International Whistleblower Rewards and Exposing International Illegal Bribe Schemes
Bribes to South American Government Officials From Multinational Corporations Are The Target of New International Whistleblower Reward Laws That Pay Large Financial Rewards To International Whistleblowers That Expose Bribes and Other Violations of the Foreign Corrupt Practices Act by South America Bribe Whistleblower Lawyer and South America Foreign Corrupt Practices Act Whistleblower Lawyer Jason Coomer
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. If you are aware of a significant Foreign Corrupt Practice Act (FCPA) violation, please feel free to contact South America Illegal Kickback and Bribery Whistleblower Reward Lawyer Jason Coomer via e-mail message or use our submission form about a potential South America Illegal Contract Bribe Foreign Corrupt Practices Act Whistleblower Bounty Action.
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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 Whisteblower 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 $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.
United States Foreign Corrupt Practices Act Whistleblower Lawyer, South America Bribe Whistleblower Reward Lawyer, United States Foreign Corrupt Practices Act Violation Whistleblower Reward Lawyer, Argentina Government Official Bribe Whistleblower Incentive Lawyer, & Multinational Corporation South America Illegal Kickback Lawyer
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 Illegal Kickback and Bribe 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 could result in large economic rewards to the whistleblower.
SEC Charges Seven Former Siemens Executives with Bribing Leaders in Argentina FOR IMMEDIATE RELEASE 2011-263
Washington, D.C., Dec. 13, 2011 — The Securities and Exchange Commission today charged seven former Siemens executives with violating the Foreign Corrupt Practices Act (FCPA) for their involvement in the company's decade-long bribery scheme to retain a $1 billion government contract to produce national identity cards for Argentine citizens. Additional Materials
Litigation Release No. 22190 SEC Complaint Spotlight on FCPA Cases
Siemens was previously charged with FCPA violations and paid $1.6 billion to resolve the charges with the SEC, U.S. Department of Justice, and Office of the Prosecutor General in Munich.
The SEC alleges that the executives who perpetuated the scheme worked at Siemens and its regional company Siemens Argentina. One of the executives had left Siemens and acted as a payment intermediary in the scheme. Siemens paid more than $100 million in bribes to such high-ranking officials as two former Argentine presidents and former cabinet members. The executives falsified documents including invoices and sham consulting contracts, and participated in meetings in the United States to negotiate the terms of bribe payments. They used U.S. bank accounts to pay some of the bribes.
"Business should flow to the company with the best product and the best price, not the best bribe," said Robert Khuzami, Director of the SEC's Division of Enforcement. "Corruption erodes public trust and the transparency of our commercial markets, and undermines corporate governance."
In a parallel criminal action, the Department of Justice announced charges against former executives and agents of Siemens. They are charged with conspiracy to violate the FCPA and the wire fraud statute, money laundering conspiracy and wire fraud.
According to the SEC's complaint filed in U.S. District Court in Manhattan, the scheme lasted from approximately 1996 to early 2007. Initially, the bribes were paid to secure a $1 billion contract to produce national identity cards known as Documentos Nacionales de Identidad (DNI) for every Argentine citizen. After a change in Argentine political administrations resulted in the DNI contract being suspended and then canceled, Siemens paid additional bribes in a failed effort to revive the DNI contract. When the company later instituted an arbitration proceeding to recover its costs and expected profits from the canceled contract, Siemens paid additional bribes to suppress evidence that the contract originally had been obtained through corruption.
The former Siemens and Siemens Argentina executives charged by the SEC each had a role in authorizing, negotiating, facilitating, or concealing bribe payments in connection with the DNI contract:
Uriel Sharef – A former managing board member at Siemens from July 2000 to December 2007. He met in the United States with payment intermediaries and agreed to pay $27 million in bribes to Argentine officials in connection with the DNI contract. Ulrich Bock – Former Commercial Head of Major Projects for Siemens Business Services (SBS) from October 1995 to 2001. As the officer responsible for the DNI contract, he authorized bribe payments to Argentine government officials. Stephan Signer –Replaced Bock as Commercial Head of Major Projects for SBS and later became Head of Business Operations and Finance at Siemens IT Solutions and Services. He authorized the payment of bribes to government officials in Argentina. Herbert Steffen –CEO of Siemens Argentina from 1983 to 1989 and again in 1991, and Group President of Siemens Transportation Systems from 1996 to 2003. Due to his longstanding connections in Argentina and Latin America, Steffen was recruited by Sharef and met directly with Argentine officials and offered bribe payments on behalf of Siemens. Andres Truppel –CFO of Siemens Argentina from 1996 to 2002. He regularly communicated with Argentine government officials regarding illicit bribe payments and participated in U.S.-based meetings where bribes were negotiated and promised. Carlos Sergi –A former board member of Siemens Argentina and a business consultant for Siemens Argentina. His primary role was to serve as a payment intermediary between Siemens and Argentine government officials in connection with the DNI contract. Bernd Regendantz –CFO of SBS from February 2002 to 2004. He authorized two bribe payments totaling approximately $10 million on Siemens' behalf.
