The DOJ and SEC Widen the Net in the Industry-Wide Pharma Initiative

On August 6 and August 9, 2010, two additional pharma companies announced that they are currently under investigation by the DOJ and SEC for potential FCPA violations. According to the companies’ corporate filings, both Merck and SciClone International, Inc. (SciClone) received letters from the DOJ and SEC concerning their business activities overseas.  Although Merck simply stated that the enforcement agencies are interested in their activities in “a number of countries”, SciClone’s disclosure provided more detail stating that the company received a subpoena from the SEC and a letter from the DOJ related to the “sale, licensing and marketing of its products in foreign countries, including China.”

Lanny Breuer, Assistant Attorney General for the DOJ’s Criminal Division, announced the pharma initiative in November 2009 during a speech at the annual ACI Conference in Washington, DC. According to press reports and public filings, the business practices of a number of pharmaceutical companies, including AstraZeneca, Bristol-Myers Squibb and Eli Lilly, are currently under scrutiny by the government.

The Compendium summaries of the Merck and SciClone investigations may be accessed here: https://secure.traceinternational.org/compendium/search.asp?mode=1&keywords=&idCaseChk=297&idCaseChk=298&sort=name&s=Search.

 

Bribery as a Business Strategy

For today’s WrageBlog see:

http://www.huffingtonpost.com/alexandra-wrage/bribery-as-a-business-str_b_661984.html

For this week’s updates on international enforcement actions, please visit our new blog site TRACEblog and join the mailing list.

 

GE Settles Oil-for-Food Matter

On July 27, 2010, the SEC charged General Electric Company and two subsidiaries – formerly known as Ionics, Inc. and Amersham plc – with paying illegal kickbacks to the Iraqi Ministry of Health and Ministry of Oil in connection with sales of humanitarian goods under the United Nations (“UN”) Oil-for-Food Program.  Over $3.5 million in kickbacks were allegedly paid between 2000 and 2003 by GE subsidiaries Marquette-Hellige, OEC-Medical Systems (Europa) AG, Nycomed Imaging AS and Ionics Italba S.r.L.  GE, Ionics and Amersham consented to the entry of a final judgment permanently enjoining them from future violations of the FCPA’s books and records and internal controls provisions.  GE was ordered to pay $22.5 million in disgorgement of profits and prejudgment interest and a $1 million civil penalty.

The Compendium summary of this matter may be accessed here.

 

Compensating the Victims of Corruption?

Increasingly, the enforcement updates and compliance best practices on this blog are contributed by others.  In recognition of that, we are changing the name from Wrageblog to TRACEblog.  We’ll continue to feature breaking news, compliance tips and other information of interest to the anti-bribery community.

On broader policy issues, I will be guest blogging on the Huffington Post.  Today’s entry can be found at:

 http://www.huffingtonpost.com/alexandra-wrage/paying-the-fox-to-buy-new_b_647837.html

 Please continue to send in comments and suggested topics, for either blog.  Thank you!

 

India’s Principal Anti-Bribery Agency Recommends Blacklisting of Six Defence Companies

India appears to be on the brink of joining the community of countries pursuing international bribery,  including the alleged bribery of its government officials by foreign companies.  Hemant Batra, a lead partner with Kaden Boriss Legal specializing in corporate, commercial & cross-border transactions and good governance, provides this update on an anti-bribery investigation in India:

“India has once again shown its determination to root out corruption. Recently, the Central Bureau of Investigation (CBI), which is the principal investigating agency in India, has advised the Defence Ministry to blacklist Singapore Technologies Kinetics (STK-Singapore), Israel Military Industries Ltd (IMI-Israel),  Rheinmetall Air Defence (RAD-Switzerland), Cooperation Defence ( CD-Russia),  T S Kisan and Companies Pvt Ltd (India) and R K Machines Tools Ltd (India) for their alleged involvement in the Ordnance Factory Board scam.  The letter is of advisory nature, but the Defence Ministry cannot ignore it in light of the seriousness of the matter.

