Category Archives: Foreign Corrupt Practices Act

Former Chief Executive Officer of Oil Services Company Pleads Guilty to Foreign Bribery Charges

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The former chief executive officer of PetroTiger Ltd., a British Virgin Islands oil and gas company with operations in Colombia and offices in New Jersey, pleaded guilty today for his role in a scheme to pay bribes to foreign government officials and to defraud PetroTiger.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Paul J. Fishman of the District of New Jersey and Special Agent in Charge Aaron T. Ford of the FBI’s Newark Division made the announcement.
Knut Hammarskjold, 42, of Greenville, S.C., the former co-CEO of PetroTiger, pleaded guilty before U.S. District Judge Josephy E. Irenas in Camden, N.J., to an information charging one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and to commit wire fraud and is scheduled for sentencing on May 16, 2014.   Gregory Weisman, 42, of Moorestown, N.J., the former general counsel of PetroTiger, pleaded guilty to the same charges on Nov. 8, 2013.   Charges remain pending against Joseph Sigelman, 42, of Miami and the Philippines, the other former co-CEO of PetroTiger, for conspiracy to commit wire fraud, conspiracy to violate the FCPA, conspiracy to launder money and substantive violations of the FCPA.
According to the charges, the defendants allegedly paid bribes to an official in Colombia in exchange for the official’s assistance in securing approval for an oil services contract worth roughly $39 million.   To conceal the bribes, the defendants allegedly first attempted to make the payments to a bank account in the name of the foreign official’s wife, for purported consulting services she did not perform.   The charges allege that Sigelman and Hammarskjold provided Weisman invoices including her bank account information.   The defendants made the payments directly to the official’s bank account when attempts to transfer the money to his wife’s account failed.
In addition, court documents allege that the defendants attempted to secure kickback payments at the expense of several of PetroTiger’s board members.   According to the criminal charges, the defendants were negotiating an acquisition of another company on behalf of PetroTiger, including on behalf of several members of PetroTiger’s board of directors who were helping to fund the acquisition.   In exchange for negotiating a higher purchase price for the acquisition, two of the owners of the target company agreed to kick back to the defendants a portion of the increased purchase price.   According to the charges, to conceal the kickback payments, the defendants had the payments deposited into Sigelman’s bank account in the Philippines, created a “side letter” to falsely justify the payments, and used the code name “Manila Split” to refer to the payments amongst themselves.
Sigelman and Hammarskjold were charged by sealed complaints filed in the District of New Jersey on Nov. 8, 2013.   Hammarskjold was arrested on Nov. 20, 2013, at Newark Liberty International Airport.   Sigelman was arrested on Jan. 3, 2014, in the Philippines.   The charges against Sigelman, Hammarskjold and Weisman were unsealed on Jan. 6, 2014.
The conspiracy to commit violations of the FCPA count carries a maximum penalty of five years in prison and a fine of the greater of $250,000 or twice the value gained or lost.   The conspiracy to commit wire fraud count carries a maximum penalty of 20 years in prison and a fine of the greater of $250,000 or twice the value gained or lost.
As to the charges in the complaint pending against Sigelman, they are merely accusations and the defendant is presumed innocent unless and until proven guilty.
The department has worked closely with and has received significant assistance from its law enforcement counterparts in the Republic of Colombia and greatly appreciates their assistance in this matter.    The department also thanks the Republic of the Philippines, including the Bureau of Immigration, and the Republic of Panama for their assistance in this matter.   Significant assistance was also provided by the Criminal Division’s Office of International Affairs.
The case is being investigated by the FBI’s Newark Division.   The case is being prosecuted by Assistant Chief Daniel S. Kahn of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Aaron Mendelsohn of the District of New Jersey.

Alcoa World Alumina Agrees to Plead Guilty to Foreign Bribery and Pay $223 Million in Fines and Forfeiture

