International Whistleblower Rewards and Exposing International Illegal Bribe Schemes
International Efforts to Help Expose & Prosecute Bribes and illegal kickbacks to Russian Government Officials & other Government Corruption by Foreign Corrupt Practices Act Attorney Jason Coomer
Russian whistleblowers, public officials, business professionals, employees of multinational corporations, and others that have evidence of government corruption are eligible for large whistleblower financial rewards. Russian government corruption that can be the basis for these awards include illegal payments for business; bribes for construction contracts; illegal incentives for oil, gas and mineral leases; illegal kickbacks for regulatory approval; and other violations of Foreign Corrupt Practices Act (FCPA). Russian whistleblowers and multinational corporation whistleblowers are needed to step up to report illegal corrupt practices and can receive large financial rewards for being the first to properly expose significant Russian government corruption.
If you are aware of a significant Foreign Corrupt Practice Act (FCPA) violation, please feel free to contact Russian Government Whistleblower Lawyer, Jason Coomer via e-mail message or use our submission form to have an international law attorney review a potential Foreign Corruption Practices Act Securities and Exchange Commission (SEC) Action.
Russian Admittance into the World Trade Organization Should Reverse Foreign Investment Flight Caused by Political Uncertainty and Currency Problems in the Eurozone
After losing over 80 billion dollars in foreign investments in 2011 and over 30 billion dollars of foreign investments in 2010, Russia may be turning this foreign direct investment flight trend around. The World Trade Organization has recently approved Russia’s membership. Russia’s membership into the World Trade Organization should help bring the nation more firmly into the global economy and reverse the capital flight that has seen many large foreign investors leave Russia. The foreign capital flight from Russia appears to be a reaction to Russian political uncertainty, Russian government corruption, and European sovereign debt worries. By entering into the World Trade Organization as well as enacting more open trade policies and anticorruption policies, Russia should be able to reverse this trend and attract more foreign direct investment. This infusion of foreign direct investment by large multinational corporations should bring much needed capital investment to Russia and improve the Russian economy. However, it is important to understand that many Russian domestic industries are still owned and controlled by the Russian government. As such, institutionalized corruption in the Russia could prevent foreign direct investment into Russia.
Corruption has particularly harmful effects on emerging economies that need foreign investment such as Russia. Multinational corporations and foreign investors will avoid unnecessary risks and will avoid investing in countries where the country’s public officials routinely abuse their power for personal gain. Government corruption undermines the health of international markets, stifles competition, and repels foreign investment.
Russian Bribes, Russian Illegal Kickbacks and other Russian Government Corruption
Russia has long been known as a country where government corruption is prevalent and bribes are necessary to obtain business and contracts. Even today, decades after the dissolution of the Soviet Union, Russian government corruption is a significant issue for the government, economy, and large multinational corporations seeking to do business there.
According to Transparency International’s 2011 Bribe Payers Index as well as the 2008 Bribe Payers Index, Russia finished last. The Transparency International bribe payers indexes rank the likelihood of companies from 28 leading economies to win business abroad by paying bribes. As such, according to the survey, it is most likely that a foreign corporation will pay a bribe to obtain business in Russia, than any other country surveyed. This research and many experts on the Russian economy, believe that Russia has institutionalized corruption that dates back generations and this Russian government corruption will be difficult to change.
Despite this history of corruption, Russia has and is making progress in enacting new laws and working with the international community to develop new anticorruption laws to prevent institutionalized bribes, kickbacks, and other corruptions. Russia has ratified the United Nations Convention against Corruption, a comprehensive anti-corruption pact that seeks to ensure that State Parties take steps to prevent corruption within their public and private sectors. The U.N. Convention provides a solid legal framework for any country serious about combating corruption.
President Medvedev has introduced important anti-bribery legislation to the Duma. If the proposed legislation becomes law, the president’s anti-bribery bill would significantly strengthen the law against corruption in Russia and would improve Russia’s ability to accede to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. The anti-bribery legislation pending in the Duma if enacted would be an extremely important step forward in overcoming institutionalized Russian government corruption. A major second step would be Russia’s accession to the OECD Anti-Bribery Convention.
The enactment of significant Russian anti-bribery legislation – accompanied by the promise of subsequent enforcement – could have a significant impact on institutionalized corruption and greatly improve Russia's ability to attract foreign direct investments and the Russian economy. The key will be implementation and enforcement of these new laws and policies.
United States Department of Justice and other International Efforts to Help the Russian Government Change, Expose, and Prosecute Institutionalized Russian Bribes, Russian Illegal Kickbacks and other Government Corruption
The United States and Russian law enforcement have also been coordinating on international corruption investigations. To assist the fight against government corruption world wide, the Department of Justice is working in many countries to beat back corruption and working with other governments and multinational corporations to make a fundamental shift in the way business leaders and public officials conduct themselves. The centerpiece of the Department of Justice’s anti-corruption efforts is enforcement of the Foreign Corrupt Practices Act, or FCPA.
