in exchange for contracts to supply equipment and technology to government agencies in Vietnam.

The DOJ said U.S. citizens Nam Nguyen, 52, of Houston; Joseph Lukas, 59, of Smithville, N.J.; Kim Nguyen, 39, of Philadelphia; and An Nguyen, 32, of Philadelphia were arrested after they, along with Nexus Technologies Inc., were indicted on Sept. 4, 2008, by a federal grand jury in Philadelphia on one count of conspiracy to violate the Foreign Corrupt Practices Act and four substantive counts of violating the FCPA.

# # #


Ex-KBR Boss Pleads Guilty (September 4, 2008)

The Justice Department said today that Albert “Jack” Stanley, 65, a former chairman and CEO of KBR, the global engineering and construction firm based in Houston, pleaded guilty to a two-count criminal information charging him with conspiracy to violate the Foreign Corrupt Practices Act and conspiracy to commit mail and wire fraud. He appeared in U.S. District Court in his hometown of Houston before U.S. District Judge Keith P. Ellison. . . .

Under the plea deal accepted by the court, Stanley faces seven years in prison and a restitution payment of $10.8 million.

# # #


Former Execs Avoid Hard Time (September 3, 2008)

Two former telecommunications executives who admitted bribing employees of state-owned companies in Africa and concealing the payments have avoided prison in exchange for their cooperation in an ongoing FBI investigation.

The Justice Department said yesterday that Roger Michael Young, 48, of Washington, D.C., a former managing director of ITXC Corporation, has been sentenced to five years probation, including three months home confinement, three months in a community confinement center, and a $7,000 fine. He pleaded guilty in July 2007 to violating the Foreign Corrupt Practices Act and the Travel Act.

Former ITXC Vice President Steven J. Ott, 49, of Princeton, N.J., who also pleaded guilty, was sentenced in July this year to five years probation, including six months in a community confinement center and six months home confinement. He was fined $10,000.

A third defendant in the case, Yaw Osei Amoako, 55, of Hillsborough, N.J., pleaded guilty in September 2006. He was sentenced in August 2007 to 18 months in prison followed by two years of supervised release, and a $7,500 fine.

# # #

FCPA Guilty Plea For Bribing UK Official (May 9, 2008)

A former co-owner and executive of California-based Pacific Consolidated Industries (PCI) pleaded guilty yesterday to violating the Foreign Corrupt Practices Act. Martin Eric Self, 51, of Orange, California pleaded guilty to a two-count information charging him with violating the FCPA by paying more than $70,000 in bribes to a U.K. Ministry of Defence official. The bribes were intended to secure equipment contracts with the U.K. Royal Air Force. . . .

Self is scheduled to be sentenced in federal court on September 29, 2008. Although he faces a maximum sentence of five years in prison per count, his plea agreement contemplates a prison term of eight months, subject to the court's final determination at sentencing.

# # #


Former ITXC Execs Settle Civil FCPA Charges (May 8, 2008)

The Securities and Exchange Commission said that on April 18, 2008 it settled civil proceedings under the Foreign Corrupt Practices Act against Steven J. Ott, Roger Michael Young, and Yaw Osei Amoako. The SEC charged the former executives of ITXC Corp. with violating the antibribery and books and records provisions of the FCPA by bribing senior officials of government-owned telephone companies in Nigeria, Rwanda and Senegal, and concealing and falsely reporting the illegal payments.

In settling the SEC's civil enforcement action, Ott, Young and Amoako each consented to the entry of a final judgment that permanently enjoins them from violating Sections 30A and 13(b)(5) of the Securities Exchange Act of 1934, Rule 13b2-1 thereunder, and from aiding and abetting violations of Exchange Act Section 13(b)(2)(A) and, with respect to Ott and Young, violations of Exchange Act Section 13(b)(2)(B). Amoako also must pay $188,453 in disgorgement and prejudgment interest. He took kickbacks for some of the bribes he paid to the foreign officials.

# # #

Ex-World Bank Manager Sentenced For FCPA Offense (April 28, 2008)

The Justice Department has announced the April 22, 2008 sentencing of former World Bank employee, Ramendra Basu. The Indian national and U.S. permanent resident received 15 months in prison for conspiring to award World Bank contracts to consultants in exchange for kickbacks and for helping a contractor bribe a foreign official in violation of the Foreign Corrupt Practices Act. In addition to the 15- month prison term, Basu was sentenced to two years supervised release and 50 hours of community service. U.S. v. Basu, (Cr. No. 02-475) D.D.C., November 2002.