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Alcoa World Alumina LLC, a majority-owned and controlled global alumina sales company of Alcoa Inc., has agreed to plead guilty later today and pay $223 million in criminal fines and forfeiture to resolve charges that it paid millions of dollars in bribes through an international middleman in London to officials of the Kingdom of Bahrain, in violation of the Foreign Corrupt Practices Act (FCPA).
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney David J. Hickton of the Western District of Pennsylvania, Chief Richard Weber of IRS—Criminal Investigation (IRS-CI), and Assistant Director in Charge Valerie Parlave of the FBI’s Washington Field Office made the announcement.
“Alcoa World Alumina today admits to its involvement in a corrupt international underworld in which a middleman, secretly held offshore bank accounts, and shell companies were used to funnel bribes to government officials in order to secure business,” said Acting Assistant Attorney General Raman.    “The law does not permit companies to avoid responsibility for foreign corruption by outsourcing bribery to their agents, and, as today’s prosecution demonstrates, neither will the Department of Justice.”
“Today’s case shows that multinational corporations cannot get away with using middlemen to structure sham business arrangements that funnel kickbacks to government officials,” said U.S. Attorney Hickton.
Alcoa World Alumina has agreed to plead guilty in the Western District of Pennsylvania to one count of violating the anti-bribery provisions of the FCPA in connection with a 2004 corrupt transaction, to pay a criminal fine of $209 million, and to administratively forfeit $14 million.   As part of the plea agreement, Alcoa Inc. (Alcoa) has agreed to maintain and implement an enhanced global anti-corruption compliance program.
In a parallel action, Alcoa settled with the U.S. Securities and Exchange Commission (SEC)  and will pay an additional $161 million in disgorgement, bringing the total amount of U.S. criminal and regulatory penalties to be paid by Alcoa and Alcoa World Alumina to $384 million.
“This case is the result of unraveling complex financial transactions used by Alcoa World Alumina LLC’s agent to facilitate kickbacks to foreign government officials,” said Chief Richard Weber of IRS-CI.   “IRS-CI will not be deterred by the use of sophisticated international financial transactions as we continue our ongoing efforts to pursue corporations and executives who use hidden offshore assets and shell companies to circumvent the law.”
“Corrupt kickback payments to foreign government officials to obtain business diminish public confidence in global commerce,” said Assistant Director in Charge Parlave.  “There is no place for bribery in any business model or corporate culture.   Today’s plea demonstrates the FBI and our law enforcement partners are committed to curbing corruption and will pursue all those who try to advance their businesses through bribery.”
Today’s court filings allege that Alcoa of Australia, another Alcoa-controlled entity, originally secured a long-term alumina supply agreement with Aluminium Bahrain B.S.C. (Alba), an aluminium smelter controlled by the government of Bahrain.   At the request of certain members of Bahrain’s Royal Family who controlled the tender process, Alcoa of Australia inserted a London-based middleman with close ties to certain Royal Family members as a sham sales agent and agreed to pay him a corrupt commission intended to conceal bribe payments, according to court papers.   Over time, Alcoa of Australia expanded the relationship with the middleman, identified as Consultant A in today’s court filings, to begin invoicing increasingly larger volumes of alumina sales through his shell companies, which permitted Consultant A to make larger bribe payments to certain government officials, according to today’s filings.
As admitted in the charging documents, in 2004, Alcoa World Alumina corruptly secured a long-term alumina supply agreement with Alba by agreeing to purportedly sell over 1.5 million metric tons of alumina to Alba through offshore shell companies owned by Consultant A.   The sham distributorship permitted Consultant A to mark up the price of alumina by approximately $188 million from 2005 to 2009, the duration of the corrupt supply agreement.   Court filings allege that Consultant A used the mark-up to pay tens of millions in corrupt kickbacks to Bahraini government officials, including senior members of Bahrain’s Royal Family.   To conceal the illicit payments, Consultant A and the government officials used various offshore bank accounts, including accounts held under aliases, at several major financial institutions around the world, including in Guernsey, Luxembourg, Liechtenstein and Switzerland.
In addition to the monetary penalty, Alcoa and Alcoa World Alumina agreed to cooperate with the department in its continuing investigation of individuals and institutions involved in these matters.
The plea agreement and related court filings acknowledge Alcoa’s current financial condition as a factor relevant to the size of the criminal fine, as well as Alcoa’s and Alcoa World Alumina’s extensive cooperation with the department, including conducting an extensive internal investigation, making proffers to the government, voluntarily making current and former employees available for interviews, and providing relevant documents to the department.   Court filings also acknowledge subsequent anti-corruption remedial efforts undertaken by Alcoa.
The department acknowledges and expresses its appreciation for the cooperation and assistance of the Office of the Attorney General of Switzerland, the Guernsey Financial Intelligence Service and Guernsey Police, the Australian Federal Police, the U.K.’s Serious Fraud Office, and other law enforcement authorities in the department’s investigation of this matter.   The department also acknowledges and expresses its appreciation for the significant assistance provided by the SEC’s Division of Enforcement.
The investigation is being conducted by Special Agents and analysts with the IRS-Criminal Investigation’s Washington Field Office and the FBI’s Washington Field Office.   The case is being prosecuted by Deputy Chief Adam G. Safwat and Trial Attorneys Andrew Gentin, Allan J. Medina and Andrew H. Warren of the Criminal Division’s Fraud Section, with the assistance of the U.S. Attorney’s Office for the Western District of Pennsylvania.   The Criminal Division’s Office of International Affairs also provided significant assistance during this investigation.
Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa .

FCPA Charges Unsealed Against Former Chief Executive Officers of Oil Services Company

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Two former chief executive officers of PetroTiger Ltd. – a British Virgin Islands oil and gas company with operations in Colombia and offices in New Jersey – have been charged for their alleged participation in a scheme to pay bribes to foreign government officials in violation of the Foreign Corrupt Practices Act (FCPA), to defraud PetroTiger, and to launder proceeds of those crimes.   In addition, PetroTiger’s former general counsel pleaded guilty to bribery and fraud charges in connection with the same scheme.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Paul J. Fishman of the District of New Jersey and Special Agent in Charge Aaron T. Ford of the FBI’s Newark Division made the announcement after the charges and guilty plea were unsealed today.

“We have said – repeatedly and emphatically – that foreign corruption, whether committed by companies or by the individuals entrusted to run those companies, will not be tolerated.   And, our track record in vigorously enforcing the FCPA has shown that message to be undeniably true,” said Acting Assistant Attorney General Raman.   “The charges unsealed today against two former CEOs of PetroTiger and the guilty plea announced today of the former General Counsel reaffirm our clear message that we will prosecute corruption and fraud wherever we find it.  Bribery distorts what should be a level playing field and deprives corporations and governments of funds that should instead be used to strengthen those institutions.   Today’s announcement should be a reminder to CEOs and other executives who seek to corrupt the system at the expense of honest businesses:   we are not going away.”

“Bribery of public officials, whether at home or abroad, corrupts business opportunity and undermines trust in government,” said U.S. Attorney Fishman.  “The under-the-table deals alleged in today’s charges are not an acceptable way of doing business.”

