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#Financial Crime Prevention

Top Ten FCPA Fines

International Compliance Association

corruption awareness week , FCPA , Fines , Sanctions

As this is Anti-Corruption week, I thought it would be good to take a look at the top ten fines handed down to companies under the Foreign Corrupt Practices Act (FCPA). This list does not include any money that had to be forfeited and constitutes fines payable purely to the US Department of Justice (DOJ) under the FCPA. It also doesn’t include any fines from the U.S. Securities and Exchange Commission or any other countries that were involved.

Interestingly, Odebrecht are not on this list as, although Odebrecht pleaded guilty and agreed to pay at least $3.5 billion in global penalties in what is the largest foreign bribery case in history, the amount of money payable to the US DOJ was initially only $117 million. This has since been reduced to $93 based on Odebrecht’s inability to pay.

 

 1. $772.3 million – Alstom - 2014

Although Alstom is a French power and transportation company, a significant part of the bribery was actually carried out from their offices in Connecticut, USA. Additionally, the energy division has since been sold to General Electric.

Alstom pleaded guilty in December 2014 to paying tens of millions of dollars in bribes from 1998 to 2004, in countries around the world including Indonesia, Saudi Arabia, Egypt and the Bahamas. By their own admission, they paid bribes to government officials and fabricated books and records in connection with power, grid and transportation projects for state-owned entities around the world. For example, in Indonesia, they bribed government officials to ensure help with securing several contracts to provide power-related services worth around $375 million.

Alstom paid over $75 million in total to acquire $4 billion worth of projects around the globe. This yielded the company approximately $300 million in profits.

They were fined a criminal penalty of £772,290,000 for violating the FCPA by falsifying its books and records and failing to implement adequate internal control. Alstom were also investigated and charged by the UK’s Serious Fraud Office (SFO).

 

 

  2. $450 million - Siemens AG and three subsidiaries - 2008

Siemens is a German conglomerate company and remains the largest manufacturing and electronics company in Europe.

In December 2008, Siemens AG and its three subsidiaries (Argentina, Bangladesh and Venezuela) pleaded guilty to violations of and charges relating to the FCPA and agreed to pay a total criminal fine of $450 million with Siemens AG contributing the majority of $448.5 million.

There were multiple offences committed by Siemens AG and its subsidiaries from the mid-1990s through to 2007, ranging from paying at least $1.7 million in kickbacks to the Iraqi government to win contracts with the Ministries of Electricity and Oil under the United Nations Oil-for-Food Programme, to making and causing to be made corrupt payments of at least $18.8 million to Venezuelan officials in exchange for favourable treatment in connection with two major metropolitan mass transit projects.

 

 

  3.  $402 million - Kellogg Brown and Root LLC 2009

Kellogg Brown and Root LLC (KBR) is an American engineering, procurement, and construction company, formerly a subsidiary of Halliburton and has its headquarters in Texas, USA.

KBR pleaded guilty in February 2009 to charges related to the FCPA for taking part in a ten year long program, between 1995 and 2004, to bribe Nigerian government officials to attain engineering, procurement and construction contracts worth more than $6 billion. As part of their plea agreement, they were fined $402 million.

 

 

  4. $400 million – BAE Systems PLC 2010

BAE Systems is a British multinational defence, security and aerospace company whose headquarters are in London.

From approximately 2000 to 2002, BAE informed several different US government agencies that it would create and implement policies and procedures to ensure compliance with the FCPA. It also advised that it would comply with similar, foreign laws implementing the Organization for Economic Cooperation and Development (OECD) Anti-bribery Convention. However, BAE failed, knowingly and intentionally, to do this. This gained BAE $200 million.

It also caused a string of sizeable payments made by BAE to shell companies and third party intermediaries to not be subjected to the level of scrutiny that it advised to the US government. BAE also admitted to retaining ‘marketing advisors’ on a regular basis to help secure sales of defence items without examining these relationships and even concealed some of these relationships and the payments to from the US government.

From May 2001, through a shell company established by them in the British Virgin Islands to disguise the ‘marketing advisor’ relationships, BAE made payments of more than $14 million, as well as payments of over £135 million. This was done despite the fact that BAE knew in certain situations, there was a high probability that some of the payments would be used to guarantee that BAE were favoured in foreign government decisions relating to the purchase of defence items.

They pleaded guilty in March 2010 to conspiring to defraud the United States by impairing and impeding its lawful functions, to make false statements about its FCPA compliance program, and to violate the Arms Export Control Act (AECA) and International Traffic in Arms Regulations (ITAR). For this, they had to pay $400 million in criminal fines.

 

 

  5. $283.2 million - Teva Pharmaceutical Industries Ltd 2016

Teva Pharmaceutical Industries Ltd is an Israeli multinational pharmaceutical company headquartered in Petah Tikva, Israel.

Teva pleaded guilty in December 2016 to paying millions of dollars in bribes to government officials in Russia, Ukraine and Mexico from 2001 to 2013 and for this paid a criminal penalty of $283.2 million. They also failed to implement policies and procedures that would have prevented bribery.