According to the SEC's complaint, approximately $31.3 million of the $100 million in bribes paid were made after March 12, 2001, when Siemens became a U.S. issuer subject to U.S. securities laws. As a result of the bribe payments it made, Siemens received an arbitration award in 2007 against the government of Argentina of more than $217 million plus interest for the DNI contract. In August 2009, after settling bribery charges with the U.S. and Germany, Siemens waived the arbitration award.
The SEC complaint alleges that Bock, Regendantz, Sergi, Sharef, Signer, Steffen, and Truppel each violated Section 30A of the Securities Exchange Act of 1934, and aided and abetted Siemens' violations of Section 30A. The complaint also alleges that they violated Exchange Act Section 13(b)(5) and Rule 13b2-1 thereunder by authorizing or directing others to falsify documents in furtherance of the bribery scheme. Regendantz violated Rule 13b2-2 by signing false internal certifications pursuant to the Sarbanes Oxley Act (SOX). They each also aided and abetted Siemens' violations of Exchange Act Sections 13(b)(2)(A) and 13(b)(2)(B) by substantially assisting in the company's failure to maintain internal controls to detect and prevent bribery of government officials in Argentina, and by substantially assisting in the improper recording of the bribe payments in Siemens' accounting books and records.
Regendantz settled the SEC charges without admitting or denying the allegations by consenting to the entry of a final judgment that permanently enjoins him from committing future violations. He paid a €30,000 administrative fine ordered by the Munich prosecutor (equivalent to $40,000 in U.S. dollars).
The SEC's investigation was conducted by Tracy L. Price, Robert Dodge, and Denise Hansberry of the Enforcement Division's FCPA Unit. The SEC appreciates the assistance of the U.S. Department of Justice's Fraud Section, the U.S. Attorney's Office for the Southern District of New York, the Federal Bureau of Investigation, and the Office of the Prosecutor General in Munich.
U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 22190 / December 13, 2011 Accounting and Auditing Enforcement No. 3342 / December 13, 2011 Securities and Exchange Commission v. Uriel Sharef, Ulrich Bock, Carlos Sergi, Stephan Signer, Herbert Steffen, Andres Truppel and Bernd Regendantz, Civil Action No. 11 civ 9073 (Judge Scheidlin/Pitman) (S.D.N.Y.) SEC Charges Seven Former Siemens Executives with Bribing Leaders in Argentina
The Securities and Exchange Commission filed a Civil Action on December 13, 2011, in the U.S. District Court for the Southern District of New York, charging seven former senior executives of Siemens AG ("Siemens") and its regional company in Argentina with violations of the anti-bribery, books and records, and internal controls provisions of the Foreign Corrupt Practices Act in connection with a decade-long scheme to bribe senior government officials in Argentina, including two Presidents and Cabinet Ministers in two Presidential administrations. One of the executives charged was also a payment intermediary for Siemens. According to the SEC complaint, the seven individuals charged today, all foreign nationals, paid scores of millions of dollars in bribes for Siemens to obtain and retain a $1 billion contract to produce national identity cards for Argentine citizens.
The SEC alleges that over $100 million in bribes were paid in connection with Siemens' efforts to secure the contract and obtain the profits from that contract. The defendants charged in the scheme are Uriel Sharef, Ulrich Bock, Carlos Sergi, Stephan Signer, Herbert Steffen, Andres Truppel, and Bernd Regendantz. The most senior of these, Uriel Sharef, is a former Siemens Managing Board member. The SEC alleges that in furtherance of the scheme, the defendants falsified documents, including invoices and sham consulting contracts, participated in meetings in the United States to negotiate the terms of bribe payments, and made use of U.S. bank accounts to pay bribes. According to the SEC's complaint, the bribery scheme lasted for more than a decade, from approximately 1996 until early 2007.
The SEC previously charged Siemens in December 2008 with FCPA violations in Argentina and numerous other countries around the world. Siemens paid over $1.6 billion to resolve the charges with the Commission, the U.S. Department of Justice, and the Office of the Prosecutor General in Munich, Germany.
The SEC's complaint alleges that:
From approximately 1996 until early 2007, senior executives at Siemens and its regional company in Argentina, Siemens S.A. ("Siemens Argentina"), paid bribes to senior Argentine government officials — including two Presidents, and Cabinet Ministers in two Presidential administrations. The bribes were initially paid to secure a $1 billion government contract (the "DNI Contract") to produce national identity cards, or Documentos Nacionales de Identidad, for every Argentine citizen. Later, after a change in Argentine political administrations resulted in the DNI Contract being suspended and then canceled, Siemens paid additional bribes in a failed effort to bring the DNI Contract back into force. Still later, after the company instituted an arbitration proceeding to recover its costs and expected profits from the canceled DNI Contract, Siemens paid additional bribes to suppress evidence that the DNI Contract had originally been obtained through corruption.