“The FBI is committed to pursuing those who disrupt the level playing field to which companies in the U.S. and around the world are entitled,” said FBI Special Agent in Charge Ford.   “We will continue to investigate these matters by working with law enforcement agencies, both foreign and domestic, to ensure that both corporations and executives who bribe foreign officials for lucrative contracts are punished.”

According to the charges, former co-CEOs of PetroTiger Joseph Sigelman, 42, formerly of Miami and the Philippines, and Knut Hammarskjold, 42, of Greenville, S.C.; former general counsel Gregory Weisman, 42, of Moorestown, N.J., and others allegedly paid bribes to an official in Colombia in exchange for the official’s assistance in securing approval for an oil services contract worth roughly $39 million.

Hammarskjold was arrested Nov. 20, 2013, at Newark Liberty International Airport.   Sigelman was arrested on Jan. 3, 2014, in the Philippines and appeared this afternoon (ChST) in Guam before U.S. Magistrate Judge Joaquin V.E. Manibusan III.   Sigelman will have an initial appearance in New Jersey federal court on a date to be determined.   Sigelman and Hammarskjold were charged by sealed complaints filed in the District of New Jersey on Nov. 8, 2013, with conspiracy to commit wire fraud, conspiracy to violate the FCPA, conspiracy to launder money and substantive violations of the FCPA.

Weisman pleaded guilty on Nov. 8, 2013, to a criminal information charging one count of conspiracy to violate the FCPA and to commit wire fraud.   The charges and guilty plea were also unsealed today.

The charges allege the defendants made three separate payments from PetroTiger’s bank account in the United States to the official’s bank account in Colombia to secure approval from Colombia’s state-owned and state-controlled oil company for a lucrative oil services contract in the country.   According to the charges, to conceal the bribes, the defendants first attempted to make the payments to a bank account in the name of the foreign official’s wife, for purported consulting services she did not perform.   The charges allege that Sigelman and Hammarskjold provided Weisman invoices including her bank account information.   The defendants made the payments directly to the official’s bank account when attempts to transfer the money to his wife’s account failed.

In addition, court documents allege that the defendants attempted to secure kickback payments at the expense of PetroTiger’s board members.   According to the criminal charges, the defendants were negotiating an acquisition of another company on behalf of PetroTiger, including on behalf of several members of PetroTiger’s board of directors who were helping to fund the acquisition.   In exchange for negotiating a higher purchase price for the acquisition, two of the owners of the target company agreed to kick back to the defendants a portion of the increased purchase price.   According to the charges, to conceal the kickback payments, the defendants had the payments deposited into Sigelman’s bank account in the Philippines, created a “side letter” to falsely justify the payments, and used the code name “Manila Split” to refer to the payments amongst themselves.

The conspiracy to commit wire fraud count carries a maximum penalty of 20 years in prison and a fine of the greater of $250,000 or twice the value gained or lost.   The conspiracy to commit violations of the FCPA count carries a maximum penalty of five years in prison and a fine of the greater of $250,000 or twice the value gained or lost.   The FCPA counts each carry a maximum penalty of five years in prison and a fine of the greater of $250,000 or twice the value gained or lost.   The conspiracy to commit money laundering count carries a maximum penalty of 20 years in prison and a fine of the greater of $500,000 or twice the value of the property involved in the transaction.

The charges contained in the complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

The department has worked closely with and has received significant assistance from its law enforcement counterparts in the Republic of Colombia and greatly appreciates their assistance in this matter.   The department also thanks the Republic of the Philippines, including the Bureau of Immigration, for its assistance in this matter.   Significant assistance was also provided by the Criminal Division’s Office of International Affairs.

The case is being investigated by the FBI’s Newark Division.   The case is being prosecuted by Assistant Chief Daniel S. Kahn of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Aaron Mendelsohn of the District of New Jersey.

ADM Subsidiary Pleads Guilty to Conspiracy to Violate the Foreign Corrupt Practices Act