Anti-corruption efforts include helping foreign countries increase their anti-corruption enforcement capacity. Since 1991, the U.S. Department of State, the Criminal Division has at the request of host nations placed legal advisors in dozens of countries around the world – including Russia – to participate in developing and sustaining these institutions. In Russia, legal advisors are currently assisting Russian authorities with their efforts to amend the Criminal Procedure Code.
The United States Department of Justice Criminal Division’s Fraud Section plays the leading role in enforcing the FCPA on behalf of the United States. The Criminal Division has dramatically increased its FCPA enforcement efforts over the past few years and is expected to continue to increase in the future. In 2009 and 2010 combined, over 50 individuals were charged with FCPA violations and nearly $2 billion in criminal fines and penalties have been imposed.
The Foreign Corrupt Practices Act (FCPA) prohibits bribery of foreign officials by U.S. companies and foreign companies listed on the U.S. securities exchange. The Foreign Corrupt Practices Act (FCPA) also requires such companies to maintain accurate books and records. Foreign Corrupt Practices Act Whistleblowers that properly report violations of the Foreign Corrupt Practice Act by a U.S. or foreign companies listed on the U.S. securities exchanges can recover a large reward for exposing Foreign Corrupt Practices Act (FCPA) violations.
Russian whistleblowers, multinational corporation employee whistleblowers, and other persons with evidence of Russian government corruption can work confidentially through Foreign Corrupt Practices Act violation lawyers to expose government corruption and recovery large financial rewards for reporting the illegal conduct. By exposing and preventing government corruption in Russia, the whistleblower will be able to help the Russian economy as a whole, improve the flow of foreign direct investment into Russia, and benefit the Russian people.
Evidence of government corruption will usually include proof of illegal payments, accounting information, bank statements, video, e-mail messages, contracts, and false certifications. Further, these corruption scams can often be very sophisticated and include multiple companies through joint ventures and subsidiaries. Typically a combination of evidence and insider knowledge is needed to expose the government corruption.
FCPA violations by U.S. businesspersons & Associated Foreign Corporations in Russia
Included in this increased enforcement, the United States Department of Justice is investigating and enforcing FCPA violations by U.S. businesspersons conducting business abroad. They are also pursuing foreign executives who work for U.S. corporations or for foreign corporations that trade on U.S. exchanges, as well as the foreign corporations themselves. Thus, any Russian citizen working for an American company in Russia or for a Russian company that trades on an American exchange, as well as any Russian company that trades on such an exchange, are also within the reach of the United States Department of Justice and may be subject to prosecution for FCPA violations. The United States Department of Justice is also bringing charges against foreign officials under U.S. money laundering statutes, alleging that those officials laundered the proceeds of foreign bribery through U.S. financial institutions. In 2009, for example, we indicted two former Haitian government officials on money laundering charges for their alleged roles in a scheme to bribe officials of Haiti’s state-owned national telecommunications company. Thus, as the Haiti Teleco case shows, Russian officials who launder the proceeds of foreign bribes through U.S. financial institutions could also be liable for FCPA-related offenses.
United States Department of Justice Money Laundering, Government Corruption, and Collection Efforts
Corruption has particularly harmful effects on emerging economies that need foreign investment for developing domestic industries and building infrastructures. When a developing country’s public officials routinely abuse their power for personal gain, the people of that country suffer. Roads are not built, schools lie in ruin, basic public services go unprovided and/or inferior and dangerous infrastructures are built at higher than necessary costs. When corruption takes hold in any nation, its political institutions tend to lose legitimacy, threatening democratic stability and the rule of law. Corruption undermines the health of international markets, stifles competition and repells foreign investment. Moreover, government corruption is a “gateway crime,” allowing money laundering, gang violence, terrorism and other crimes to thrive.
The United States Department of Justice Asset Forfeiture and Money Laundering Section has initiated a Kleptocracy Asset Recovery Initiative, which is designed to target and recover the proceeds of foreign official corruption that have been laundered into or through the United States. In November of 2009, at the Global Forum on Fighting Corruption and Safeguarding Integrity, in Qatar, Attorney General Holder pledged to redouble the United States’ commitment to recovering foreign corruption proceeds. The Kleptocracy Initiative represents a concrete step toward fulfilling that commitment; and once the initiative is fully implemented, it will allow the Justice Department to recover assets on behalf of countries victimized by high-level corruption.