Over the course of the bribery scheme, over $100 million in bribes were paid, approximately $31.3 million of which were made after March 12, 2001, when Siemens became a U.S. issuer subject to U.S. securities laws. As a result of the bribe payments it made, Siemens received an arbitration award in 2007 against the government of Argentina of over $217 million plus interest for the DNI Contract. In August 2009, after settling bribery charges with the U.S. and Germany, Siemens waived the arbitration award.
During the relevant 2001 to 2007 time period, defendants Uriel Sharef, Ulrich Bock, Carlos Sergi, Stephan Signer, Herbert Steffen, Andres Truppel, and Bernd Regendantz each had a role in authorizing, negotiating, facilitating, or concealing bribe payments in connection with the DNI Contract. Siemens employed a group of consultants, designated the Project Group and led by defendant Sergi, to serve as payment intermediaries between the company and the Argentine government officials.
Each of the defendants violated Section 30A of the Securities Exchange Act of 1934 (the "Exchange Act") by engaging in the bribery of government officials in Argentina. Each defendant also aided and abetted Siemens' violations of Section 30A. The defendants also violated Exchange Act Section 13(b)(5) and Rule 13b2-1 thereunder by authorizing or directing others to falsify documents, including invoices and sham consulting contracts, in furtherance of the bribery scheme. Defendant Regendantz violated Rule 13b2-2 by signing false internal certifications pursuant to the Sarbanes Oxley Act ("SOX"). All defendants aided and abetted Siemens' violations of Exchange Act Sections 13(b)(2)(A) and 13(b)(2)(B) by substantially assisting in Siemens' failure to maintain internal controls to detect and prevent bribery of government officials in Argentina, and by substantially assisting in the improper recording of the bribe payments in Siemens' accounting books and records. The SEC's complaint seeks permanent injunctive relief, disgorgement and civil penalties from the defendants.
Without admitting or denying the SEC's allegations, defendant Bernd Regendantz has consented to the entry of a final judgment that permanently enjoins him from future violations of Sections 30A and 13(b)(5) of the Exchange Act, and Rules 13b2-1 and 13b2-2 thereunder, and from aiding and abetting violations of Exchange Act Sections 30A, 13(b)(2)(A), and 13(b)(2)(B); and orders him to pay a civil penalty of $40,000, deemed satisfied by Regendantz' payment of a €30,000 administrative fine ordered by the Public Prosecutor General in Munich, Germany.
The SEC appreciates the assistance of the U.S. Department of Justice's Fraud Section, the U.S. Attorney's Office for the Southern District of New York, the Federal Bureau of Investigation, and the Office of the Prosecutor General in Munich, Germany
SIEMENS AG AND THREE SUBSIDIARIES PLEAD GUILTY TO
FOREIGN CORRUPT PRACTICES ACT VIOLATIONS AND AGREE TO
PAY $450 MILLION IN COMBINED CRIMINAL FINES
December 15, 2008
Department of Justice – News Release
Siemens Aktiengesellschaft et al.
WASHINGTON – Siemens Aktiengesellschaft (Siemens AG), a German corporation, and three of its subsidiaries today pleaded guilty to violations of and charges related to the Foreign Corrupt Practices Act (FCPA), the Department of Justice and U.S. Securities and Exchange Commission announced.
At a hearing before U.S. District Judge Richard J. Leon in the District of Columbia, Siemens AG pleaded guilty to a two-count information charging criminal violations of the FCPA’s internal controls and books and records provisions. Siemens S.A.- Argentina (Siemens Argentina) pleaded guilty to a one-count information charging conspiracy to violate the books and records provisions of the FCPA. Siemens Bangladesh Limited (Siemens Bangladesh) and Siemens S.A. - Venezuela (Siemens Venezuela), each pleaded guilty to separate one-count informations charging conspiracy to violate the anti-bribery and books and records provisions of the FCPA. As part of the plea agreements, Siemens AG agreed to pay a $448.5 million fine; and Siemens Argentina, Bangladesh, and Venezuela each agreed to pay a $500,000 fine, for a combined total criminal fine of $450 million.
According to court documents, beginning in the mid-1990s, Siemens AG engaged in systematic efforts to falsify its corporate books and records and knowingly failed to implement and circumvent existing internal controls. As a result of Siemens AG’s knowing failures in and circumvention of internal controls, from the time of its listing on the New York Stock Exchange on March 12, 2001, through approximately 2007, Siemens AG made payments totaling approximately $1.36 billion through various mechanisms. Of this amount, approximately $554.5 million was paid for unknown purposes, including approximately $341 million in direct payments to business consultants for unknown purposes. The remaining $805.5 million of this amount was intended in whole or in part as corrupt payments to foreign officials through the payment mechanisms, which included cash desks and slush funds.