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A subsidiary of Archer Daniels Midland Company (ADM) pleaded guilty today and has agreed to pay more than $17 million in criminal fines to resolve charges that it paid bribes through vendors to Ukrainian government officials to obtain value-added tax (VAT) refunds, in violation of the Foreign Corrupt Practices Act (FCPA).
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney James A. Lewis of the Central District of Illinois and Special Agent in Charge David A. Ford of the FBI’s Springfield Division made the announcement.
“As today’s guilty plea shows, paying bribes to reap business benefits corrupts markets and undermines the rule of law,” said Acting Assistant Attorney General Raman.  “ADM’s subsidiaries sought to gain a tax benefit by bribing government officials, and then attempted to deliberately conceal their conduct by funneling payments through local vendors.  ADM, in turn, failed to implement sufficient policies and procedures to prevent the bribe payments, although ultimately ADM disclosed the conduct, cooperated with the government, and instituted extensive remedial efforts.  Today’s corporate guilty plea demonstrates that combating bribery is and will remain a mainstay of the Criminal Division’s mission.  We are committed to working closely with our foreign and domestic law enforcement partners to fight global corruption.”
Alfred C. Toepfer International Ukraine Ltd. (ACTI Ukraine), a subsidiary of ADM, pleaded guilty in the Central District of Illinois to one count of conspiracy to violate the anti-bribery provisions of the FCPA and agreed to pay $17.8 million in criminal fines.    The Department of Justice also entered into a non-prosecution agreement (NPA) with ADM in connection with the company’s failure to implement an adequate system of internal financial controls to address the making of improper payments both in Ukraine and by an ADM joint venture in Venezuela.
In a parallel action, ADM consented with the U.S. Securities and Exchange Commission (SEC)  to a proposed final judgment that orders the company to pay roughly $36.5 million in disgorgement and prejudgment interest, bringing the total amount of U.S. criminal and regulatory penalties to be paid by ADM and its subsidiary to more than $54 million.
According to the charges, from 2002 to 2008, ACTI Ukraine, a trader and seller of commodities based in the Ukraine, together with Alfred C. Toepfer International G.m.b.H. (ACTI Hamburg), another subsidiary of ADM, paid third-party vendors to pass on bribes to Ukrainian government officials to obtain VAT refunds.    The charges allege that, in total, ACTI Ukraine and ACTI Hamburg paid roughly $22 million to two vendors, nearly all of which was to be passed on to Ukrainian government officials to obtain over $100 million in VAT refunds, resulting in a benefit to ACTI Ukraine and ACTI Hamburg of roughly $41 million.
According to the NPA with ADM, a number of concerns were expressed to ADM executives, including an e-mail calling into question potentially illegal “donations” by ACTI Ukraine and ACTI Hamburg to recover the VAT refunds, yet nonetheless failed to implement sufficient anti-bribery compliance policies and procedures to prevent corrupt payments.
In addition to the monetary penalty, ADM and ACTI Ukraine also agreed to cooperate with the department, to periodically report the companies’ compliance efforts, and to continue implementing enhanced compliance programs and internal controls designed to prevent and detect FCPA violations.
The agreements acknowledge ADM’s timely, voluntary and thorough disclosure of the conduct; ADM’s extensive cooperation with the department, including conducting a world-wide risk assessment and corresponding global internal investigation, making numerous presentations to the department on the status and findings of the internal investigation, voluntarily making current and former employees available for interviews, and compiling relevant documents by category for the department; and ADM’s early and extensive remedial efforts.
The department acknowledges and expresses its appreciation for the cooperation and assistance of German law enforcement authorities, which, in a parallel investigation, reached a resolution with ACTI Hamburg regarding its role in the bribery scheme.
In addition, the department acknowledges and expresses its appreciation for the significant assistance provided by the SEC’s Division of Enforcement.
This ongoing investigation is being conducted by the FBI.    The case is being prosecuted by Trial Attorney Daniel S. Kahn of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Eugene Miller of the Central District of Illinois, with significant assistance from the Criminal Division’s Office of International Affairs.
Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa .

Three Subsidiaries of Weatherford International Limited Agree to Plead Guilty to FCPA and Export Control Violations;

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Three subsidiaries of Weatherford International Limited (Weatherford International), a Swiss oil services company that trades on the New York Stock Exchange, have agreed to plead guilty to anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA) and export controls violations under  the International Emergency Economic Powers Act (IEEPA) and the Trading With the Enemy Act (TWEA).  Weatherford International and its subsidiaries have also  agreed to pay more than $252 million in penalties and fines.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Kenneth Magidson of the Southern District of Texas, and Assistant Director in Charge Valerie Parlave of the FBI’s Washington Field Office made the announcement.        Weatherford Services Limited (Weatherford Services), a subsidiary of Weatherford International, today agreed to plead guilty to violating the anti-bribery provisions of the FCPA.   As part of a coordinated FCPA resolution, the department today also filed a criminal information in U.S. District Court for the Southern District of Texas charging Weatherford International with one count of violating the internal controls provisions of the FCPA.    To resolve the charge, Weatherford International has agreed to pay an $87.2 million criminal penalty as part of a deferred prosecution agreement with the department.
“Effective internal accounting controls are not only good policy, they are required by law for publicly traded companies – and for good reason,” said Acting Assistant Attorney General Raman.  “This case demonstrates how loose controls and an anemic compliance environment can foster foreign bribery and fraud by a company’s subsidiaries around the globe.  Although Weatherford’s extensive remediation and its efforts to improve its compliance functions are positive signs, the corrupt conduct of Weatherford International’s subsidiaries allowed it to earn millions of dollars in illicit profits, for which it is now paying a significant price.”

