It was blockbuster quarter for FCPA enforcement, and April was one of the busiest months on record.
Entries in Parker Drilling (6)
Did someone say FCPA enforcement had slowed down? Look again.
Houston-based Parker Drilling Company resolved Foreign Corrupt Practices Act charges Tuesday for bribes paid to Nigerian officials through an agent to circumvent customs and tax laws.
In its quarterly report released August 9, SciClone Pharmaceuticals, Inc. said it received an SEC subpoena and a letter from the DOJ investigating the "sale, licensing and marketing of its products in foreign countries, including China."
According to SciClone, the DOJ said it was looking at FCPA issues in the pharmaceutical industry generally, and had received information about SciClone's practices suggesting possible violations.
A reader was curious about the timing of SciClone's announcement. Less than a month ago, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act. It authorizes payments of 10% to 30% for recoveries of at least a million dollars based on information about violations of the securities laws, including the FCPA.
So we asked SciClone if the FCPA investigation was triggered by a recent whistleblower complaint. Ana Kapor, the firm's director of investor relations and corporate communications, answered quickly but said only: "We are not able to comment on this topic beyond what we included in our filings earlier this week."
Is this the first FCPA-related whistleblower case under the new reward program? Or is it, as most assume, part of the year-old investigation of drug makers that already targeted GlaxoSmithKline, AstraZeneca, and Merck? Or is it both? There's no way to tell until someone involved goes on the record.
SciClone Pharmaceuticals, Inc. trades on NASDAQ under the symbol SCLN.
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A slice of the FCPA pie. In his August 16 article about FCPA-related civil suits, Forbes' Nathan Vardi correctly says there's no private right of action under the FCPA. So plaintiff lawyers look for other ways to sue directors and officers for their company's overseas bribery.
Results of the suits have been mixed but some have produced big settlements. He lists Faro Technologies, which paid $6.9 million; Nature’s Sunshine, which paid $6 million; Immucor, $2.5 million; and Syncor, $15.5 million. And he says plaintiff lawyers are prowling for more targets by following SEC and DOJ leads -- including Weatherford International, Parker Drilling, Avon Products, and Pride International.
Ther article is Plaintiff Lawyers Join The Bribery Racket.
Parker Drilling's directors are facing a shareholder suit that was brought after the company's detailed disclosure earlier this month that it is being investigated by the Justice Department and Securities and Exchange Commission for compliance problems in Nigeria and Kazakhstan.
Courthouse News said the derivative suit was filed in Harris County Court in Texas.
The suit alleges breach of fiduciary duty, abuse of control, gross mismanagement and wasting corporate assets. It named Robert Parker Jr., Robert Parker, John Gibson, Roger Plank, Robert McKee, George Donnelly, Robert Goldman, Gary King, Rudolph Reinfrank and David Mannon.
As we've reported, Parker is one of the dozen or so oil and gas-related companies dragged into FCPA compliance problems by Panalpina, the Swiss logistics firm that allegedly bribed overseas customs and licensing officials on behalf of its clients. Among those investigated by the DOJ and SEC in addition to Parker are Schlumberger, Shell, Tidewater, Nabors Industries, Transocean, GlobalSantaFe Corp., ENSCO, Cameron, Noble Corp., and Pride International. Panalpina itself was hit with a shareholder derivative suit in federal court in Texas last year.
There's no private right of action under the FCPA. So private litigants have to resort to other causes of action -- such as common law fraud, RICO, securities law violations, or breach of fiduciary duties. But private litigants haven't done well with FCPA-related claims. BAE directors this year won dismissal of a bribe-related case, as did Dow Chemical's.
In 2008, the Ninth Circuit in Glazer Capital Management v. Magistri put an obstacle in the path of plaintiffs. The court raised the "scienter" bar for FCPA-related claims against officers and directors under the federal securities laws. Since then, plaintiffs have filed FCPA-based derivative claims in state court, including one in Texas a year ago against some of the officers and directors of Halliburton and its one-time subsidiary, KBR.
Parker Drilling is one of the dozen or so oil and gas-related companies dragged into FCPA compliance problems by Panalpina, the Swiss logistics firm that allegedly bribed overseas customs and licensing officials on behalf of its clients. Among those investigated by the DOJ and SEC in addition to Parker are Schlumberger, Shell, Tidewater, Nabors Industries, Transocean, GlobalSantaFe Corp., ENSCO, Cameron, Noble Corp., and Pride International.
In its latest quarterly report, Houston-based Parker, which trades on the New York Stock Exchange under the symbol PKD, disclosed details of the investigation, including potential compliance problems in Nigeria and, unexpectedly, Kazakhstan. Some might argue the amount of Parker's disclosure goes beyond the technical requirements of the securities laws. If that's true, why so many words?