From 2000 to 2002, four Siemens AG subsidiaries – Siemens S.A.S. of France (Siemens France), Siemens Sanayi ve Ticaret A.S. of Turkey (Siemens Turkey), Osram Middle East FZE (Osram Middle East) and Gas Turbine Technologies S.p.A. (GTT) – each wholly owned by Siemens AG or one of its subsidiaries, were awarded 42 contracts with a combined value of more than $80 million with the Ministries of Electricity and Oil of the government of the Republic of Iraq under the United Nations Oil for Food Program. To obtain these contracts, Siemens France, Siemens Turkey, Osram Middle East and GTT paid a total of at least $1,736,076 in kickbacks to the Iraqi government, and they collectively earned more $38 million in profits on those 42 contracts. Siemens France, Siemens Turkey, Osram Middle East and GTT inflated the price of the contracts by approximately 10 percent before submitting them to the United Nations for approval and improperly characterized payments to purported business consultants, part of which were paid as kickbacks to the Iraqi government as “commissions” to the business consultants. For the relevant years, the books and records of Siemens France, Siemens Turkey, Osram Middle East and GTT, including those containing false characterizations of the kickbacks paid to the Iraqi government, were part of the books and records of Siemens AG.
As the charging and plea documents reflect, beginning around September 1998 and continuing until 2007, Siemens Argentina made and caused to be made significant payments to various Argentine officials, both directly and indirectly, in exchange for favorable business treatment in connection with a $1 billion national identity card project. From the date that Siemens AG became listed on the New York Stock Exchange on March 12, 2001, through approximately January 2007, Siemens Argentina made approximately $31,263,000 in corrupt payments to various Argentine officials through purported consultants and other conduit entities, and improperly characterized those corrupt payments in its books and records as legitimate payments for “consulting fees” or “legal fees.” Siemens Argentina’s books and records, including those containing the false characterizations of the corrupt payments, were part of the books and records of Siemens AG.
According to court documents, beginning around November 2001 and continuing until approximately May 2007, Siemens Venezuela admitted it made and caused to be made corrupt payments of at least $18,782,965 to various Venezuelan officials, indirectly through purported business consultants, in exchange for favorable business treatment in connection with two major metropolitan mass transit projects called Metro Valencia and Metro Maracaibo. Some of those payments were made using U.S. bank accounts controlled by the purported business consultants.
In the charging and plea documents, Siemens Bangladesh admitted that from May 2001 to August 2006, it caused corrupt payments of at least $5,319,839 to be made through purported business consultants to various Bangladeshi officials in exchange for favorable treatment during the bidding process on a mobile telephone project. At least one payment to each of these purported consultants was paid from a U.S. bank account.
“Today’s filings make clear that for much of its operations across the globe, bribery was nothing less than standard operating procedure for Siemens. It should be equally clear that Siemens has undertaken significant remedial measures, instituted real reforms and cooperated from the inception of this investigation,” said Acting Assistant Attorney General Matthew Friedrich. “The Department and our international colleagues will continue our efforts to level the business playing field, making it free from corruption and fair to those who seek to participate in it.”
“The coordinated efforts of U.S. and German law enforcement authorities in this case set the standard for multi-national cooperation in the fight against corrupt business practices,” said U.S. Attorney for the District of Columbia Jeffrey A. Taylor. “To its credit, Siemens has taken extraordinary steps to reveal its long-standing, systemic criminal conduct and it has fundamentally restructured its operations to make them transparent and honest going forward.”
“This pattern of bribery by Siemens was unprecedented in scale and geographic reach. The corruption involved more than $1.4 billion in bribes to government officials in Asia, Africa, Europe, the Middle East and the Americas,” said Linda Chatman Thomsen, Director of the SEC's Division of Enforcement. “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 other U.S. and international law enforcement, particularly the Office of the Prosecutor General in Munich.”
“Today’s announcement of the guilty pleas entered by Siemens AG and several of its regional companies reflects the FBI’s dedication to enforce the provisions of the Foreign Corrupt Practices Act,” said Joseph Persichini Jr., Assistant Director in Charge of the FBI’s Washington Field Office. “Simply stated, it is a federal crime for U.S. citizens and companies traded on U.S. markets to pay bribes in return for business. The FBI will continue to assist its law enforcement partners to ensure that the corporate and business communities are not tarnished with violations of the kind we are presenting here today.”