“When business executives engage in bribery and pay-offs in order to obtain contracts, an uneven marketplace is created and honest competitor companies are put at a disadvantage,” said Assistant Director in Charge Parlave.  “The FBI is committed to investigating corrupt backroom deals that influence contract procurement and threaten our global commerce.”
In a separate matter, Weatherford International and four of its subsidiaries today agreed to pay a combined $100 million to resolve a criminal and administrative export controls investigation conducted by the U.S. Attorney’s Office for the Southern District of Texas, the Department of Commerce’s Bureau of Industry and Security, and the Department of the Treasury’s Office of Foreign Assets Control.    As part of the resolution of that investigation, Weatherford International has agreed to enter into a deferred prosecution agreement for a term of two years and two of its subsidiaries have agreed to plead guilty to export controls charges.
“The resolution today of these criminal charges represents the seriousness that our office and the Department of Justice puts on enforcing the export control and sanctions laws,” said U.S. Attorney Magidson.
In a related FCPA matter, the U.S. Securities and Exchange Commission (  SEC) filed a settlement today in which Weatherford International consented to the entry of a permanent injunction against FCPA violations and agreed to pay $65,612,360 in disgorgement, prejudgment interest, and civil penalties.    Weatherford International also agreed with the SEC to comply with certain undertakings regarding its FCPA compliance program, including the retention of an independent corporate compliance monitor.
The combined investigations resulted in the conviction of three Weatherford subsidiaries, the entry by Weatherford International into two deferred prosecution agreements and a civil settlement, and the payment of a total of $252,690,606 in penalties and fines.
FCPA Violations According to court documents filed by the department, prior to 2008, Weatherford International knowingly failed to establish an effective system of internal accounting controls designed to detect and prevent corruption, including FCPA violations.   The company failed to implement these internal controls despite operating in an industry with a substantial corruption risk profile and despite growing its global footprint in large part by purchasing existing companies, often themselves in countries with high corruption risks.    As a result, a permissive and uncontrolled environment existed within which employees of certain of Weatherford International’s wholly owned subsidiaries in Africa and the Middle East were able to engage in corrupt conduct over the course of many years, including both bribery of foreign officials and fraudulent misuse of the United Nations’ Oil for Food Program.
Court documents state that Weatherford Services employees established and operated a joint venture in Africa with two local entities controlled by foreign officials and their relatives from 2004 through at least 2008.    The foreign officials selected the entities with which Weatherford Services would partner, and Weatherford Services and Weatherford International employees knew that the members of the local entities included foreign officials’ relatives and associates.    Notwithstanding the fact that the local entities did not contribute capital, expertise or labor to the joint venture, neither Weatherford Services nor Weatherford International investigated why the local entities were involved in the joint venture.    The sole purpose of those local entities, in fact, was to serve as conduits through which Weatherford Services funneled hundreds of thousands of dollars in payments to the foreign officials controlling them.    In exchange for the payments they received from Weatherford Services through the joint venture, the foreign officials awarded the joint venture lucrative contracts, gave Weatherford Services inside information about competitors’ pricing, and took contracts away from Weatherford Services’ competitors and awarded them to the joint venture.
Additionally, Weatherford Services employees in Africa bribed a foreign official so that he would approve the renewal of an oil services contract, according to court documents.    Weatherford Services funneled bribery payments to the foreign official through a freight forwarding agent it retained via a consultancy agreement in July 2006.    Weatherford Services generated sham purchase orders for consulting services the freight forwarding agent never performed, and the freight forwarding agent, in turn, generated sham invoices for those same nonexistent services.    When paid for those invoices, the freight forwarding agent passed at least some of those monies on to the foreign official with the authority to approve Weatherford Services’ contract renewal.    In exchange for these payments, the foreign official awarded the renewal contract to Weatherford Services in 2006.
Further, according to court documents, in a third scheme in the Middle East, from 2005 through 2011, employees of Weatherford Oil Tools Middle East Limited (WOTME), another Weatherford International subsidiary, awarded improper “volume discounts” to a distributor who supplied Weatherford International products to a government-owned national oil company, believing that those discounts were being used to create a slush fund with which to make bribe payments to decision-makers at the national oil company.    Between 2005 and 2011, WOTME paid approximately $15 million in volume discounts to the distributor.
Weatherford International’s failure to implement effective internal accounting controls also permitted corrupt conduct relating to the United Nations’ Oil for Food Program to occur, according to court documents.    Between in or about February 2002 and in or about July 2002, WOTME paid approximately $1,470,128 in kickbacks to the government of Iraq on nine contracts with Iraq’s Ministry of Oil, as well as other ministries, to provide oil drilling and refining equipment.    WOTME falsely recorded these kickbacks as other, seemingly legitimate, types of costs and fees.    Further, WOTME concealed the kickbacks from the U.N. by inflating contract prices by 10 percent.
According to court documents, these corrupt transactions in Africa and the Middle East earned Weatherford International profits of $54,486,410, which were included in the consolidated financial statements that Weatherford International filed with the SEC  .
In addition to the guilty plea by Weatherford Services, the deferred prosecution agreement entered into by Weatherford International and the Department requires the company to cooperate with law enforcement, retain an independent corporate compliance monitor for at least 18 months, and continue to implement an enhanced compliance program and internal controls designed to prevent and detect future FCPA violations.    The agreement acknowledges Weatherford International’s cooperation in this matter, including conducting a thorough internal investigation into bribery and related misconduct, and its extensive remediation and compliance improvement efforts.
Export Control Violations
According to court documents filed today in a separate matter, between 1998 and 2007, Weatherford International and some its subsidiaries engaged in conduct that violated various U.S. export control and sanctions laws by exporting or re-exporting oil and gas drilling equipment to, and conducting Weatherford business operations in, sanctioned countries without the required U.S. Government authorization.    In addition to the involvement of employees of several Weatherford International subsidiaries, some Weatherford International executives, managers, or employees on multiple occasions participated in, directed, approved, and facilitated the transactions and the conduct of its various subsidiaries.
This conduct involved persons within the U.S.-based management structure of Weatherford International participating in conduct by Weatherford International foreign subsidiaries, and the unlicensed export or re-export of U.S.-origin goods to Cuba, Iran, Sudan, and Syria. Weatherford subsidiaries Precision Energy Services Colombia Ltd. (PESC) and Precision Energy Services Ltd. (PESL), both headquartered in Canada, conducted business in the country of Cuba.    Weatherford’s subsidiary Weatherford Oil Tools Middle East (WOTME), headquartered in the United Arab Emirates (UAE), conducted business in the countries of Iran, Sudan, and Syria.    Weatherford’s subsidiary Weatherford Production Optimisation f/k/a eProduction Solutions U.K. Ltd. (eProd-U.K.), headquartered in the United Kingdom, conducted business in the country of Iran. Weatherford generated approximately $110 million in revenue from its illegal transactions in Cuba, Iran, Syria and Sudan.      To resolve these charges, Weatherford and its subsidiaries will pay a total penalty of $100 million, with a $48 million monetary penalty paid pursuant to a deferred prosecution agreement, $2 million paid in criminal fines pursuant to the two guilty pleas, and a $50 million civil penalty paid pursuant to a Department of Commerce settlement agreement to resolve 174 violations charged by Commerce’s Bureau of Industry and Security.    Weatherford International and certain of its affiliates are also signing a $91 million settlement agreement with the Department of the Treasury to resolve their civil liability arising out of the same underlying course of conduct, which will be deemed satisfied by the payments above.
The FCPA case was investigated by the FBI’s Washington Field Office and its team of special agents dedicated to the investigation of foreign bribery cases.    The case is being prosecuted by Trial Attorney Jason Linder of the Criminal Division’s Fraud Section, with the assistance of Assistant U.S. Attorney Mark McIntyre of the Southern District of Texas.   The case was previously investigated by Fraud Section Trial Attorneys Kathleen Hamann and Allan Medina, with assistance from the Criminal Division’s Asset Forfeiture and Money Laundering Section.   The Justice Department also acknowledges and expresses its appreciation for the significant assistance provided by the SEC’s FCPA Unit.
The export case was investigated by the Department of Commerce’s Bureau of Industry and Security, Office of Export Enforcement, and the Department of the Treasury’s Office of Foreign Assets Control.    The case is being prosecuted by Assistant U.S. Attorney S. Mark McIntyre and was previously investigated by Assistant U.S. Attorney Jeff Vaden.