# # #


That's Entertainment? (December 19, 2007)

Wow! It's not often -- never, in fact -- that we can talk about the LA movie scene and tap Variety as one of our sources. But here it is. The Department of Justice just announced that a Los Angeles film executive and his wife were arrested on allegations of making corrupt payments to a Thai government official in order to obtain lucrative contracts to run an international film festival in Bangkok, in violation of the Foreign Corrupt Practices Act.

Gerald Green, 75, and his wife Patricia Green, 52, both of Los Angeles, were arrested on a criminal complaint filed on Dec. 7, 2007, in federal court in Los Angeles and unsealed today. The complaint alleges that the Greens conspired to pay more than $1.7 million in bribes for the benefit of a government official with the Tourism Authority of Thailand (TAT) in order to obtain the film festival contract and other contracts with the TAT worth more than $10 million.

[The Greens are awaiting trial.]

# # #


Schnitzer's Former Boss Settles FCPA Charges (December 14, 2007)

The former chairman and ceo of Schnitzer Steel Industries, Inc. resolved charges on December 13, 2007 brought by the Securities and Exchange Commission under the U.S. Foreign Corrupt Practices Act. Robert W. Philip, 60, of Portland, Oregon, will pay about $250,000 to settle charges that he violated the antibribery, books and records and internal controls provisions of the FCPA (Section 30A of the Securities Exchange Act of 1934 [15 U.S.C. § 78dd-1], Section13(b)(2)(A) [15 U.S.C. § 78m(b)(2)(A)], and Section 13(b)(2)(B) [15 U.S.C. § 78m(b)(2)(B)]). He served as Schnitzer's president beginning in 1991, as its chief executive officer from 2002, and as chairman from 2004. He left the company in May 2005.

# # #


Another Former Willbros Executive Pleads Guilty (November 6, 2007)

Jason Edward Steph, 37, who once served as general manager of on-shore operations for a subsidiary of Willbros Group Inc., entered into a plea agreement with the U.S. Department of Justice on November 5, 2007. He pleaded guilty to conspiring to bribe officials of the government of Nigeria with more than $6 million -- in violation of the U.S. Foreign Corrupt Practices Act. Steph, of Sunset, Texas, was indicted on July 19, 2007. He now faces five years in prison and a $250,000 fine. . . .

Steph also said that in February and March of 2005 he, former Willbros executive Jim Bob Brown, and others arranged for the payment of approximately $1.8 million in cash to government officials in Nigeria. Brown pleaded guilty to a similar charge on Sept. 14, 2006. Steph and Brown are cooperating with the government’s ongoing investigation . . . .

[Steph and Brown are awaiting sentencing.]

# # #


Syncor's Founder Settles FCPA Charges With The SEC (October 1, 2007)

Monty Fu, the founder of Syncor International Corp., agreed with the Securities and Exchange Commission on September 27, 2007 to resolve U.S. Foreign Corrupt Practices Act charges by consenting to a permanent injunction against FCPA books-and-records violations and agreeing to pay a $75,000 civil penalty. Fu was Syncor's CEO from 1985 to 1989 and board chairman from 1985 to November 6, 2002, when he went on paid leave until he resigned in December 2002.

# # #


A.T. Kearney's Former India President Violated The FCPA (September 26, 2007)

The U.S. Securities and Exchange Commission announced on September 25, 2007 two settled enforcement actions based on violations of the books and records provisions of the Foreign Corrupt Practices Act. The actions involved the founder and former president of A.T. Kearney Ltd's India business, Chandramowli Srinivasan, and Kearney's former parent company, Electronic Data Systems Corp. . . .

For violating Sections 13(b)(5) and 30A of the Securities Exchange Act of 1934, Srinivasan paid a civil penalty of $70,000.

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Sunday
Jul062008

Shock And Awe In U.S. Federal Court

The government of Iraq filed a civil suit in late June in federal district court in New York City against two individuals and about 50 companies and some of their related firms for bribery that allegedly occurred under the United Nations oil-for-food program. Referring to the U.N. program as "the largest financial fraud in human history," the 47-page complaint seeks more than $10 billion in damages.