“Complicated schemes involving high finance, bribery and corruption, particularly in the international arena, are often solved most efficiently through a multiple-agency approach to crime fighting,” said Eileen Mayer, Chief of Internal Revenue Service (IRS) Criminal Investigation Division. “As the IRS expands its international presence and impact, we are proud to lend our financial investigative expertise to this formidable multi-agency approach that has culminated with today’s guilty pleas.”
The resolution of the U.S. criminal investigation of Siemens AG and its subsidiaries reflects, in large part, the actions of Siemens AG and its audit committee in disclosing potential FCPA violations to the Department after the Munich Public Prosecutor’s Office initiated searches of multiple Siemens AG offices and homes of Siemens AG employees. Siemens AG and its subsidiaries disclosed these violations after initiating an internal FCPA investigation of unprecedented scope; shared the results of that investigation with the Department efficiently and continuously; cooperated extensively and authenticolor:#066ef0;y with the Department in its ongoing investigation; took appropriate disciplinary action against individual wrongdoers, including senior management with involvement in or knowledge of the violations; and took remedial action, including the complete restructuring of Siemens AG and the implementation of a sophisticated compliance program and organization.
Under the terms of the plea agreement, Siemens AG agreed to retain an independent compliance monitor for a four-year period to oversee the continued implementation and maintenance of a robust compliance program and to make reports to the company and the Department of Justice. Siemens AG also agreed to continue fully cooperating with the Department in ongoing investigations of corrupt payments by company employees and agents.
Today, Siemens AG also reached a settlement of a related civil complaint filed by the Securities and Exchange Commission (SEC), charging Siemens AG with violating the FCPA’s anti-bribery, books and records, and internal controls provisions in connection with many of its international operations including those discussed in the criminal charges. Siemens AG agreed to pay $350 million in disgorgement of profits relating to those violations.
Also today, Siemens AG agreed to a disposition resolving an ongoing investigation by the Munich Public Prosecutor’s Office of Siemens AG’s operating groups other than the Telecommunications group. The charges were based on corporate failure to supervise its officers and employees, and in connection with those charges Siemens AG agreed to pay €395 million or approximately $569 million, including a €250,000 corporate fine and €394.75 million in disgorgement of profits. In October 2007, in connection with charges related to corrupt payments to foreign officials by Siemens AG’s Telecommunications operating group, the Munich Public Prosecutor’s Office announced a settlement with Siemens AG under which Siemens AG agreed to pay €201 million, or approximately $287 million, including a €1 million fine and €200 million in disgorgement of profits.
In connection with the cases brought by the Department, the SEC and the Munich Public Prosecutor’s Office, Siemens AG will pay a combined total of more than $1.6 billion in fines, penalties and disgorgement of profits, including $800 million to U.S. authorities, making the combined U.S. penalties the largest monetary sanction ever imposed in an FCPA case since the act was passed by Congress in 1977.
The Department and the SEC closely collaborated with the Munich Public Prosecutor’s Office in bringing these cases. The high level of cooperation, including sharing information and evidence, was made possible by the use of mutual legal assistance provisions of the 1997 Organization for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, which entered into force on Feb. 15, 1999.
The criminal case is being prosecuted by Deputy Chief Mark F. Mendelsohn and Trial Attorney Lori A. Weinstein of the Criminal Division’s Fraud Section, and by Assistant U.S. Attorney John D. Griffith from the U.S. Attorney’s Office for the District of Columbia. The criminal case was investigated by FBI agents who are part of the Washington Field Office’s dedicated FCPA squad. Investigative assistance also was provided by the Internal Revenue Service – Criminal Investigation.
The Department acknowledges and expresses its appreciation of the significant assistance provided by the staff of the SEC during the course of this investigation. The Department also acknowledges the exceptional help provided, in the form of mutual legal assistance, by the authorities of Germany, including in particular by the Munich Public Prosecutor’s Office.
U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 19657 / April 17, 2006 Accounting and Auditing Enforcement Release No. 2414 / April 17, 2006 SEC v. Tyco International Ltd., 06 CV 2942 (S.D.N.Y. filed April 17, 2006) SEC Brings Settled Charges Against Tyco International Ltd. Alleging Billion Dollar Accounting Fraud
The U.S. Securities and Exchange Commission today filed a settled civil injunctive action in the United States District Court for the Southern District of New York against Tyco International Ltd. The Commission's complaint in that action alleges that, from 1996 through 2002, Tyco violated the federal securities laws by, among other things, utilizing various improper accounting practices and a scheme involving transactions with no economic substance to overstate its reported financial results by at least one billion dollars.
The Commission's complaint alleges that Tyco inflated its operating income by at least $500 million as a result of improper accounting practices related to some of the many acquisitions that Tyco engaged in during that time. Tyco's improper acquisition accounting included undervaluing acquired assets, overvaluing acquired liabilities, and misusing accounting rules concerning the establishment and utilization of purchase accounting reserves. The complaint further alleges that, apart from its acquisition activities, Tyco improperly established and used various kinds of reserves to make adjustments at the end of reporting periods to enhance and smooth its publicly reported results and to meet earnings forecasts.