High-Ranking Bank Official at Venezuelan State Development Bank Pleads Guilty to Participating in Bribery Scheme

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A senior official in Venezuela’s state economic development bank has pleaded guilty in New York federal court to accepting bribes from agents and employees of a New York-based broker-dealer (Broker-Dealer) in exchange for directing her bank’s security-trading business to the Broker-Dealer.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara of the Southern District of New York, and Assistant Director in Charge George Venizelos of the New York Office of the FBI made the announcement.

Maria De Los Angeles Gonzalez De Hernandez, 55, pleaded guilty today before U.S. District Judge Paul A. Engelmayer in the Southern District of New York to conspiring to violate the Travel Act and to commit money laundering, as well as substantive counts of these offenses.  Sentencing for Gonzalez is scheduled for Aug. 15, 2014, before Judge Engelmayer.

At all times relevant to the charges, Banco de Desarrollo Económico y Social de Venezuela (BANDES) was a state-run economic development bank in Venezuela.  The Venezuelan government had a majority ownership interest in BANDES and provided it with substantial funding.

According to court records, Gonzalez was an official at BANDES and oversaw the development bank’s overseas trading activity.  At her direction, BANDES conducted substantial trading through the Broker-Dealer.  Most of the trades executed by the Broker-Dealer on behalf of BANDES involved fixed income investments for which the Broker-Dealer charged the bank a mark-up on purchases and a mark-down on sales.

From early 2009 through 2012, Gonzalez participated in a bribery scheme in which she directed trading business she controlled at BANDES to the Broker-Dealer and, in return, agents and employees of the Broker-Dealer shared the revenue the Broker-Dealer generated from this trading business with Gonzalez.  During this time period, the Broker-Dealer generated over $60 million in mark-ups and mark-downs from trades with BANDES.  Agents and employees of the Broker-Dealer devised a split with Gonzalez of the commissions paid by BANDES to the Broker-Dealer.  Emails, account records, and other documents collected from the Broker-Dealer and other sources reveal that Gonzalez received a substantial share of the revenue generated by the Broker-Dealer for BANDES-related trades.  Specifically, Gonzalez received millions in bribe payments from Broker-Dealer agents and employees.

Additionally, Gonzalez paid a portion of the bribe payments she received to another BANDES employee who was also involved in the scheme.

To further conceal the scheme, the kickbacks to Gonzalez were often paid using intermediary corporations and offshore accounts that Gonzalez and others held in Switzerland, among other places.

Previously, three former employees of the Broker-Dealer – Ernesto Lujan, Jose Alejandro Hurtado, and Tomas Alberto Clarke Bethancourt – each pleaded guilty in New York federal court to conspiring to violate the Foreign Corrupt Practices Act (FCPA), to violate the Travel Act and to commit money laundering, as well as substantive counts of these offenses, relating, among other things, to the scheme involving bribe payments to Gonzalez.  Sentencing for Lujan and Clarke is scheduled for Feb. 11, 2014, before U.S. District Judge Paul G. Gardephe.  Hurtado is scheduled for sentencing before U.S. District Judge Harold Baer Jr. on March 6, 2014.

This ongoing investigation is being conducted by the FBI, with assistance from the SEC and the Justice Department’s Office of International Affairs. Assistant Chief James Koukios and Trial Attorneys Maria Gonzalez Calvet and Aisling O’Shea of the Criminal Division’s Fraud Section and Assistant United States Attorneys Harry A. Chernoff and Jason H. Cowley of the Southern District of New York’s Securities and Commodities Fraud Task Force are in charge of the prosecution.  Assistant United States Attorney Carolina Fornos is also responsible for the forfeiture aspects of the case.