History of the FCPA
The FCPA was the first effort of any nation to specifically criminalize the act of bribing foreign officials. The statute was enacted in the wake of the “Watergate” scandal in the United States, which led to the resignation of President Richard Nixon in 1974 and resulted in a dramatic plunge in Americans’ overall trust in government. In 1976, following certain prosecutions for illegal use of corporate funds arising out of the Watergate scandal, the U.S. Securities and Exchange Commission, or S.E.C., which regulates the securities industry in the United States, issued a “Report on Questionable and Illegal Corporate Payments and Practices.” In its report, the S.E.C. determined that foreign bribery by U.S. corporations was “serious and sufficiently widespread to be a cause for deep concern.” S.E.C. investigations revealed that hundreds of U.S. companies had made corrupt foreign payments involving hundreds of millions of dollars. With this background, the U.S. Senate Banking Committee concluded that there was a strong need for anti-bribery legislation in the United States. “Corporate bribery is bad business,” the committee said in its Report. “In our free market system it is basic that the sale of products should take place on the basis of price, quality, and service. Corporate bribery is fundamentally destructive of this basic tenet.”
Slush Funds, Illegal Bribes, Illegal Kickbacks, and Illegal Gifts
The Foreign Corrupt Practices Act (FCPA) prohibits the offer or making of payments or giving anything of value, either directly or indirectly, to any foreign official, political party or political candidate, or public international organization to obtain or maintain business when the offer, payment or gift is intended to influence a desired action; induce an act in violation of a lawful duty; cause a person to refrain from acting in violation of a lawful duty; secure any improper advantage; or influence the decision of a government or instrumentality.
These prohibitions preclude payments that are unlawful under the laws of the country in which payment was made; payments that are not legitimate expenses directly related to the promotion, demonstration or explanation of the company’s product or services; and payments that are not made in accordance with a contract between the company and a foreign entity. These prohibitions also include third party actions where the company knows that a payment or a gift will be provided to a government official or agency for the purpose of obtaining a contract or business.
"Giving anything of value" can include cash, slush funds, kickbacks, tax benefits, information and promises of future employment, scholarships, discounts, entertainment, travel expenses and insurance benefits. FCPA bribery is an illegal offering, giving, receiving, or soliciting of any item of value to influence the actions of an official or other person in charge of a public or legal duty. The bribe is the gift bestowed to influence the recipient's conduct. It may be any money, good, right in action, property, preferment, privilege, emolument, object of value, advantage, or merely a promise or undertaking to induce or influence the action, vote, or influence of a person in an official or public capacity. Evidence of illegal bribes often include accounting records, bank records, business contracts, and e-mail correspondence.
The Russian Economy
The economy of Russia is the ninth largest economy in the world by nominal value and the sixth largest by purchasing power parity. Russia has undergone significant changes since the collapse of the Soviet Union, moving from a centrally planned economy to a more market-based and globally integrated economy. Economic reforms in the 1990s privatized some Russian industries, but left the energy and defense industries in government control and placed ownership in the hands of a few. As of 2011, Russia's capital, Moscow, had the highest billionaire population of any city in the world.
Russia has vast natural resources including the world’s largest natural gas reserves; the second largest coal reserves; and eighth largest crude oil reserves. Russia's admittance into World Trade Organization may alter the global commodities trade matrix by pushing aside the Middle East as the number one supplier of energy. This transition will take time and foreign investment, but could greatly improve Russia's economy. A key element to this transition will be to make sure that Russia's petroleum industry which is controlled by the Russian government is not stalled by corruption which could prevent the adequate foreign investment of capital and technology needed to develop the infrastructure to increase production levels. It is important that Russian government officials and foreign multinational corporations are prevented from offering and receiving illegal contract bribes and illegal kickbacks to obtain large gas leases and large oil leases; illegal kickbacks for regulatory permits; and illegal construction bribes for infrastructure projects.
Bribes, slush fund payments, and illegal kickbacks to government officials in the Oil and Gas Energy industries for Drilling Leases and contracts are potential violations of the Foreign Corrupt Practices Act and can be the basis for whistleblower reward lawsuits and other types of fraud litigation. International petroleum employees including petroleum accountants, executives, and other oil company employees with original information of significant violations of the Foreign Corrupt Practices Act by a large oil company may be able to collect a reward through whistleblower law. The key to obtaining a whistleblower financial reward is to make sure that as the employee whistleblower you are the first to file with sufficient evidence of significant fraud.
Multinational Oil Companies that pay illegal kickbacks and bribes to government officials and former government officials in exchange for drilling contracts, pipeline contracts, oil leases, offshore drilling, mining contracts, and other large building projects can be brought to justice and made to pay large penalties under the Foreign Corrupt Practices Act. The whistleblowers that bring these corporations to justice may be able to collect large economic rewards under the Securities Exchange Act (SEC Whistleblower Bounty Actions) and the Commodity Exchange Act (CFTC Whisteblower Bounty Actions).