The complaint alleges that Tyco inflated its operating income by $567 million from its fiscal year 1998 through its fiscal quarter ended December 31, 2002, by means of connection fees that Tyco's ADT Security Services, Inc. subsidiary charged to dealers from whom it purchased security monitoring contracts. Because the connection fee was fully offset by a simultaneous increase in the purchase price ADT allocated to the dealers' security monitoring contracts, the connection fee transaction lacked economic substance and should not have been recorded in Tyco's income statement. In 2003, Tyco restated its operating income and cash flow relating to the connection fees.
The complaint further alleges that, from September 1996 through early 2002, Tyco failed to disclose in its proxy statements and annual reports certain executive compensation, executive indebtedness, and related party transactions of its former senior management. Tyco also incorrectly accounted for certain executive bonuses it paid in its fiscal years 2000 and 2001, thereby excluding from its operating expenses the costs associated with those bonuses. Finally, the complaint alleges that Tyco violated the antibribery provisions of the Foreign Corrupt Practices Act when employees or agents of its Earth Tech Brasil Ltda. subsidiary made payments to Brazilian officials for the purpose of obtaining or retaining business for Tyco.
Between 1996 and 2002, as a result of these various practices, Tyco made false and misleading statements or omissions in its filings with the Commission and its public statements to investors and analysts.
Without admitting or denying the allegations in the Commission's complaint, Tyco has consented to the entry of a final judgment permanently enjoining it from violating Section 17(a) of the Securities Act of 1933, Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), 14(a), and 30A(a) of the Securities Exchange Act of 1934, and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-13, 13b2-1, and 14a-9. The proposed final judgment also orders Tyco to pay $1 in disgorgement and a $50 million civil penalty.
The Commission's investigation is continuing with respect to individuals. The Commission acknowledges the assistance and cooperation of the Manhattan District Attorney and the New York City Police Department.
See Litigation Release No. 17722 / September 12, 2002; Litigation Release No. 17896 / December 17, 2002; Exchange Act Release No. 48328 / August 13, 2003.
Alcatel-Lucent S.A. and Three Subsidiaries Agree to Pay $92 Million to Resolve Foreign Corrupt Practices Act Investigation Coordinated Enforcement Actions by Department of Justice and SEC Result in Penalties of more than $137 Million
WASHINGTON – Alcatel-Lucent S.A. and three of its subsidiaries have agreed to pay a combined $92 million penalty to resolve a Foreign Corrupt Practices Act (FCPA) investigation into the worldwide sales practices of Alcatel S.A. prior to its 2006 merger with Lucent Technologies Inc., the Department of Justice announced.
As part of the agreed resolution, the department today filed a criminal information in U.S. District Court for the Southern District of Florida charging Alcatel-Lucent with one count of violating the internal control provisions of the FCPA, and one count of violating the books and records provisions of the FCPA. The department and Alcatel-Lucent agreed to resolve the charges by entering into a deferred prosecution agreement for a term of three years.
The department also filed a criminal information charging three subsidiaries: Alcatel-Lucent France S.A., formerly known as Alcatel CIT S.A.; Alcatel-Lucent Trade International A.G., formerly known as Alcatel Standard A.G.; and Alcatel Centroamerica S.A., formerly known as Alcatel de Costa Rica S.A. The three subsidiaries were each charged with conspiring to violate the anti-bribery, books and records, and internal controls provisions of the FCPA. Each of the three subsidiaries has agreed to plead guilty to the charges.
"Foreign bribery weakens economic development, erodes confidence in the marketplace and distorts competition," said Mythili Raman, Principal Deputy Assistant Attorney General of the Criminal Division. "The resolutions announced today and our related prosecutions of corporate executives demonstrate our sustained commitment to combating such conduct wherever we find it."
In addition to the $92 million penalty, Alcatel-Lucent and its three subsidiaries agreed to implement rigorous compliance enhancements. Alcatel-Lucent also agreed to retain an independent compliance monitor for a three-year period to oversee the company’s implementation and maintenance of an enhanced FCPA compliance program and to submit yearly reports to the Department of Justice. The charging documents and penalty reflect, among other things, that there was limited and inadequate cooperation by the company for a substantial period of time, but that after the merger, Alcatel-Lucent substantially improved its cooperation with the department’s investigation. In addition, the charging documents also credit Alcatel-Lucent for, on its own initiative and at a substantial financial cost, making an unprecedented pledge to stop using third-party sales and marketing agents in conducting its worldwide business.
