The British press is reporting (here and here) that oil giant BP and its current and former CEOs, Tony Hayward and Lord Browne, as well as Norway’s Statoil and its CEO, are among the defendants named in a civil lawsuit involving allegations of bribery of government officials in Kazakhstan.
The suit was filed in the U.S. District Court for the District of Columbia by Grynberg Production Corporation, a Denver-based oil company owned and run by chairman Jack Grynberg. According to one report, “The 27-page lawsuit, a copy of which has been seen by The Daily Telegraph, accuses the defendants of violating the United States’ Racketeer Influenced and Corrupt Organisations (RICO) Act, of conspiring to break the RICO Act, of common law fraud, of theft, and breaching constructive trust. . . . . The core allegation is that the defendants, without Grynberg’s knowledge, bribed officials in Kazakhstan to win oil rights from joint ventures in which Grynberg had an interest.”
Private parties, as we have said, have no right of action under the Foreign Corrupt Practices Act. Only the Department of Justice and the Securities and Exchange Commission can enforce it. But this is the second civil suit filed in U.S. federal district court recently that involves allegations of behavior that, if true, would constitute violations of the FCPA. Last month, Bahrain-owned Alba filed a civil suit against Alcoa and its agent alleging bribery of Bahraini officials. That suit also included causes of action based on RICO and common-law fraud. The suit was stayed after just three weeks at the request of the Department of Justice, while it conducts its own investigation whether the FCPA and other criminal laws were violated. The DOJ has not indicated whether it will also launch a criminal investigation into Mr. Grynberg’s allegations against BP, Statoil and their leaders.
According to one British press report, “Mr. Grynberg began working in the Kazakh region in November 1990, signing partnership agreements with the defendants in a bid to take advantage of the untapped resources onshore and offshore in the north-west of the former Soviet state. However, Mr Grynberg claims that he did not know that the defendants were involved in allegedly channelling some of his money from the various joint ventures to bribe Kazakh officials in order to win specific licences.”
The case is related to the smoldering controversy involving American businessman James Giffen. He was arrested in New York in 2003 for allegedly paying or offering $78 million in bribes to an advisor of Kazakhstan’s president and its former oil and gas minister. Giffen was charged with violating the FCPA but has not been brought to trial. When arrested he was carrying a Kazakhstani diplomatic passport. His lawyers say he was acting in Kazahkstan with the full knowledge and approval of the U.S. government.
Mr. Grynberg alleges in his civil suit that BP, Statoil and the other defendants paid about $12 million among them of the alleged bribes in Kazakhstan that the U.S. government says are attributed to Mr Giffen. Mr Grynberg apparently told The Daily Telegraph he was bringing the civil suit to protect himself against FCPA charges. “Unless I assert that I was an unwilling participant in this, my neck could be on the line. I’m too old to go to prison,” said 76-year-old Mr Grynberg. He has also recently sued BP and its former CEO Lord Browne based on bribery allegations involving government officials in Grenada.
The British press reports say BP declined to comment on the case and that a spokesman for Statoil said the suit was completely unfounded.
I think it is rather ironic that this is coming from the very company that was a fairly strong proponent of the EITI, for the Extractive Industries’ Transparency Initiative. Still, I would commend their honesty as opposed to trying to further shelter dealings behind good lawyering.
Lastly, one would think that if such a company were found out in a particular context and industry, that the regulatory agencies would also take a look at the accused’s competition to see if they could potentially muster further compliance (or compliance related revenue)from those competitors. (See generally, 513 F.3d 432, 432, (or “the American Rice case”) for a candid comment made by the court acknowledging that competitors likely paid similar bribes that the accused has been caught paying to Haitian officials.)
All true. BP is known to put a lot of emphasis on compliance and they place quite a burden on their contractors and subcontractors in that regard. On the other hand, Kazakhstan is known as a particularly challenging environment. That’s why the Giffen case would be fascinating if it ever moves forward. We also agree that in light of the allegations in this case against BP and Statoil, other foreign companies with business arrangements in Kazakhstan, particularly those in the energy sector, should expect some extra DOJ scrutiny.
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