Enforcement Sans Frontières

By most counts, U.S. authorities are now investigating between 50 and 60 companies for possible violations of the Foreign Corrupt Practices Act. That’s a record number. How many of them will face enforcement actions is anyone’s guess. But three investigations worth watching have this in common: the targets are industry-leading multinationals headquartered outside the United States. The U.S. government hasn’t said much about the cases, but the message seems clear: if other countries won’t police their corporate citizens, American authorities will do it for them — at least when it comes to international public corruption.

Panalpina (Switzerland) — In February 2007, the Department of Justice said in connection with the Vetco case that bribes in Nigeria “were paid through a major international freight forwarding and customs clearance company to employees of the Nigerian Customs Service . . .” Since then, about a dozen leading oil and gas services companies have announced FCPA investigations resulting from their relationship with logistics leader Panalpina. By mid year, the DOJ and the Securities and Exchange Commission had extended the investigation into Panalpina’s activities in Nigeria, Kazakhstan and Saudi Arabia, and had sent letters to its customers, “asking them to detail their relationship with Panalpina . . . .” Schlumberger, Tidewater, Nabors Industries, Transocean, GlobalSantaFe Corp., Noble Corp. and Global Industries are among those involved. In September, Panalpina said it is cooperating with U.S. prosecutors and exiting the Nigeria logistics and freight forwarding market for all oil and gas services customers. With crude prices near triple digits, can the U.S. government afford to cripple output anywhere in the name of FCPA enforcement? Probably not. But the DOJ may have made special arrangements directly with the Nigerian government for customs clearance and permitting on behalf of the oil services companies. That will allow them to keep working but still comply with the FCPA. Meanwhile, the investigation of Panalpina continues. Prior posts about Panalpina are here.

Siemens (Germany) — In early October 2007, the German engineering and industrial giant settled global corruption charges with Munich prosecutors. Siemens paid a fine of €201 million and at the time admitted to questionable payments around the globe of approximately €420 million. But the settlement didn’t resolve the FCPA investigation by U.S. authorities, and Siemens later disclosed that its internal review, run by a U.S. law firm, has identified questionable payments of up to €1.3 billion. The company is also facing possible charges of public corruption in Italy, China, Hungary, Indonesia and Norway. When Siemens finally reaches a deal with U.S. prosecutors, it will likely pay the highest penalties ever for FCPA offenses. The current record of $44.1 million is held by Baker Hughes. Prior posts about Siemens are here.

BAE Systems (United Kingdom) — The defense contractor is accused of paying £1 billion to Prince Bandar (who allegedly passed money to other officials) in return for help selling Typhoon jet fighters to the Saudi government. The Serious Fraud Office started an investigation but Prime Minister Tony Blair shut it down last year, citing national security. That darkened the OECD’s tenth anniversary celebration of its Anti-Corruption Treaty, to which the United Kingdom is a signatory. Meanwhile, the U.S. Department of Justice picked up the investigation and started gathering evidence about possible FCPA violations directly from British witnesses. The U.K. government has already complained about U.S. investigative tactics. And Prince Bandar has lawyered up big time — retaining Freeh Group International, whose partners include former FBI director Louis Freeh, former head of enforcement at the SEC Stanley Sporkin, and a retired British high court judge, Sir Stephen Mitchell. Prior posts about BAE are here.