On June 30, the CBI filed a 2,700-page charge sheet in a special CBI court against former Director General of Ordnance factory Board, Sudipta Ghosh and eleven others for graft. The charges were filed in a case registered by the CBI on May 17, 2009, under different Sections of the Indian Penal Code and Prevention of the Corruption Act, against Ghosh and others. It is alleged that Ghosh had entered into criminal conspiracy with the aim of demanding and obtaining  illegal gratification in the transactions of diverse supply orders placed by Ordnance Factory Board (OFB) and also in the matters pertaining to transfer or posting of the officers of Ordnance Factories. In fact, pursuant to registration of the case and the ensuing probe, the CBI had arrested Ghosh and others. The special CBI court will take up the matter next on 31^st July.

Interestingly, BVT Poland, which was initially named, has been given a clean chit by the CBI.”

Source: Press Trust of India

Web Links: http://timesofindia.indiatimes.com/biz/india-business/OFB-scam-CBI-urges-MoD-to-blacklist-6-firms/articleshow/6141138.cms

http://www.ndtv.com/article/india/cbi-asks-defence-ministry-to-blacklist-six-firms-36141

http://www.thestatesman.net/index.php?option=com_content&view=article&id=333797&catid=36

The TRACE Compendium summary of this matter may be accessed here.

 

Snamprogetti and Eni Settle FCPA Charges for Combined $365 Million in Penalties

On July 7, 2010, Snamprogetti Netherlands BV and Eni SpA settled FCPA charges with the U.S. Department of Justice and U.S. Securities and Exchange Commission for a combined $365 million in penalties.  Under the terms of a two-year deferred prosecution agreement with the DOJ, Snamprogetti agreed to pay a $240 million criminal fine and Snamprogetti, Eni and Saipem SpA agreed to ensure that their compliance programs satisfied certain standards and agreed to cooperate with the DOJ’s ongoing investigations.  Snamprogetti and Eni also reached a settlement of a related civil complaint with the SEC, agreeing jointly to pay $125 million in disgorgement of profits and prejudgment interest.  A long-running investigation and prosecution by the Milan Public Prosecutor’s Office appears to be ongoing.

Snamprogetti Netherlands BV (“Snamprogetti”) was part of the four-company “TSKJ” joint venture [Technip of France; Snamprogetti; KBR of the U.S.; and JGC Corporation of Japan] that was alleged to have paid hundreds of millions in bribes to Nigerian officials between 1995 and 2004 in order to secure four engineering, procurement and construction (EPC) contracts for the development of liquefied natural gas facilities on Bonny Island in Nigeria.  In February 2009, Halliburton and KBR settled FCPA charges related to its involvement in the scheme, resulting in $579 million in combined penalties.  The DOJ and SEC have been investigating other joint venture partners since.  Recently, on June 28, 2010, Technip settled with the DOJ and SEC for $338 million in combined penalties.

During the relevant time period, Snamprogetti was a wholly-owned indirect subsidiary of Italy’s oil and gas giant, Eni SpA.  Eni became a U.S. issuer in 1995 and remains a 43% owner in Snamprogetti’s current parent company, Saipem SpA.

To access the Compendium summary regarding this matter, please click here.

 

Veraz Networks Settles With SEC for $300,000

On June 29, 2010, without admitting or denying the SEC’s allegations, Veraz Networks, Inc. consented to the entry of a final judgment permanently enjoining the company from future violations of the FCPA’s books and records and internal controls provisions.  Veraz was ordered to pay a $300,000 civil penalty.  The SEC alleged that Veraz made or offered improper payments to government officials in China and Vietnam following the company’s initial public offering in April 2007.  The improper payments included gifts and entertainment promised to employees of state-controlled telecommunications companies and, in most cases, were offered through third party intermediaries. 

