French Issuer Pays $338 Million for FCPA Violations

Tuesday, July 06, 2010

Michael Volkov

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On June 28, 2010, the U.S. Department of Justice (“DOJ”) announced that Technip S.A. (“Technip”) entered into a deferred prosecution agreement and would pay a $240 million criminal penalty to resolve charges that the company conspired to violate the Foreign Corrupt Practices Act (“FCPA”) and that it violated the FCPA’s anti-bribery provisions.

Separately, Technip agreed to disgorge an additional $98 million in ill-gotten gains to the Securities and Exchange Commission (“SEC”) to resolve charges that the company violated the FCPA’s anti-bribery, books and records, and internal controls provisions.

This settlement—the latest in what appears to be another banner year for FCPA enforcement—highlights U.S. enforcement authorities’ ability to reach foreign issuers and extract significant financial penalties where there is evidence of corrupt behavior and misconduct in violation of the FCPA.

Technip is a global engineering, construction, and services company headquartered in Paris, France. According to the SEC complaint, Technip’s shares were registered with and listed on the New York Stock Exchange (“NYSE”) during the time period when Technip participated in acts that violated the FCPA.

The DOJ and SEC charges against Technip stem from its participation in the “TSKJ” joint venture alleged to have paid bribes to Nigerian officials between 1995 and 2004 to secure contracts valued at over $6 billion to build liquefied natural gas (“LNG”) facilities on Bonny Island in Nigeria.

According to the SEC complaint, Technip and its joint venture partners formed a “cultural committee” to consider how to carry out the bribery scheme and entered into sham contracts with a shell company controlled by a U.K. agent and a Japanese trading company to conceal more than $180 million in illicit payments.

The joint venture partners allegedly used the agents to bribe a range of Nigerian government officials, including top-level executive branch officials. According to the DOJ, a senior executive of Technip, along with Albert “Jack” Stanley, the former CEO of one of the joint venture partners, and others, met with top-level executive branch officials in the Nigerian government to discuss the logistics of the illicit payments.

Notably, the SEC alleges that the joint venture partners paid bribes to employees of Nigeria LNG, Ltd. (“Nigeria LNG”), a company owned by the Nigerian government and three multinational companies.

Even though the Nigerian government may have owned less than 50% of Nigeria LNG, the SEC complaint states that the company is an instrumentality of the Nigerian government, and therefore, its employees are government officials under the FCPA.

The SEC reasoned that the Nigerian government exercised control over Nigeria LNG through the directors it appointed to the Board of Directors.

One of Technip’s partners and that partner’s former parent company previously paid a total of $579 million to the DOJ and SEC to resolve criminal and civil charges in relation to the TSKJ joint venture.

Mr. Stanley pleaded guilty in September 2008 to conspiring to violate the FCPA and was sentenced to seven years in prison. In March 2010, another TSKJ partner announced that it had reserved approximately $330 million to settle with the DOJ and SEC, although that settlement is still pending.

Impact of the Technip Settlement

By registering and listing its stock on the NYSE, Technip became an issuer under the FCPA and subjected itself to the requirements of the FCPA and the jurisdiction of the U.S. government for FCPA enforcement actions.

The Technip case makes it clear that the DOJ and SEC intend to continue targeting foreign-based companies as well as U.S. companies.

Including the Technip resolutions, the DOJ and SEC have obtained a total of $917 million in criminal and civil penalties to date as a result of investigations into the TSKJ joint venture bribery.

With the potential for significant settlements from the two remaining partners, it appears that the TSKJ joint venture will shatter the current $800 million record for fines and penalties levied in a single investigation.

Given the increasingly aggressive FCPA enforcement environment, companies or individuals based in the U.S. or with stock listed on U.S. exchanges must ensure that they and their employees, joint venture partners, agents, consultants, and other third-party representatives take steps to comply with the FCPA.

Such compliance includes assessing the relevant business environments and establishing a robust compliance program, conducting due diligence on third parties and joint venture partners, training employees and agents to understand and identify red flags, and ensuring transparency and accuracy when recording financial transactions.

Compliance also includes recognizing that a foreign government’s minority ownership of a company may be sufficient for enforcement authorities to consider the company’s employees foreign officials.

For more information, contact Michael L. Volkov in Washington, D.C. at 202.659.6927 or mvolkov@dickinsonwright.com

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