According to court documents, Alcatel-Lucent was formed in late 2006 after Lucent Technologies merged with Alcatel, a French telecommunications equipment and services company. Starting in the 1990s and continuing through late 2006, Alcatel pursued many of its business opportunities around the world through subsidiaries like Alcatel CIT and Alcatel de Costa Rica using third-party agents and consultants who were retained by Alcatel Standard. This business model was shown to be prone to corruption, as consultants were repeatedly used as conduits for bribe payments to foreign officials and business executives of private customers to obtain or retain business in many countries.
Alcatel-Lucent’s three subsidiaries paid millions of dollars in improper payments to foreign officials for the purpose of obtaining and retaining business in Costa Rica, Honduras, Malaysia and Taiwan. In addition to the improper payments, Alcatel-Lucent also admitted that it violated the internal controls and books and records provisions of the FCPA related to the hiring of third-party agents in Kenya, Nigeria, Bangladesh, Ecuador, Nicaragua, Angola, Ivory Coast, Uganda and Mali. Overall, Alcatel-Lucent admitted that the company earned approximately $48.1 million in profits as a result of these improper payments.
Specifically, Alcatel CIT won three contracts in Costa Rica worth a combined total of more than $300 million as a result of corrupt payments to government officials and from which Alcatel reaped a profit of more than $23 million, according to court documents. Alcatel CIT wired more than $18 million to two consultants in Costa Rica, which had been retained by Alcatel Standard, in connection with obtaining business in that country. According to court documents, more than half of this money was then passed on by the consultants to various Costa Rican government officials for assisting Alcatel CIT and Alcatel de Costa Rica in obtaining and retaining business. As part of the scheme, the consultants created phony invoices that they then submitted to Alcatel CIT. According to court documents, senior Alcatel executives approved the retention of and payments to the consultants despite obvious indications that the consultants were performing little or no legitimate work.
In addition, according to court documents, Alcatel Standard hired a consultant in Honduras who was a perfume distributor with no experience in telecommunications. The consultant was retained after being personally selected by the brother of a senior Honduran government official. Alcatel CIT executives knew that a significant portion of the money paid to the consultant would be paid to the family of the senior Honduran government official in exchange for favorable treatment of Alcatel CIT. As a result of these payments, Alcatel CIT was able to retain contracts worth approximately $47 million and from which Alcatel earned $870,000.
In addition, according to court documents, Alcatel Standard retained two consultants on behalf of another Alcatel subsidiary in Taiwan to assist in obtaining an axle counting contract worth approximately $19.2 million. Alcatel and its joint venture paid these two consultants more than $950,000 despite the fact that neither consultant had telecommunications experience. In fact, according to court documents, Alcatel Standard’s purpose for hiring the consultants was so that Alcatel SEL could funnel payments through the consultants to Taiwanese legislators who had influence in the award of the contract. Alcatel earned approximately $4.34 million from this contract.
In a related case, two former Alcatel executives, Christian Sapsizian, a French citizen and Alcatel CIT executive, and Edgar Valverde Acosta, a Costa Rican citizen and president of Alcatel de Costa Rica, were charged in March 2007 with conspiring to violate the FCPA, making corrupt payments in violation of the FCPA, and laundering the bribe payments through a third-party. Sapsizian was arrested in Miami in late 2006 and pleaded guilty on June 6, 2007, to FCPA violations. He was sentenced on Sept. 23, 2008, in the U.S. District Court for the Southern District of Florida to 30 months in prison. Sapsizian admitted that from February 2000 through September 2004, he conspired with Valverde and others to make millions of dollars in bribe payments to Costa Rican officials in order to obtain a telecommunications contract on behalf of Alcatel. Valverde remains a fugitive, and is considered innocent until proven guilty in a court of law.
In a related matter, the U.S. Securities and Exchange Commission (SEC) reached a settlement filed today in which Alcatel-Lucent consented to the entry of a permanent injunction against FCPA violations and agreed to pay $45,372,000 in disgorgement and prejudgment interest. Alcatel-Lucent also agreed with the SEC to comply with certain undertakings regarding its FCPA compliance program.
In January 2010, Alcatel-Lucent also agreed to pay $10 million to settle a corruption case brought by the government of Costa Rica arising out of the bribery of Costa Rican officials by the company. The settlement marked the first time in Costa Rica’s history that a foreign corporation agreed to pay the government damages for corruption.
The case is being prosecuted by Deputy Chief Charles E. Duross and Trial Attorney Andrew Gentin of the Criminal Division’s Fraud Section. The department also acknowledges the significant contributions to this investigation by Assistant U.S. Attorney Mary K. Dimke, formerly of the Fraud Section. Significant assistance was provided by the SEC’s Miami Regional Office, the Criminal Division’s Office of International Affairs, the U.S. Attorney’s Office for the Southern District of Florida, the FBI, U.S. Immigration and Customs Enforcement, the Office of the Attorney General in Costa Rica, the Fiscalia de Delitos Economicos, Corrupcion y Tributarios in Costa Rica, the French Ministry of Justice, the Tribunal de Grande Instance de Paris, and Service Central de Prévention de la Corruption.
