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Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

Bill Steinman
Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
Contributing Editor

Eric Carlson
Contributing Editor

Why was $73 million ‘missing’ from this FCPA settlement?

Last week, Sargeant Marine agreed to pay the DOJ $16.6 million to settle FCPA charges that it bribed officials in multiple South American countries. The bribes it paid in Brazil alone helped the company and its trading affiliate win Petrobras contracts worth $185 million. Why was the penalty so small?

Sargeant Marine earned around $37.9 million in profit from the bribes it paid in Brazil, Venezuela, and Ecuador. According to its plea agreement, the base fine was $150 million due to the severity of the violations, with a range under the U.S. Sentencing Guidelines of between $120 million and $240 million.

The company received a 25 percent discount because of its “full cooperation and remediation,” the DOJ said.

The DOJ said the final “appropriate total criminal penalty” amount was $90 million.

Ultimately, however, the DOJ fined the company $16.6 million.

Why was Sargeant Marine’s penalty discounted by more than $73 million, and amounted to just 44 percent of the profits it made corruptly?

From Sargeant Marine’s plea agreement:

Based on that analysis, the Fraud Section and the Office determined that a criminal fine greater than $16,600,000 would substantially threaten the continued viability of the Company… The Defendant has represented, and the Fraud Section and the Office have independently verified, that the Defendant has an inability to pay a criminal fine in excess of $16,600,000 over a period of eight months.

Sargeant Marine isn’t the first company to pay a significantly reduced criminal penalty because of an inability to pay.

In 2018, Transport Logistics International Inc. should have paid $21.3 million to resolve FCPA charges for bribing a Russian official with $2 million to award uranium transportation contracts, according to its deferred prosecution agreement. But the company resolved the case by paying the DOJ a criminal fine of $2 million.

In 2017, Dutch oil services company SBM Offshore NV paid a reduced criminal penalty of $238 million to resolve FCPA offenses in Brazil, Angola, Equatorial Guinea, Kazakhstan, and Iraq. According to its DPA, the base penalty was $2.8 billion.

Also in 2017, the DOJ reduced Odebrecht’s criminal penalty for FCPA offenses from $260 million to $93 million because of the company’s inability to pay.

The DOJ doesn’t specify in plea agreements how companies used their corrupt profits or why they aren’t recoverable. But Sargeant Marine’s plea agreement said the company is no longer operating in Brazil, Venezuela, Ecuador, or Chile.

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