 

LIBOR update: Wall Street Journal Ordered Not to Divulge Libor Names

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Journal Ordered Not to Divulge Libor Names

U.K. Prosecutors Win Injunction Amid Investigation

“A British judge ordered the Journal and David Enrich, the newspaper’s European banking editor, to comply with a request by the U.K.’s Serious Fraud Office prohibiting the newspaper from publishing names of individuals not yet made public in the government’s ongoing investigation into alleged manipulation of the London interbank offered rate, or Libor.”

MainJustice.Com: “Former Civil Division Fraud Leader Joins White Collar Firm”

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MainJustice.Com: “Former Civil Division Fraud Leader Joins White Collar Firm”

Three Former Broker-dealer Employees Plead Guilty in Manhattan Federal Court to Bribery of Foreign Officials, Money Laundering and Conspiracy to Obstruct Justice

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Three employees of a New York-based U.S. broker-dealer have pleaded guilty for their roles in bribery schemes involving two state economic development banks in Venezuela.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara of the Southern District of New York and Assistant Director in Charge George Venizelos of the New York Office of the FBI made the announcement.

Ernesto Lujan, Jose Alejandro Hurtado and Tomas Alberto Clarke Bethancourt pleaded guilty in New York federal court to conspiring to violate the Foreign Corrupt Practices Act (FCPA), to violate the Travel Act and to commit money laundering, as well as substantive counts of these offenses.  These charges relate to a scheme to bribe a foreign official named Maria de los Angeles Gonzalez de Hernandez at Banco de Desarrollo Económico y Social de Venezuela (BANDES), a state economic development bank in Venezuela, in exchange for receiving trading business from BANDES.  Lujan, Hurtado and Clarke each also pleaded guilty to an additional charge of conspiring to violate the FCPA in connection with a similar scheme to bribe a foreign official employed by Banfoandes (the “Banfoandes Foreign Official”), another state economic development bank in Venezuela, and to conspiring to obstruct an examination by the U.S. Securities and Exchange Commission (SEC) of the New York-based broker-dealer (the “Broker-Dealer”) where all three defendants had worked, to conceal the true facts of the Broker-Dealer’s relationship with BANDES.

Lujan, 50, and Clarke, 43, entered their guilty pleas yesterday before U.S. Magistrate Judge James C. Francis IV, and Hurtado, 38, pleaded guilty today, also before Judge Francis. The men each pleaded guilty to the same six offenses and face a maximum penalty of five years in prison on each count except money laundering, which carries a maximum penalty of 20 years in prison.  Sentencing for Lujan and Clarke is scheduled for Feb. 11, 2014, before U.S. District Judge Paul G. Gardephe.  Hurtado is scheduled for sentencing before U.S. District Judge Harold Baer Jr. on March 6, 2014.

According to the informations filed against Lujan, Hurtado and Clarke this week, the criminal complaints previously filed, and statements made during the plea proceedings, Lujan, Clarke and Hurtado worked or were associated with the Broker-Dealer, principally through its Miami offices.  In 2008, the Broker-Dealer established a group called the Global Markets Group, which included Lujan, Clarke and Hurtado, and which offered fixed income trading services to institutional clients.

One of the Broker-Dealer’s clients was BANDES, which operated under the direction of the Venezuelan Ministry of Finance.  The Venezuelan government had a majority ownership interest in BANDES and provided it with substantial funding.  Gonzalez was an official at BANDES and oversaw the development bank’s overseas trading activity.  At her direction, BANDES conducted substantial trading through the Broker-Dealer.  Most of the trades executed by the Broker-Dealer on behalf of BANDES involved fixed-income investments for which the Broker-Dealer charged the bank a mark-up on purchases and a mark-down on sales.

The Broker-Dealer also conducted business with Banfoandes, another state development bank in Venezuela that, along with its 2009 successor Banco Bicentenario, operated under the direction of the Venezuelan Ministry of Finance.  Banfoandes acted as a financial agent of the Venezuelan government in order to promote economic and social development by, among other things, offering credit to low-income Venezuelans.  The Banfoandes Foreign Official was responsible for some of Banfoandes’s foreign investments.

Court records state that from early 2009 through 2012, Lujan, Clarke and Hurtado participated in a bribery scheme in which Gonzalez allegedly directed trading business she controlled at BANDES to the Broker-Dealer, and in return, agents and employees of the Broker-Dealer split the revenue the Broker-Dealer generated from this trading business with Gonzalez.  During this time period, the Broker-Dealer generated over $60 million in mark-ups and mark-downs from trades with BANDES.  Agents and employees of the Broker-Dealer, including Lujan, Clarke and Hurtado, devised a split with Gonzalez of the commissions paid by BANDES to the Broker-Dealer.  Emails, account records and other documents collected from the Broker-Dealer and other sources reveal that Gonzalez allegedly received a substantial share of the revenue generated by the Broker-Dealer for BANDES-related trades.  Specifically, Gonzalez allegedly received kickbacks and payments from Broker-Dealer agents and employees that were frequently in six-figure amounts.

To further conceal the scheme, the kickbacks to Gonzalez were often paid using intermediary corporations and offshore accounts that she held in Switzerland, among other places.  For instance, Lujan, Clarke and Hurtado used accounts they controlled in Switzerland to transfer funds to an account Gonzalez allegedly controlled in Switzerland.  Additionally, Hurtado and his spouse received substantial compensation from the Broker-Dealer, portions of which Hurtado transferred to an account allegedly held by Gonzalez in Miami and to an account held by an associate of Gonzalez in Switzerland.  Hurtado also sought and allegedly received reimbursement from Gonzalez for the U.S. income taxes he had paid on money that he used to make kickback payments to Gonzalez.  Lujan and Clarke also derived substantial profit from their roles in the bribery scheme.