The Whistleblower may be entitled to not only the amount of the illegal bribe or kickback, but the benefit of the illegal bribe or kickback. In cases where $100,000.00 bribe is made to obtain a $100 million pipeline, the Whistleblower may be entitled to 10 to 30% of the $100,000,000.00 and the $100,000.00 translating into a $10 million to $30 million award for blowing the whistle on illegal fraud.
Under the Foreign Corrupt Practices Act and SEC Whistleblower Incentive Program, whistleblowers with original and specialized knowledge and evidence of corporate bribes of government officials and illegal kickbacks to government agents are eligible to recover large economic awards. By gathering this evidence and going through a lawyer, these whistleblowers can protect their identity through the process and potentially collect large rewards of 10% to 30% of the monetary sanctions including disgorged funds. If you are aware of an illegal bribe or illegal kickback that was used to secure a large contract, please feel free to contact Multinational Corporation Whistleblower Lawyer Jason Coomer via e-mail message or use our submission form about a potential SEC Whistleblower Incentive Program Action or other Whistleblower Bounty Action.
Below are press releases from the U.S. Securities and Exchange Commission (SEC) and Department of Justice regarding large bribe schemes and illegal kickbacks used in South America. These multinational corporate bribes in South America include Brazil and Argentina. In these cases we see that large multinational corporations are using bribes and kickbacks to government officials to secure large contracts. In these cases, the U.S. Securities and Exchange Commission is able to impose large fines for FCPA violations. If similar fines are made as a result of a whistleblower action in Russia it could result in similar large economic rewards to the whistleblower.
Daimler AG and Three Subsidiaries Resolve Foreign Corrupt Practices Act Investigation and Agree to Pay $93.6 Million in Criminal Penalties
Combined Criminal and Civil Penalties of $185 Million to be Paid
WASHINGTON – Daimler AG, a German corporation, and three of its subsidiaries have resolved charges related to a Foreign Corrupt Practices Act (FCPA) investigation into the company’s worldwide sales practices, the Department of Justice announced today.
At a hearing today before U.S. District Court Judge Richard J. Leon in the District of Columbia, Daimler AG’s Russian subsidiary DaimlerChrysler Automotive Russia SAO (DCAR), now known as Mercedes-Benz Russia SAO, and its German subsidiary, Export and Trade Finance GmbH (ETF), each pleaded guilty to criminal information charging the companies with one count of conspiracy to violate the anti-bribery provisions of the FCPA and one count of violating those provisions. As part of the plea agreements, DCAR and ETF agreed to pay criminal fines of $27.26 million and $29.12 million, respectively.
Daimler AG entered into a deferred prosecution agreement and agreed to the filing of a criminal information charging that company with one count of conspiracy to violate the books and records provisions of the FCPA and one count of violating those provisions. Daimler AG’s Chinese subsidiary DaimlerChrysler China Ltd. (DCCL), now known as Daimler North East Asia Ltd., also entered into a deferred prosecution agreement and agreed to the filing of a criminal information charging it with one count of conspiracy to violate the anti-bribery provisions of the FCPA and one count of violating those provisions. In total, Daimler AG and its subsidiaries will pay $93.6 million in criminal fines and penalties.
According to court documents, Daimler AG, whose shares trade on multiple exchanges in the United States, engaged in a long-standing practice of paying bribes to foreign government officials through a variety of mechanisms, including the use of corporate ledger accounts known internally as “third-party accounts” or “TPAs,” corporate “cash desks,” offshore bank accounts, deceptive pricing arrangements and third-party intermediaries. According to court documents, Daimler AG and its subsidiaries made hundreds of improper payments worth tens of millions of dollars to foreign officials in at least 22 countries – including China, Croatia, Egypt, Greece, Hungary, Indonesia, Iraq, Ivory Coast, Latvia, Nigeria, Russia, Serbia and Montenegro, Thailand, Turkey, Turkmenistan, Uzbekistan, Vietnam and others – to assist in securing contracts with government customers for the purchase of Daimler vehicles. The contracts were valued at hundreds of millions of dollars. In some cases, Daimler AG or its subsidiaries wire transferred these improper payments to U.S. bank accounts or to the foreign bank accounts of U.S. shell companies, in order for those entities to pass on the bribes. Within Daimler AG and its subsidiaries, bribe payments were often identified and recorded as “commissions,” “special discounts,” and/or “nützliche Aufwendungen” or “N.A.” payments, which translates to “useful payment” or “necessary payment,” and was understood by certain Daimler employees to mean “official bribe.” According to court documents, certain corrupt payments continued as late as January 2008, after the Department of Justice had begun its investigation. In all cases, Daimler AG improperly recorded these corrupt payments in its corporate books and records. Daimler AG admitted that it earned more than $50 million in profits from corrupt transactions with a nexus to the territory of the United States. Daimler AG also admitted that it agreed to pay kickbacks to the former Iraqi government in connection with contracts to sell vehicles to Iraq under the U.N.’s Oil for Food program.
