It’s a strange scenario. How did London-based Amec Foster Wheeler (AFW) end up with agents in three different countries for a single, relatively small project in Brazil — including two agents disqualified by AFW’s due diligence and a third agent that AFW thought had lost influence?
Last week the company agreed to pay around $41 million to resolve criminal and civil FCPA offenses. Facts recited by the DOJ and SEC described an unlikely web of corrupt agents that formed around Amec Foster Wheeler and eventually trapped it.
Briefly, here’s what happened.
AFW hoped to win a $190 million contract from Brazil’s state-owned Petrobras to design a gas-to-chemicals complex.
The company began dealing with an Italian agent. The Italian agent said it had links to a Monaco-based agent with good intelligence, probably Unaoil.
Retaining an agent before or during due diligence violated AFW’s compliance policy, but AFW retained the Italian agent anyway. The SEC said: “In fact, [Amec Foster Wheeler’s] general counsel drafted an interim agency agreement to use Italian Agent even though Foster Wheeler’s policy on outside agents did not allow for interim agreements while due diligence was pending.”
Amec Foster Wheeler’s earlier due diligence on Unaoil revealed disqualifying corruption risks. Due diligence also disqualified the Italian agent because of links to Unaoil and misrepresentations about past experience. AFW, however, didn’t terminate the interim agreement but left it in place.
The Italian agent introduced AFW’s Brazil country manager to a Brazilian agent to help with the Petrobras project. Due diligence was fudged. Incriminating links to the Italian agent were concealed, and AFW retained the Brazil agent.
According to the SEC, AFW’s country manager thought the Brazil agent’s influence with Petrobras was diminished “owing to changes in positions over the last 18 months.”
But the country manager also told a colleague that despite their loss of influence, the Brazil agent “can make life difficult for us if we do not pay [them].”
Between February 2013 and July 2014, the SEC said, the Brazil agent sent Amec Foster Wheeler four invoices, “none of which documented any meaningful work . . . to justify its two percent commission.”
The Brazil and Italian agents used part of the “commission” to pay over $1 million in bribes to officials for the Petrobras project.
What happened at Amec Foster Wheeler? I only know what the feds said.
But there’s this: Agents with a grievance can do serious damage.
In Egypt, a company I knew fired its long-serving agent as part of a new “agent-less” business approach. Within months, labor problems engulfed the company’s local operations. The Egyptian government sided with the workers. A provincial sheriff seized the company’s property and auctioned it to the public for pennies on the dollar.
In Indonesia, a company that wanted a fresh start terminated its powerful local agent without cause, offering just a token final payment. The insulted former agent refused to sign any documents related to the company’s business. Without the agent’s cooperation as the official country representative, the company couldn’t obtain new visas for expat workers or permits to import and export equipment. The standoff lasted years.
At Amec Foster Wheeler, did fear of agents contribute to bad decisions?
Did the company pay the Brazil agent’s “commission” not only to win and keep the Petrobras project but also to avoid future problems?
(Ironically, Petrobras eventually canceled the project early for unrelated financial reasons. By then, Amec Foster Wheeler had made about $13 million in profit, the DOJ said.)
Did the Italian, Monaco, and Brazil agents set a clever trap that finally caught AFW?
The feds didn’t adopt that narrative. Instead, the DOJ and SEC both said Amec Foster Wheeler succumbed to the profit motive.
Charles Cain, chief of the SEC’s FCPA enforcement unit, said: “The potential for a new market cannot be a siren’s song that overwhelms good corporate governance.”
The DOJ’s Nicholas McQuaid said, “In the pursuit of profits, the company resorted to corruption, which distorts markets and undermines the rule of law.”
Still, the SEC included in its settlement order that quote from AFW’s country manager: The Brazil agent “can make life difficult for us if we do not pay [them].”
Did fear of agents play a role in AFW’s bribery?
Maybe. But that’s no excuse for bribery. And of course, no company should expect sympathy after ignoring the requirements of its own compliance program.
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