Many of the defendants named in the complaint -- which relies heavily on the U.N.'s October 2005 internal report by former Federal Reserve Chairman Paul Volcker -- have already faced enforcement action for violating U.N. regulations or U.S. law, including the Foreign Corrupt Practices Act. Among those discussed in our prior posts are ABB, AB Volvo, Flowserve, Akzo Nobel, Chevron, Siemens, Ingersoll-Rand, York International, Oscar Wyatt, El Paso (successor to Coastal Corp.) and Textron. Others named in the complaint include Air Liquide, Atlas Copco, Boston Scientific, BNP Paribas, Buhler, Daewoo, Daimler-Chrysler, Dow, Eastman, Glaxo, Dresser, Kia Motors, Novo Nordisk and Vitol.

The complaint describes how kickbacks paid to representatives of Saddam Hussein were funded through illegal and undisclosed transportation and port fees, bogus after-sales service fees and overpricing of goods and services.

Although there is no private right of action under the Foreign Corrupt Practices Act, this is the third civil suit filed this year in U.S. federal court by alleged victims of overseas public corruption. In March, Bahrain-owned Alba sued Alcoa and its agent in Pittsburgh for allegedly inflating prices and using the money to bribe Bahraini officials. Then in April, Denver-based oilman Jack Grynberg and his company brought a suit in the District Of Columbia against their former consortium partners BP and Statoil, and their top executives, for allegedly using some of Grynberg's money to bribe government officials in Kazakhstan.

Similar to the Alba and Grynberg complaints, the Iraqi government's claims are based on the Racketeer Influenced and Corrupt Organizations Act (RICO), common-law fraud and breach of fiduciary duty. Iraq also alleges illegal price discrimination under the Robinson Patman Act ("It shall be unlawful for any person engaged in commerce, in the course of such commerce, knowingly to induce or receive a discrimination in price which is prohibited by this section.").

The complaint says the federal court in New York should hear the case because the oil-for-food program was administered at the United Nations' headquarters there, all funds related to the program "were supposed to pass through an escrow account in New York," and all oil-for-food contracts were "approved in New York."

View Iraq's complaint here (courtesy of The AmLaw Daily).

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Wednesday
Feb132008

U.S. v. Green, Take One

Two weeks from now, in a Los Angeles federal district court, the husband-and-wife Hollywood movie producers charged with violating the U.S. Foreign Corrupt Practices Act will go on trial. Gerald and Patricia Green were arrested last December and are out on bail. They're accused of bribing a Thai government official with kickbacks of more than $1.7 million in exchange for a film festival contract worth $10 million.

We're not privy to the Greens' defense, of course, but they appear to have a tough legal battle ahead of them. Here are some reasons why:

-- CW-1 and CW-2. According to the FBI's 28-page affidavit, at least two former insiders identified as Confidential Witnesses One and Two are giving evidence against the Greens, and it's juicy. The FBI says the CWs prepared the budgets, arranged the meetings, wrote the checks and ran the bank accounts that are now at the center of the case. The government says it has physical evidence too. When the police raided the Greens' office, among the goods seized was a spreadsheet showing the details of each kickback. And earlier in the investigation, FBI agents even jetted to Thailand to watch (and perhaps listen?) as Mr. Green met with the Thai government official to seal their allegedly corrupt deal. The Greens' defense lawyers, it appears, will have an armory full of smoking guns to deal with at the trial.

-- War on multiple fronts. In addition to the FCPA charges, the government might raise allegations of fraud and obstruction. That's important because the elements of an FCPA offense can be complicated to prove. When prosecutors think they can obtain a conviction based on other charges, as they did in Oscar Wyatt's trial, they'll usually try to do that. Paragraph 12 of the FBI's affidavit is a potential blueprint. It says, "The defendants attempted to conceal their bribery of the Thai official in a variety of ways, among other things, by: (a) employing different business entities, some with dummy business addresses and telephone numbers, in their dealings with the [Tourism Authority of Thailand] in order to hide the large amount of money they were being paid under the contracts; (b) making 'commission' payments to the Thai official through the foreign bank accounts of intermediaries; and (c) once the government's investigation became known to the defendants, attempting to manufacture evidence in support of false, exculpatory explanations for the corrupt payments."