In Russia, bribes were paid to a high-ranking Russian government official with the aim of influencing him to use his authority to increase the purchase of Copaxone, a drug made by Teva, by the Russian Ministry of Health. After an agreement with a repackaging and distribution company owned by said Russian official, Teva made over $200 million in profit on the sale of Copaxone to the Russian government.

Teva also bribed a senior government official within the Ministry of Health in Ukraine for the purpose of influencing the Ukrainian government’s approval of Teva drug registrations. These registrations are needed for the marketing and sale of pharmaceuticals in that country.

Finally, Teva bribed doctors in Mexico to prescribe Copaxone and it was found that Teva had an inadequate system of internal accounting controls and failed to enforce any internal accounting controls that it did have in place which therefore failed to prevent these bribes from being paid. 

 

 

  6. $245.2 million - Total S.A., a French oil and gas company 2013

Total S.A. is a French multinational integrated oil and gas company and one of the seven ‘supermajor’ oil companies in the world.

In May 2013, Total agreed to pay $245.2 million for violations of the FCPA. These included making $60 million of corrupt bribe payments from 1995 to 2004 to an Iranian government official in order to persuade the official to use his influence to obtain and retain lucrative oil rights in specific oil and gas fields for Total. Total then misrepresented these payments as ‘business development expenses’. In addition, Total had ineffective internal accounting controls in place which therefore caused the true nature of the payments to be concealed and allowed these violations to take place.

 

 

  8 = $240 million – Snamprogetti Netherlands B.V. 2010

Snamprogetti Netherlands B.V. provides oilfield services and is based in Amsterdam, the Netherlands. It is a subsidiary of Eni S.p.A. which is an Italian multinational oil and gas company headquartered in Rome.

Snamprogetti was involved in the same decade-long scheme to bribe Nigerian government officials as Kellogg Brown and Root as they were part of the same joint venture, and in July 2010 agreed to pay a $240 million criminal penalty for conspiracy and aiding and abetting violations of the FCPA.

Snamprogetti’s role in the scheme was the authorisation of hiring two agents to pay the bribes to a range of Nigerian government officials to assist them and the joint venture in obtaining engineering, procurement and construction contracts. The joint venture paid approximately $182 million to the two agents which Snamprogetti knew and intended for these to be used, in part, for bribes to the Nigerian officials.

 

  8 = $240 million - Technip S.A. 2010

Technip S.A. carries out project management, engineering and construction for the energy industry and is based in Paris, France.

Technip was the third company to be involved in the Nigerian bribery scheme along with Kellogg Brown and Root and Snamprogetti. They also had a hand in hiring the two agents to pay bribes to the Nigerian government officials. A senior executive of Technip - coincidentally Kellogg Brown and Root’s former CEO - met with holders of a top-level office in the executive branch of the Nigerian government to ask them to assign someone that the joint venture could negotiate bribes with.

Technip agreed to pay $240 million in June 2010 for violations of the FCPA.

 

 

  9.  $230.3 million - VimpelCom Limited 2016

VimpelCom (now renamed Veon) is a global provider of telecommunication services, incorporated in Bermuda and headquartered in Amsterdam.

In February 2016, VimpelCom, along with its wholly owned Uzbek subsidiary, Unitel LLC agreed to pay $230.3 million in criminal penalties after admitting that they conspired to make more than $114 million in bribery payments to an Uzbek government official between 2006 and 2012 in order to facilitate them entering and continuing to operate in the Uzbek telecommunications market. VimpelCom also admitted to falsifying its books in an attempt to conceal the bribery, classifying the payments as ‘equity transactions’, ‘consulting and repudiation agreements’, and ‘reseller transactions’. They were also found to have failed to apply and impose adequate internal accounting controls; this is what allowed the corrupt payments to happen without detection or remediation.

 

 

   10.   $218.8 million - JGC Corporation 2011

JGC Corporation is a global engineering and construction company headquartered in Yokohama, Japan.

JGC Corporation was the fourth and final company to be involved in the Nigerian bribery scheme to obtain lucrative construction contracts along with Technip, Kellogg Brown and Root and Snamprogetti. They agreed to pay $218.8 million in April 2011 for violations of the FCPA.

JGC Corporation appear to have had the same role as Technip and Snamprogetti as they were also involved in hiring the two agents to pay bribes to the Nigerian government officials.

 

And More Besides?

With the most recent high-profiled cases of Rolls-Royce and Odebrecht, there is the hope that this will deter other firms from being involved in corruption. However, there are five FCPA related enforcement actions already this year and although organisations like Transparency International are doing fantastic work in tackling corruption, there are always going to be individuals looking for opportunities to best the competition and, unfortunately, in many circumstances, this could be bribery.

 

Find out more about the ICA Certificate in Anti-Corruption today

Go back to Corruption Awareness Week.

 


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