“In a decade-long scheme involving tens of millions of dollars, Daimler AG and three of its subsidiaries brazenly offered bribes in exchange for business around the world,” said Principal Deputy Assistant Attorney General Mythili Raman of the Criminal Division. “Using offshore bank accounts, third-party agents and deceptive pricing practices, these companies saw foreign bribery as a way of doing business. The guilty pleas and deferred prosecution agreements entered today by Daimler AG and its subsidiaries should serve as a message to other companies subject to the FCPA and conducting business around the world that corrupt business is bad business.”
In connection with its guilty plea, DCAR admitted that it made improper payments to Russian federal and municipal government officials to secure contracts to sell vehicles by over-invoicing the customer and paying the excess amount back to the government officials, or to other designated third parties that provided no legitimate services to DCAR or Daimler AG. When requested, DCAR or Daimler AG employees caused the wire transfer of payments from Daimler AG’s bank accounts in Germany to, among other destinations, U.S. and Latvian bank accounts held by shell companies with the understanding that the money, in whole or in part, was for the benefit of Russian government officials.
In connection with its guilty plea, ETF admitted that it made corrupt payments directly to Croatian government officials and to third parties, including two U.S.-based corporate entities, with the understanding that the payments would be passed on, in whole or in part, to Croatian government officials, to assist in securing the sale of 210 fire trucks.
In connection with its deferred prosecution agreement, DCCL admitted that it made improper payments in the form of commissions, delegation travel, and gifts for the benefit of Chinese government officials or their designees in connection with sales of commercial vehicles and Unimogs to various Chinese government customers. DCCL admitted that in certain cases it used U.S.-based agents to facilitate the bribe payments.
Under the terms of its deferred prosecution agreement, Daimler AG agreed to retain an independent compliance monitor for a three-year period to oversee the company’s continued implementation and maintenance of an FCPA compliance program, and to make reports to the company and the Department of Justice. DCAR, ETF and DCCL are covered by the monitoring provisions of the deferred prosecution agreement with their parent company Daimler AG. Daimler AG also agreed to fully cooperate with investigations by U.S. and foreign authorities of the company’s corrupt payments.
Today, Judge Leon also entered a separate judgment against Daimler AG resolving a related civil complaint filed by the U.S. Securities and Exchange Commission (SEC). Daimler AG agreed to pay $91.4 million in disgorgement of profits relating to those violations.
SEC Charges Baker Hughes With Foreign Bribery and With Violating 2001 Commission Cease-and-Desist Order Baker Hughes Subsidiary Pleads Guilty to Three Felony Charges in Criminal Action Filed by Department of Justice; Criminal Fines, Civil Penalties and Disgorgement of Illicit Profits Total More Than $44 Million FOR IMMEDIATE RELEASE 2007-77
Washington, D.C., April 26, 2007 - The Securities and Exchange Commission today announced the filing of a settled enforcement action charging Baker Hughes Incorporated, a Houston, Texas-based global provider of oil field products and services, with violations of the Foreign Corrupt Practices Act (FCPA). Baker Hughes has agreed to pay more than $23 million in disgorgement and prejudgment interest for these violations and to pay a civil penalty of $10 million for violating a 2001 Commission cease-and-desist Order prohibiting violations of the books and records and internal controls provisions of the FCPA.
In the same complaint, the SEC also charged Roy Fearnley, a former business development manager for Baker Hughes, with violating and aiding and abetting violations of the FCPA. Fearnley has not reached any settlement with the Commission regarding these charges.
Linda Chatman Thomsen, Director of the SEC's Division of Enforcement, said, "Baker Hughes committed widespread and egregious violations of the FCPA while subject to a prior Commission cease-and-desist Order. The $10 million penalty demonstrates that companies must adhere to Commission Orders and that recidivists will be punished."
Christopher R. Conte, an Associate Director in the SEC's Division of Enforcement, added, "Companies like Baker Hughes will be held accountable when they circumvent the rules of fair play and honest competition by making improper payments to win business."
