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Harry Cassin
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Julie DiMauro
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Thomas Fox
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Marc Alain Bohn
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Bill Waite
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Shruti J. Shah
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Russell A. Stamets
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Eric Carlson
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Panalpina, Shell Near FCPA Settlements, Paper Says

The Wall Street Journal is reporting that Swiss logistics giant Panalpina and its customer Shell are close to settlement of FCPA charges with the DOJ and SEC. The paper said Panalpina may pay about $85 million in penalties and Shell about $30 million.

In April this year, Panalpina said had reserved an amount now equivalent to about $130 million for an expected FCPA settlement with the DOJ and SEC, and for a separate antitrust resolution. It said then the settlements should happen “in the near future.”

Two weeks ago, Panalpina announced the settlement with the DOJ of violations of the antitrust laws. The company pleaded guilty to three counts of conspiring to violate the Sherman Act, and paid a fine of about $12 million. 

The corruption investigation of Panaplina dates back to at least February 2007. The DOJ noted then in connection with Vetco’s FCPA settlement that bribes in Nigeria “were paid through a major international freight forwarding and customs clearance company to employees of the Nigerian Customs Service . . .”

In the following months, about a dozen leading oil and gas-related companies received letters from the DOJ and SEC asking them to “detail their relationship with Panalpina . . . .” Shell, Schlumberger, Tidewater, Nabors Industries, Transocean, GlobalSantaFe Corp., Noble Corp. and Pride International were among those involved.

In July 2007, Panalpina disclosed that some customers of its U.S. subsidiary had “been requested by U.S. authorities to produce documents related to the provision of its services to Nigeria . . . .” It said the federal investigation also related to Kazakhstan and Saudi Arabia for some customers.

In its Annual Report for the year ended December 31, 2007, Royal Dutch Shell plc included an FCPA disclosure related to Panalpina. Shell said,

In July 2007, Shell’s U.S. subsidiary, Shell Oil, was contacted by the U.S. Department of Justice regarding Shell’s use of the freight forwarding firm Panalpina, Inc and potential violations of the U.S. Foreign Corrupt Practices Act (FCPA) as a result of such use. Shell has started an internal investigation and is cooperating with the U.S. Department of Justice and the United States Securities and Exchange Commission investigations. While these investigations are ongoing, Shell may face fines and additional costs.

In October 2007, Schlumberger said it was under investigation because of Panalpina’s freight-forwarding and customs clearance practices. Last week, the Wall Street Journal reported that the DOJ is investigating potential bribery in Yemen by Schlumberger Ltd. The story didn’t say whether the Yemen investigation was connected with Schlumberger’s earlier disclosure about Panalpina.

In July this year, Tidewater Inc. said in its annual report that it expected a settlement soon with the SEC and possibly the DOJ. It said its SEC settlement would require a total payment of about $11.4 million, consisting of $8.4 million in disgorgement and prejudgment interest, and a contingent civil penalty of $3 million. The disgorgement would be payable right away, while the contingent civil penalty would be due within 18 months, but only to the extent Tidewater has not paid a penalty to the DOJ for the same FCPA offenses.

Compliance concerns forced Panalpina in August 2008 to withdraw completely from the Nigerian domestic market. It had suspended local logistics and freight forwarding services there in September 2007 for all oil and gas-related customers. It said in 2008 it was cooperating with the DOJ and SEC in an FCPA investigation.

In July 2009, an investment fund that owns about 5% of Panalpina World Transport (Holding) Ltd. filed a federal civil suit in Texas against the company, some current and former officers and directors, and its owner before its 2005 IPO in Switzerland.

The fund sued to recover damages caused by Panalpina’s withdrawal from Nigeria. There’s no private right of action under the FCPA. Private litigants have to resort to other claims. In its case against Panalpina, the investment fund alleged violations of Sections 10(b) and 20 of the Securities Act, common law fraud, aiding and abetting common law fraud, and negligent misrepresentation.

The company operates through 500 branches in 80 countries with about 14,000 employees worldwide. It serves the rest of the world through local partners.

Panalpina Welttransport (Holding) AG (also known as Panalpina World Transport Holding Ltd.) trades on various European exchanges, and in the U.S. OTC pink sheets under the symbol PLWTF.PK.

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