Iran has all the ingredients to be an FCPA minefield. It’s big — 66 million people in an area about the size of Alaska — and it’s the world’s 6th largest oil producer. On top of that, it has a corruption problem, ranking near the bottom of the latest Corruption Perception Index — 168th, tied with Burundi, Equatorial Guinea, Haiti, and Turkmenistan.
But although the country routinely makes world headlines, it’s hardly mentioned on the FCPA Blog. Why not?
Iran has been off limits to U.S. companies from around the time the FCPA became law in 1977. The U.S. first imposed sanctions on Iran in 1979. After the takeover of the American embassy in Teheran, President Carter banned imports of Iranian oil and blocked all transfers of property in the U.S. owned by the Central Bank and Government of Iran. In 1980, he embargoed all U.S. exports to and imports from Iran, and stopped U.S. citizens from traveling or conducting financial transactions there.
Some of those sanctions were loosened after the U.S. hostages were released. But in 1987, President Reagan imposed a new embargo on Iranian-origin goods and services. And in 1995, after Iran was labelled a sponsor of international terrorism, President Clinton again banned U.S. involvement with Iran’s oil and gas development. He later confirmed that “virtually all trade and investment activities with Iran by U.S. persons, wherever located, are prohibited,” according to the Treasury Department. With some small adjustments, that’s how things stand today.
Criminal penalties for violating the U.S. sanctions are stiff — fines up to $1,000,000 and prison for up to 20 years, four times harsher than the FCPA’s penalties.
Even without America’s business, Iran was the focus of an important FCPA case. In 2006 the Norwegian company Statoil was hit with DOJ and SEC enforcement actions for bribery and books and records violations. Statoil in 2002 had paid $5.2 million in bribes to a modern-day prince of Persia — the son of a former president of Iran, and promised to pay $20 million more for access to the giant Pars oil field. The company eventually self-disclosed the payments and paid $3 million to Norwegian prosecutors and $21 million in penalties and disgorgement to the DOJ and SEC (with credit for the $3 million it paid back home).
That was the first FCPA criminal enforcement action against a foreign company — Statoil is an “issuer,” trading on the NYSE under the symbol STO. Its three-year deferred prosecution agreement with the DOJ expired in November 2009.
We could be hearing more FCPA news involving Iran. Last week the Wall Street Journal said the SEC’s enforcement and corporation finance divisions have sent letters to several pharmaceutical and energy companies that work in Iran, as well as in Cuba, Sudan, and Syria — which all appear on the State Department’s list of countries that sponsor terrorism. (Some medicines and medical devices are licensed for export from the U.S. to Iran.) The letters reportedly asked the companies, which haven’t been named, what they are doing in the four countries to ensure compliance with the FCPA.