First, there's really no downside risk in disclosing more instead of less. We've been debating this point for years with securities lawyers, who often ask us why there's so much voluntary FCPA disclosure when it may not be legally required. We in turn ask what's to be gained by not disclosing an internal investigation?
Second, there are two men named Parker on the board of directors -- Robert L. Parker, the Chairman Emeritus who bought the company from his father in 1957, and Robert L. Parker Jr., who now leads the firm. So although it's a public company, Parker Drilling retains a family-owned aspect. With their name on the door, the Parkers are probably more sensitive than most professional managers to reputational risks. No doubt they want to put the FCPA troubles in the rear-view mirror as soon as possible. One strategy for doing that is to disclose everything -- dissipate the news by releasing it to the public and the press in one go. Don't leave shareholders, bankers, customers, and other stakeholders guessing.
Finally, a detailed disclosure can reduce the chances of future compliance problems. It educates everyone inside the company about FCPA risks, especially in challenging places where oil drillers often find themselves. We think Parker's disclosure reads in some ways like an FCPA compliance manual, full of real-life warnings about what can go wrong, the damage caused, and the way to fix things.
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Here's the full text of the FCPA disclosure from Parker Drilling Company's Form 10-Q dated May 7, 2010:
Customs Agent and Foreign Corrupt Practices Act (FCPA) Investigation
As previously disclosed, we received requests from the United States Department of Justice (DOJ) in July 2007 and the United States Securities and Exchange Commission (SEC) in January 2008 relating to our utilization of the services of a customs agent. The DOJ and the SEC are conducting parallel investigations into possible violations of U.S. law by us, including the FCPA. In particular, the DOJ and the SEC are investigating our use of customs agents in certain countries in which we currently operate or formerly operated, including Kazakhstan and Nigeria. We are fully cooperating with the DOJ and SEC investigations and are conducting an internal investigation into potential customs and other issues in Kazakhstan and Nigeria. The internal investigation has identified issues relating to potential non-compliance with applicable laws and regulations, including the FCPA with respect to operations in Kazakhstan and Nigeria. At this point, we are unable to predict the duration, scope or result of the DOJ or the SEC investigation or whether either agency will commence any legal action.
Further, in connection with our internal investigation, we also have learned that an individual who may be considered a foreign official under the FCPA owns in trust a substantial stake in a foreign subcontractor with whom we do business through a joint venture relationship in Kazakhstan. We are currently engaged in efforts to evaluate and implement alternatives to restructure or end the relationship with the subcontractor. At this point, we are unable to predict the outcome of our restructuring efforts or whether termination will result, either of which could negatively impact some of our operations in Kazakhstan and potentially have a material adverse impact on our business, results of operations, financial condition and liquidity.
The DOJ and the SEC have a broad range of civil and criminal sanctions under the FCPA and other laws and regulations, which they may seek to impose against corporations and individuals in appropriate circumstances including, but not limited to, injunctive relief, disgorgement, fines, penalties and modifications to business practices and compliance programs. These authorities have entered into agreements with, and obtained a range of sanctions against, several public corporations and individuals arising from allegations of improper payments and deficiencies in books and records and internal controls, whereby civil and criminal penalties were imposed. Recent civil and criminal settlements have included multi-million dollar fines, deferred prosecution agreements, guilty pleas, and other sanctions, including the requirement that the relevant corporation retain a monitor to oversee its compliance with the FCPA. In addition, corporations may have to end or modify existing business relationships. Any of these remedial measures, if applicable to us, could have a material adverse impact on our business, results of operations, financial condition and liquidity.
We have taken certain steps to enhance our anti-bribery compliance efforts, including retaining a full-time Chief Compliance Officer who reports to the Chief Executive Officer and Audit Committee, and implementing efforts for the adoption of revised FCPA policies, procedures, and controls; increased training and testing requirements; contractual provisions for our service providers that interface with foreign government officials; due diligence and continuing oversight procedures for the review and selection of such service providers; and a compliance awareness improvement initiative that includes issuance of periodic anti-bribery compliance alerts.
In April 2010, we received a demand letter from a law firm representing Ernest Maresca. The letter states that Mr. Maresca is one of our stockholders and that he believes that certain of our current and former officers and directors violated their fiduciary duties related to the issues described above under “Customs Agent and Foreign Corrupt Practices Act (FCPA) Investigation.” The letter requests that our Board of Directors take action against the individuals in question. In response to this letter, the Board has formed a special committee to evaluate the issues raised by the letter and determine a course of action for the Company.