-- There's something rotten in Denmark. The Greens' story as the government is telling it sounds like an Elmore Leonard movie script. Here's the pitch: A high-powered Hollywood couple befriend a Thai government official who controls a prestigious film festival in exotic Bangkok. She's crooked, so she and the Greens hatch a plan. She'll give them the exclusive no-bid right to promote the festival, and they'll kick back a part of every dollar they make. Together the plotters create shell companies and phony invoices. They use borrowed bank accounts, and so much more. The plan works perfectly. But one day someone close to the Greens betrays them and calls the feds. It's a great story, and that's probably bad news for the Greens. Even if the government's evidence isn't rock solid on all the elements of an FCPA offense, the jury will still get the picture that people stepped over the line of acceptable business behavior. To understand the significance, consider what happened to poor David H. Mead, the former president of Saybolt Inc. In 1998, a jury in New Jersey convicted him of paying a $50,000 bribe to government officials in Panama in violation of the FCPA. Mead had admitted making the payment but pleaded not guilty. He only paid the bribe, he said, because the company's outside lawyer assured him it could be done legally from Saybolt's Dutch affiliate. So his defense was that he didn't act "knowingly" to violate the FCPA, which the statute requires. His defense looked great on paper but the jury convicted him anyway. Why? Probably because they just didn't want a $50,000 bribe to a corrupt government official in Panama to go unpunished. Will the government's version of a similarly sordid tale in U.S. v. Green have the same effect on the jury?

-- For better or for worse. Any time family members appear as co-defendants in a criminal case, the defense has a problem. The FBI affidavit separates Mrs. Green's role from her husband's somewhat by indicating that she was part of the conspiracy but less involved in the substantive FCPA violation. But just by bringing her into the case, the government is putting enormous pressure on Mr. Green. He'll want to spare her a trial and possible jail time. And presumably Mrs. Green, who's in her early 50s, will be desperately trying to keep her 75-year-old husband out of jail. Will these terrible worries convince the Greens either to cop a plea before trial or to shape their defense to save one of them from prison?

-- Looking at the numbers. Perry Mason's lucky clients were assured of a successful outcome in their criminal trials. But real-life FCPA defendants have fared much worse. Most accused individuals have plea bargained to avoid jail time -- FCPA convictions carry a prison term of up to five years. Of the few people who've gone to trial since 1991, none have been acquitted. Dan Newcomb, in his invaluable 2007 FCPA Digest, sorts the numbers out this way: "Since, 1990, DOJ prosecutions under the FCPA against seventy-one individual defendants and corporations have been resolved. Of those seventy-one, forty-three were resolved through plea agreements. In only four of those cases was there a conviction after trial. In the cases where a plea was taken or a defendant was convicted, defendants were sentenced to a term in prison, fined, or both. Sentences have been imposed in 26 of those cases, and sentencing has been deferred in two others. Recently, the defendants in U.S. v. David Kay and Douglas Murphy received terms of 37 months and 63 months, respectively. In 1990, seven prosecutions ended in a dismissal of the charges. Since then, only one case (in 2004) has been dismissed. Also, during the years 1990 and 1991 there were five acquittals after trial. There have not been any since. In addition, at least four individuals have failed to appear in court to answer the charges against them." There's not much there to cheer the Greens as their trial date approaches.

View the FBI's Affidavit here.

View the 2007 FCPA Digest here.

View prior posts about the Greens here.

Wednesday
Nov142007

Chevron Pays $30 Million To Settle Oil For Food Violations

Chevron Corporation resolved violations under the U.N. Oil-For-Food Program by entering into a non-prosecution agreement with the U.S. Department of Justice and separate agreements with the Office of Foreign Assets Control of the U.S. Department of the Treasury ("OFAC") and the Securities and Exchange Commission. The SEC's charges against Chevron included violations of the U.S. Foreign Corrupt Practices Act under the books and records and internal controls provisions (Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934). Chevron will pay a civil penalty of $3,000,000, disgorge $25 million, and pay OFAC a penalty of $2,000,000 for violating the sanctions against the former government of Iraq.