The SEC's complaint alleges that Baker Hughes paid approximately $5.2 million to two agents while knowing that some or all of the money was intended to bribe government officials, specifically officials of State-owned companies, in Kazakhstan. The complaint alleges that one agent was hired in September 2000 on the understanding that Kazakhoil, Kazakhstan's national oil company at that time, had demanded that the agent be hired to influence senior level employees of Kazakhoil to approve the award of business to the company. Baker Hughes retained the agent principally at the urging of Fearnley. According to the complaint, Fearnley told his bosses that the "agent for Kazakhoil" told him that unless the agent was retained, Baker Hughes could "say goodbye to this and future business." Baker Hughes engaged the agent and was awarded an oil services contract in the Karachaganak oil field in Kazakhstan that generated more than $219 million in gross revenues from 2001 through 2006. Baker Hughes, the complaint alleges, paid the agent $4.1 million to its bank account in London but received no identifiable services from the agent. The complaint also alleges that in 1998 Baker Hughes retained a second agent in connection with the award of a large chemical contract with KazTransOil, the national oil transportation operator of Kazakhstan. Between 1998 and 1999, Baker Hughes paid over $1 million to the agent's Swiss bank account, despite a company employee knowing by December 1998 that the agent's representative was a high-ranking executive of KazTransOil.
The SEC's complaint against Baker Hughes also alleges violations of the books and records and internal controls provisions of the FCPA in Nigeria, Angola, Indonesia, Russia, Uzbekistan and Kazakhstan. In addition to violating the FCPA, certain of this conduct occurred after September 12, 2001, and consequently violated the Commission's 2001 cease-and-desist Order. Specifically, the complaint alleges that between 1998 and 2005, Baker Hughes made payments in Nigeria, Angola, Indonesia, Russia, Uzbekistan and Kazakhstan in circumstances that reflected a failure to implement sufficient internal controls to determine whether the payments were for legitimate services, whether the payments would be shared with government officials, or whether these payments would be accurately recorded in Baker Hughes' books and records.
For example, the complaint alleges that
from 1998 to 2004, Baker Hughes authorized commission payments of nearly $5.3 million to an agent (who worked in Kazakhstan, Russia and Uzbekistan) under circumstances in which the company failed to determine whether such payments were, in part, to be funneled to government officials in violation of the FCPA;
in Indonesia, between 2000 and 2003, Baker Hughes paid certain freight forwarders to import equipment into Indonesia using a "door-to-door" process under circumstances in which the company failed to adequately assure itself that such payments were not being passed on, in part, to Indonesian customs officials;
in Nigeria, between at least 2001 and 2005, Baker Hughes authorized payments to certain customs brokers to facilitate the resolution of alleged customs deficiencies under circumstances in which the company failed to adequately assure itself that such payments were not being passed on, in part, to Nigerian customs officials; and
in Angola, from 1998 to 2003, Baker Hughes paid an agent more than $10.3 million in commissions under circumstances in which the company failed to adequately assure itself that such payments were not being passed on to employees of Sonangol, Angola's state-owned oil company, to obtain or retain business in Angola.
Without admitting or denying the SEC's allegations, Baker Hughes consented to the entry of a final judgment permanently enjoining it from future violations of the FCPA and ordering it to pay a civil penalty and disgorgement with prejudgment interest; and to retain an independent consultant to review the company's FCPA policies and procedures.
The Commission acknowledges Baker Hughes' cooperation in the investigation.
In a related criminal proceeding announced today, the United States Department of Justice filed criminal FCPA charges against Baker Hughes and its wholly-owned subsidiary Baker Hughes Services International, Inc., with an office in Atyrau, Kazakhstan. Baker Hughes Services International, Inc. entered a guilty plea before the Honorable Gray H. Miller, United States District Judge for the Southern District of Texas, and agreed to plead guilty to one count of violating the anti-bribery provisions of the FCPA, one count of aiding and abetting the falsification of the books and records of Baker Hughes, and one count of conspiracy to violate the FCPA, and to pay a criminal fine of $11 million. The Department of Justice has also entered into an agreement with Baker Hughes to defer prosecution for two years on charges of violating the anti-bribery and books and records provisions of the FCPA. Under the agreement, the company will retain for a period of three years a monitor to review and assess the company's compliance program and monitor its implementation of and compliance with new internal policies and procedures.
The staff acknowledges the cooperation and assistance of the U.S. Department of Justice, Fraud Section. The staff also acknowledges the help provided, in the form of mutual legal assistance, by the Isle of Man Financial Supervision Commission, HM Procureur (Attorney General) for Guernsey, and by the authorities of the United Kingdom and Switzerland.
SEC Charges Siemens AG for Engaging in Worldwide Bribery FOR IMMEDIATE RELEASE 2008-294
Washington, D.C., Dec. 15, 2008 — The Securities and Exchange Commission today announced an unprecedented settlement with Siemens AG to resolve SEC charges that the Munich, Germany-based manufacturer of industrial and consumer products violated the Foreign Corrupt Practices Act (FCPA) by engaging in a systematic practice of paying bribes to foreign government officials to obtain business. Additional Materials
Litigation Release No. 20829 SEC Complaint
The SEC alleges that Siemens paid bribes on such widespread transactions as the design and construction of metro transit lines in Venezuela, power plants in Israel, and refineries in Mexico. Siemens also used bribes to obtain such business as developing mobile telephone networks in Bangladesh, national identity cards in Argentina, and medical devices in Vietnam, China, and Russia. According to the SEC's complaint, Siemens also paid kickbacks to Iraqi ministries in connection with sales of power stations and equipment to Iraq under the United Nations Oil for Food Program. Siemens earned more than $1.1 billion in profits on these and several other transactions.