The Compendium summary of this matter may be accessed here:  https://secure.traceinternational.org/compendium/view.asp?id=233

 

Technip Settles FCPA Charges for Combined $338 Million in Penalties

On June 28, 2010, Technip SA, the Paris-based engineering, construction and services company, settled FCPA charges with the U.S. Department of Justice and U.S. Securities and Exchange Commission for a combined $338 million in penalties.  Under the terms of a two-year deferred prosecution agreement with the DOJ, Technip agreed to pay a $240 million criminal fine, to retain an independent compliance monitor for a two-year period and to cooperate with the DOJ in its ongoing investigations.  Technip also reached a settlement of a related civil complaint with the SEC, agreeing to pay $98 million in disgorgement of profits and pre-judgment interest.  The French government’s investigation of the company appears to be ongoing.

Technip was part of the four-company “TSKJ” joint venture [Technip of France; Snamprogetti Netherlands B.V. (a subsidiary of Saipem SpA of Italy); KBR of the U.S.; and JGC Corporation of Japan] that was alleged to have paid hundreds of millions in bribes to Nigerian officials between 1995 and 2004 in order to secure engineering, procurement and construction (EPC) contracts for the development of liquefied natural gas facilities on Bonny Island in Nigeria.  In February 2009, Halliburton and KBR settled FCPA charges related to its involvement in the scheme, resulting in $579 million in combined penalties.  The DOJ and SEC have been investigating other joint venture partners since.  

Technip’s American Depository Receipts (“ADRs”) were traded on the New York Stock Exchange from 2001 until 2007.

The Compendium summary regarding this matter may be accessed here:  https://secure.traceinternational.org/compendium/view.asp?id=148

 

Virginia Businessman Sentenced in Panama Bribery Case

On June 25, 2010, Virginia businessman John W. Warwick was sentenced to 37 months in prison for conspiring to violate the FCPA in connection with improper payments made to Panamanian officials in order to obtain maritime contracts.  Warwick was indicted on December 15, 2009 and pleaded guilty on February 10, 2010.  His prison term is to be followed by two years of supervised release.  He was also ordered to forfeit $331,000 in proceeds of the crime. 

The Compendium summary of this matter may be accessed here: https://secure.traceinternational.org/compendium/view.asp?id=132

 

Ousama Naaman Pleads Guilty

On June 25, 2010, Ousama Naaman, a Lebanese and Canadian citizen and Innospec’s middleman in Iraq during the United Nations Oil-for-Food Program, pleaded guilty in U.S. District Court for the District of Columbia.  He pleaded guilty to a two-count superseding information charging him with one count of conspiracy to commit wire fraud, violate the FCPA and falsify the books and records of a U.S. issuer; and one count of violating the FCPA.  Naaman, initially indicted on August 7, 2008, was arrested in Frankfurt, Germany on July 30, 2009 and later extradited to the United States.  He had initially entered a plea of not guilty on May 3, 2010.

Naaman admitted to orchestrating an arrangement whereby Innospec paid a 10% kickback to the Iraqi government between 2001 and 2003 to obtain five contracts under the Oil-for-Food program to supply an anti-knock fuel additive (tetraethyl lead) to Iraq’s oil refineries.  According to the DOJ press release, Naaman also paid or promised to pay over $3 million in bribes (in the form of cash, travel, gifts and entertainment) between 2004 and 2008 to officials of the Iraqi Ministry of Oil and the Trade Bank of Iraq on Innospec’s behalf in order to secure sales of tetraethyl lead and to secure more favorable exchange rates, respectively. 

Naaman’s sentencing has not yet been scheduled.  He faces up to 10 years in prison. 

On March 18, 2010, Innospec pleaded guilty to a twelve-count information charging, agreeing to a $14.1 million criminal fine and three-year compliance monitorship.  The company also settled with the SEC, agreeing to disgorge $11.2 million, and with the Treasury Department’s Office of Foreign Assets Control (OFAC) for $2.2 million.  On the same day, Innospec’s UK subsidiary pleaded guilty to paying bribes in Indonesia, receiving a $12.7 million criminal fine.  The Corruption Eradication Commission (KPK) in Indonesia appears to be conducting an ongoing investigation into the company’s activities in the country.

Today’s DOJ press release can be accessed here:  http://www.justice.gov/opa/pr/2010/June/10-ag-747.html