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South America is a continent situated in the Western Hemisphere. The continent is also considered a subcontinent of the Americas. It includes twelve independent countries—Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay, and Venezuela—and French Guiana, which is an overseas region of France. The South American countries that border the Caribbean Sea—Colombia, Venezuela, Guyana, Suriname, and French Guiana—are also known as Caribbean South America.
South America is also known as América del Sur, Sudamérica or Suramérica in Spanish; América do Sul in Portuguese; Zuid-Amerika in Dutch; and Amérique du Sud in French.
During the first decade of the 21st century, South American governments have elected socialist leaders in Chile, Uruguay, Brazil, Argentina, Ecuador, Bolivia, Paraguay, Peru and Venezuela. South America for the most part still embraces free market policies, and it is taking an active path toward greater continental integration. Additionally, South America has a strong intergovernmental entity that was formed which aims to merge the two existing customs unions: Mercosur and the Andean Community, thus forming the third-largest trade bloc in the world. This new political organization known as Union of South American Nations seeks to establish free movement of people, economic development, a common defense policy and the elimination of tariffs.
South America relies heavily on the exporting of goods and natural resources. On an exchange rate basis Brazil (the seventh largest economy in the world and the largest in South America) leads the way in total amount of exports followed by Argentina and Chile. Key exports include oil and gas, raw materials, and agricultural products.
Many large multinational corporations are seeking to obtain large contracts in South America including large oil companies, engineering companies, construction companies, energy companies, pharmaceutical companies, energy companies, consultants, oil & gas exploration companies, telecom companies, manufacturing companies, aerospace companies, and defense contractors. Some of these multinational corporations are offering large bribes and illegal kickbacks in an attempt to secure these South American contracts.
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Oil Companies that pay illegal kickbacks and bribes to South American government officials and former South American government officials in exchange for South American drilling contracts, Sudamérica pipeline contracts, Sudamérica oil leases, South American offshore drilling, South American mining contracts, and other South American 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 South American Oil Company Illegal Bribe Whistleblower or South American Petroleum Company 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 $100,000.00 bribe is made to obtain a $900 million pipeline, the South American Petroleum Illegal Bribe Whistleblower or South American Oil Company Illegal Kickback Whistleblower may be entitled to 10 to 30% of the $900,000,000.00 and the $100,000.00 translating into a $90 million to $300 million award.
South American Economy and the Opening of New Trading Markets
With the advance of technology and the ability to communicate and transport goods throughout the World, the World is becoming a global international trading network of many nations. In developing new markets, large multinational corporations often become extremely competitive to the point where they will violate laws and ethics in the pursuit of advantages to obtain large profits. South America's economy is emerging as a strong new market where many large multinational corporations are attempting to obtain large contracts. As such, multinational energy corporations, multinational manufacturing corporations, multinational construction corporations,and many other large multinational corporations are competing to obtain large oil exploration contracts, large construction contracts, large pharmaceutical contracts, and large manufacturing contracts.
This fierce competition too often leads to large illegal kickbacks and contract bribes to government officials to obtain these contracts. In these cases large multinational corporations and their subsidiaries that are registered with the SEC can be held accountable for illegal actions that violate the FCPA.
The World is United the EU is the largest trading partner of the US with $319.6 billion worth of EU goods going to the US and $239.8 billion of US goods going to the EU as of 2010, totaling approximately $559.4 billion in total trade.
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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 are 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.
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As an United States Multinational Corporation Illegal Bribe Whistleblower Bounty Lawyer and United States SEC Multinational Illegal Kickback Whistleblower Reward Lawyer, Jason S. Coomer commonly works with other powerful illegal international business contract bribe whistleblower lawyers and illegal contract kickback whistleblower lawyers to handle large South America Multinational Corporation Bribe Whistleblower Bounty Lawsuits, SEC Multinational Corporation Business Illegal Bribe Whistleblower Reward Lawsuits, South America Multinational Oil Company Illegal Kickback Whistleblower Bounty Actions, Commodity Fraud Bounty Lawsuits, and other Foreign Corrupt Practices Act Whistleblower Reward 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 South America Multinational Corporation illegal kickback lawsuit, Multinational Oil Corporation SEC violation Whistleblower Reward Lawsuit, Multinational Corporation South America FCPA violation Informant Reward Lawsuit, or other large contract bribe whistleblower recovery lawsuit, please feel free to contact South America Illegal Kickback and Bribery Whistleblower Reward Lawyer Jason Coomer via e-mail message or use our submission form about a potential South America Illegal Bribe United States SEC Whistleblower Incentive Program Action, South America Illegal Kickback Whistleblower Recovery Lawsuit, or other Whistleblower Bounty Action.