Siemens has agreed to pay $350 million in disgorgement to settle the SEC's charges, and a $450 million fine to the U.S. Department of Justice to settle criminal charges. Siemens also will pay a fine of approximately $569 million to the Office of the Prosecutor General in Munich, to whom the company previously paid an approximately $285 million fine in October 2007.
"Public companies that bribe foreign officials are confronting an increasingly well-coordinated international law enforcement effort," said SEC Chairman Christopher Cox. "The SEC has brought a record number of enforcement actions for foreign bribery during the past two years, and heightened international cooperation has been critical to those successful efforts. Seimens paid staggering amounts of money to circumvent the rules and gain business. Now, they will pay for it with the largest settlement in the history of the Foreign Corrupt Practices Act since it became law in 1977."
Linda Chatman Thomsen, Director of the SEC's Division of Enforcement, said, "This pattern of bribery by Siemens was unprecedented in scale and geographic reach. The corruption alleged in the SEC's complaint involved more than $1.4 billion in bribes to government officials in Asia, Africa, Europe, the Middle East, and the Americas. Our success in bringing the company to justice is a testament to the close, coordinated working relationship among the SEC, the U.S. Department of Justice, and international law enforcement, particularly the Office of the Prosecutor General in Munich."
Cheryl J. Scarboro, an Associate Director in the SEC's Division of Enforcement, said, "The day is past when multi-national corporations could regard illicit payments to foreign officials as simply another cost of doing business. The $1.6 billion in combined sanctions that Siemens will pay in the U.S. and Germany should make clear that these corrupt business practices will be rooted out wherever they take place, and the sanctions for them will be severe."
The SEC's complaint alleges that between March 12, 2001, and Sept. 30, 2007, Siemens created elaborate payment schemes to conceal the nature of its corrupt payments, and the company's inadequate internal controls allowed the conduct to flourish. Siemens made thousands of payments to third parties in ways that obscured the purpose for, and the ultimate recipients of, the money. Employees obtained large amounts of cash from cash desks, which were sometimes transported in suitcases across international borders for bribery. The authorizations for payments were placed on post-it notes and later removed to eradicate any permanent record. Siemens used numerous slush funds, off-books accounts maintained at unconsolidated entities, and a system of business consultants and intermediaries to facilitate the corrupt payments. Siemens made at least 4,283 payments, totaling approximately $1.4 billion, to bribe government officials in return for business to Siemens around the world. In addition, Siemens made approximately 1,185 separate payments to third parties totaling approximately $391 million, which were not properly controlled and were used, at least in part, for such illicit purposes as commercial bribery and embezzlement.
The misconduct involved employees at all levels, including former senior management, and revealed a corporate culture long at odds with the FCPA. The SEC's complaint alleges that despite the company's knowledge of bribery at two of its largest groups — Communications and Power Generation — the tone at the top at Siemens was inconsistent with an effective FCPA compliance program and created a corporate culture in which bribery was tolerated and even rewarded at the highest levels of the company. In November 2006, Siemens' current management began to implement reforms to the company's internal controls, which substantially reduced, but did not entirely eliminate, corrupt payments. All but $27.5 million of the corrupt payments occurred before Nov. 15, 2006.
Siemens violated Section 30A of the Securities Exchange Act of 1934 (Exchange Act) by making illicit payments to foreign government officials in order to obtain or retain business. Siemens violated Section 13(b)(2)(B) of the Exchange Act by failing to have adequate internal controls to detect and prevent the payments. Siemens violated Section 13(b)(2)(A) of the Exchange Act by improperly recording the payments in its books and records.
Without admitting or denying the SEC's allegations, Siemens has consented to the entry of a court order permanently enjoining it from future violations of Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act; ordering it to pay $350 million in disgorgement of wrongful profits, which does not include profits factored into Munich's fine; and ordering it to comply with certain undertakings regarding its FCPA compliance program, including an independent monitor for a period of four years. Since being approached by SEC staff, Siemens has cooperated fully with the ongoing investigation. Siemens' massive internal investigation and lower level employee amnesty program was essential in gathering facts regarding the full extent of Siemens' FCPA violations.
The SEC acknowledges the assistance of the U.S. Department of Justice, Fraud Section; the U.S. Attorney's Office for the District of Columbia, Fraud and Public Corruption Section; the Federal Bureau of Investigation; the Internal Revenue Service; the Office of the Prosecutor General in Munich, Germany; the U.K. Financial Services Authority; and the Hong Kong Securities and Futures Commission.