According to court records, beginning in or about November 2010, the SEC commenced a periodic examination of the Broker-Dealer, and from November 2010 through March 2011 the SEC’s examination staff made several visits to the Broker-Dealer’s offices in Manhattan.  In early 2011, Lujan, Clarke and Hurtado discussed their concern that the SEC was examining the Broker-Dealer’s relationship with BANDES and asking questions regarding certain emails and other information that the SEC examination staff had discovered.  Lujan, Clarke and Hurtado agreed that they would take steps to conceal the true facts of the Broker-Dealer’s relationship with BANDES, including deleting emails.  Lujan, Clarke and Hurtado then, in fact, deleted emails.  Additionally as part of this effort to obstruct the SEC examination, Clarke lied to SEC examination staff in response to an interview question about his relationship to an individual who had received purported foreign associate payments relating to BANDES.

In a related scheme, from 2008 through mid-2009, Lujan, Clarke and Hurtado paid bribes to the Banfoandes Foreign Official, who, in exchange, directed Banfoandes trading business to the Broker-Dealer.

Gonzalez was charged in a criminal complaint and arrested on May 3, 2013, in connection with the BANDES bribery scheme.  The charges against Gonzalez are merely accusations, and she is presumed innocent unless and until proven guilty.

This ongoing investigation is being conducted by the FBI, with assistance from the SEC and the Justice Department’s Office of International Affairs.

Assistant Chief James Koukios and Trial Attorneys Maria Gonzalez Calvet and Aisling O’Shea of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Harry A. Chernoff and Jason H. Cowley of the Southern District of New York’s Securities and Commodities Fraud Task Force are in charge of the prosecution.  Assistant U.S. Attorney Carolina Fornos is responsible for the forfeiture aspects of the case.

Noted Antitrust and Disaster Fraud Prosecutor Joan E. Marshall Joins GeyerGorey LLP

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Joan Marshall who prosecuted the worldwide vitamins cartel and brought a series of fraud cases in the aftermath of Hurricane Katrina, has joined the firm as a partner. Previously, Ms. Marshall was with the US DOJ Antitrust Division in the Dallas Field Office. She is the tenth former DOJ prosecutor to join the new boutique law firm in less than a year.Joan Marshall_4small

FOR IMMEDIATE RELEASE

 

PRLog (Press Release) – Aug. 6, 2013 – WASHINGTON, D.C. — GeyerGorey LLP is pleased to announce that Joan E. Marshall, a former Department of Justice prosecutor, has joined the firm as partner. Ms. Marshall will open a new office for the firm, in Dallas, where she will be resident.

Ms. Marshall comes to GeyerGorey from the Antitrust Division of the Department of Justice, where she also served as a prosecutor on the Department’s Disaster Fraud Task Force and its predecessor, the Hurricane Katrina Fraud Task Force. While with the Department of Justice, Ms. Marshall supervised numerous multi-agency investigations of bid rigging, price fixing, mail fraud, wire fraud, bank fraud, bribery, perjury and obstruction of justice.

Ms. Marshall had the distinction of breaking the Dallas Field Office’s acclaimed vitamins cartel case and helped to devise, structure and carry out what became one of the most comprehensive international investigations and prosecutions of all time, resulting in more than $1 billion in collected criminal fines. She led the Antitrust Division’s bribery prosecutions involving construction of the levees surrounding New Orleans after the devastation of Hurricane Katrina. Her experience spans investigations and prosecutions involving numerous industries including wholesale groceries, milk, seafood, medical equipment, oilfield supplies, military moving and storage, road and building construction, and municipal finance.

“We are thrilled that Joan has decided to join us,” said Hays Gorey. “She adds deep experience with numerous enforcement agencies and compliments our experience in key industries like oil and gas exploration, not to mention the fraud piece. Our corporate compliance and competition expertise is a perfect fit in the Dallas-Ft. Worth market, which has the largest concentration of corporate headquarters in the United States.”

Ms. Marshall is a frequent speaker on antitrust enforcement and fraud prevention and detection and has developed numerous training programs. She is a recipient of the United States Department of Justice, Assistant Attorney General’s Award and certificates of appreciation from the United States Department of Homeland Security, Office of Inspector General, and the United States Army Criminal Investigation Command, Major Procurement Fraud Unit.

Robert Zastrow, who was Verizon’s Assistant General Counsel for 15 years before co-founding the firm in October 2012, added, “Joan’s extensive background and expertise nicely complements our firm’s unique philosophy and enriches our solid bench in the White Collar world.” Co-founder, Brad Geyer added: “We are very involved in servicing the government contractor and the non-profit and non-governmental organization community and we are excited to roll in Joan’s disaster fraud experience into our overall product offerings. It is also unusual to have career prosecutors in one firm that worked on the highest profile matters on both the criminal and civil worlds. Joan will give us a strategic presence in the Dallas market, which is home to companies in the airline, technology, energy, banking, medical and defense contracting sectors.”

Headquartered in Washington, D.C., GeyerGorey LLP specializes in white collar criminal defense, particularly investigations and cases involving allegations of economic crimes, such as violations of the federal antitrust laws (price fixing, bid rigging, territorial and customer allocation agreements), procurement fraud, securities fraud, foreign bribery (Foreign Corrupt Practices Act) and qui tam (False Claims Act) and other whistleblower actions. The firm also conducts internal investigations of possible criminal conduct and provides advice regarding compliance with U.S. antitrust, anti-bribery and other laws.