The case revealed an enormous breakdown of Chevron's compliance program. According to the SEC's complaint, despite a January 2001 company-wide policy prohibiting the payment of surcharges in connection with the purchase of Iraqi oil, Chevron's traders included $20 million in illegal surcharges to Iraq for the purchase of 78 million barrels of crude oil under 36 contracts.

"Among other things," the SEC said, "the policy required traders to obtain prior written approval for all proposed Iraqi oil purchases, and charged management with reviewing each proposed Iraqi oil deal. Chevron's traders did not follow the company-wide policy and Chevron's management was unsuccessful in ensuring its compliance. Despite being required to consider the identity, experience and reputation of a third party seller prior to approving a proposed Iraqi oil purchase, Chevron's management relied on its trader's representations. . . . At least one trader responsible for a large portion of Chevron's purchases from Iraq factored the cost of the surcharge payments into price negotiations with third parties. One third party seller, whose company on occasion sold oil to Chevron, stated that the trader he dealt with at Chevron and the trader's bosses always knew about the illegal surcharge demands by Iraq. . . . Chevron failed to devise and maintain a system of internal accounting controls to detect and prevent such illicit payments. Chevron's accounting for its Oil for Food transactions failed properly to record the true nature of the company's payments to third parties."

Other Oil-For-Food prosecutions have been resolved against El Paso Corporation and Oscar Wyatt, Jr., Textron, York International and Ingersoll-Rand Co., Ltd.

Chevron Corporation trades on the New York Stock Exchange under the symbol CVX.

View the SEC's Litigation Release No. 20363 / November 14, 2007 Here.

View the SEC's Complaint Here.

View the DOJ's November 8, 2007 Non-Prosecution Agreement Here.

Monday
Oct012007

Oscar Wyatt, Founder Of Coastal Corporation, Pleads Guilty To Iraq Bribes

Guilty Plea Follows El Paso's Settlement of FCPA Violations Earlier This Year

Oscar Wyatt Jr., 83, pleaded guilty on October 1, 2007 to one count of conspiracy to commit wire fraud in connection with the U.N. oil-for-food program. The U.S. Government accused him of paying millions in illegal surcharges directly to Iraqi officials in return for oil allocations from 2000 to 2002. He faces 18 to 24 months in prison under a plea agreement and will forfeit $11 million. He founded and ran Coastal Corporation, which he sold to El Paso Corporation in 2001.

In February this year, El Paso settled violations of the U.S. Foreign Corrupt Practices Act related to illegal surcharges it paid to Iraqi officials under the oil-for-food program. It disgorged $5,482,363 in profits and paid a civil penalty of $2,250,000. It also entered into a non-prosecution agreement with the U.S. Attorney’s Office for the Southern District of New York and cooperated in providing evidence relating to Wyatt's role. Violations under the anti-bribery provisions of the FCPA carry potential prison sentences of 5 years, while under the oil-for-food program, which ran from 1996 to 2003, Wyatt could have faced 20 years for his role.

The Securities and Exchange Commission's February 7, 2007 litigation release said, “El Paso failed to maintain an adequate system of internal controls to detect and prevent the illegal payments. Although El Paso inserted a provision in some contracts requiring the third party to represent that it had not paid surcharges, El Paso failed to conduct due diligence to ensure that surcharges were not paid. Recorded conversations reveal El Paso’s knowledge that the provision was entirely ineffective. In one conversation, a third party that indicated he was willing to pay illegal surcharges to Iraq indicated that he would be equally willing to sign a false certification denying the payment. El Paso’s accounting for its Oil for Food transactions failed properly to record the nature of the company’s payments. In at least fifteen transactions, a portion of the company’s price for oil constituted kickbacks to Iraq. The company failed to so designate those payments, characterizing them instead simply as part of the cost of goods sold.”

During Wyatt's trial, which ended mid-way with his guilty plea, prosecutors played tapes for the jury of conversations between him and Saddam Hussein.

El Paso Corporation trades on the New York Stock Exchange under the symbol EP.

View the SEC's Litigation Release No. 19991 / February 7, 2007 Here.

View the SEC's Complaint Against El Paso Corporation Here.

View the DOJ's 2005 Press Release About Wyatt's Indictment Here.