The Foreign Corrupt Practices Act (FCPA)
The Foreign Corrupt Practices Act (FCPA) applies to “issuers” (U.S. and foreign companies listed on U.S. securities exchanges and their employees); “domestic concerns,” which run the gamut of business entities organized under U.S. laws or with their principal place of business in the United States; the officers, directors, employees, and agents of those U.S. business entities (irrespective of nationality); U.S. citizens; U.S. resident aliens; “any person,” including all foreign persons, who commit an act in furtherance of a foreign bribe while in the United States, and U.S. businesses and nationals acting abroad. A Company must require all of its affiliated companies and all of their employees to comply with the Foreign Corrupt Practices Act.
Foreign Corrupt Practices Act (FCPA) Prohibitions
The Foreign Corrupt Practices Act (FCPA) prohibits the offer or making of payments or giving anything of value, either directly or indirectly, to any foreign official, political party or political candidate, or public international organization to obtain or maintain business when the offer, payment or gift is intended to influence a desired action; induce an act in violation of a lawful duty; cause a person to refrain from acting in violation of a lawful duty; secure any improper advantage; or influence the decision of a government or instrumentality. These prohibitions preclude payments were unlawful under the laws of the country in which payment was made; payments that are not legitimate expenses directly related to the promotion, demonstration or explanation of the company’s product or services; and payments that are not made in accordance with a contract between the company and a foreign entity. These prohibitions also include third party actions where the company knows that a payment or a gift will be provided to a government official or agency for the purpose of obtaining a contract or business.
Violations of the Foreign Corrupt Practices Act (FCPA) are particularly common when a new market is opening up because of the intense interaction with a foreign government during the opening of the market; in markets that are under heightened government scrutiny or regulation; in markets where foreign investors including U.S. business operate through foreign consultants and contractors; and in markets where foreign companies are acting through partners in joint ventures.
International businesses and large corporations that are conducting business in a new market which is opening up; in markets that are under heightened government scrutiny or regulation; in markets where foreign investors operate through foreign consultants and contractors; and in markets where foreign companies are acting through partners in joint ventures should have strong compliance departments and anti-bribery policies fail to properly prohibit illegal kickbacks, bribery, and other violations of the Foreign Corrupt Practices Act (FCPA). These compliance departments and anti-bribery policies should including strong and clear policies regarding suppliers in the supply chain and mandate that third party business partners such as agents, distributors and joint venture partners comply with the Foreign Corrupt Practices Act (FCPA).
Foreign Corrupt Practices Act (FCPA) Exceptions
Under the Foreign Corrupt Practices Act (FCPA), the only exception to the prohibition of making payments to do business in another country is qualified facilitating payments. Qualified facilitating payments made in accordance with local custom or to expedite or secure the performance of routine government action that the payor is entitled to receive, such as government action to obtain licenses or permits, process government papers such as visas and work orders, or obtain government provided services such as police protection, mail, power or phone services may be exempted from coverage by the FCPA.
Corporations that pay illegal kickbacks and bribes to government officials and former government officials in exchange for contracts including large building projects can be brought to justice and made to pay large penalties under the Foreign Corrupt Practices Act and whistleblowers that bring these corporations to justice may be able to collect large economic rewards under the Securities Exchange Act (SEC Whistleblower Bounty Actions) and the Commodity Exchange Act (CFTC Whistleblower Bounty Actions).
The Illegal Bribe Whistleblower or Illegal Kickback Whistleblower may be entitled to not only the amount of the illegal bribe or kickback, but the benefit of the illegal bribe or kickback. In cases where a $100,000.00 bribe is made to obtain a $100 million building project, the Illegal Bribe Whistleblower or Illegal Kickback Whistleblower may be entitled to 10 to 30% of the $100,000,000.00 and the $100,000.00 translating into a $10 million to $30 million award.
As an United States Multinational Corporation Whistleblower and SEC Multinational Whistleblower Reward Lawyer, Jason S. Coomer commonly works with other powerful international lawyers and to handle large Multinational Lawsuits. He also works on Medicare Fraud Whistleblower Lawsuits, Defense Contractor Fraud Whistleblower Lawsuits, Stimulus Fraud Whistleblower Lawsuits, Government Contractor Fraud Whistleblower Lawsuits, Medicare Illegal Kickback Lawsuits, Confidential Financial Analyst Whistleblower Reward Lawsuits and other whistleblower recovery lawsuits.
If you are the original source with special knowledge of fraud and are interested in learning more about a Potential lawsuit, SEC, or FCPA or other large whistleblower recovery lawsuit, please feel free to contact Whistleblower Reward Lawyer Jason Coomer via e-mail message or use our submission form about a potential action.