We continue our exploration of the TechnipFMC Foreign Corrupt Practices Act (FCPA) enforcement action by considering the actions taken by the company (or both separately before their merger) in response to their FCPA violation. The matter wassettled via a Deferred Prosecution Agreement (DPA) for TechnipFMC and a guilty plea from the company’s US subsidiary, Technip USA Inc. (Technip USA). The settlement documents include an Information for Technip USA and an Information for TechnipFMC. While the total fine and penalty is $296 million, TechnipFMC will pay about $82 million in the US, with the remainder of its penalties going to authorities in Brazil. $500,000 of this amount will be paid by Technip USA as a criminal penalty under its guilty plea.
Neither company received any credit for self-reporting. However both companies did receive credit for their thorough internal investigation, meeting the Justice Department’s requests promptly, proactively identifying issues and facts that would likely be of interest to the Fraud Section and the Justice Department, making regular factual presentations to the Fraud Section and the Justice Department, voluntarily making foreign-based employees available for interviews in the United States, producing documents to the Fraud Section and the Justice Department from foreign countries in ways that did not implicate foreign data privacy laws, and collecting, analyzing and organizing voluminous evidence and information for the Fraud Section and the Office.”
Technip engaged in significant remedial measures listed in the DPA, including “separating or taking disciplinary action against former employees, ceasing to retain the intermediaries involved in the conduct, banning the use of all commercial consultants in Brazil, suspending all payments to commercial consultants in Brazil, providing additional compliance training to employees and ce1iain third parties, and making specific enhancements to the Company’s internal controls and compliance program.”
The Company is also reported to have “enhanced and has committed to continuing to enhance its compliance program and internal controls, including by implementing heightened controls and additional procedures and policies relating to third parties, conducting ongoing reviews of its compliance program, increasing the resources the Company dedicates to compliance”. Unfortunately there were no separate remedial steps listed for FMC which it took before the merger so those cannot be listed or evaluated.”
The TechnipFMC FCPA resolution demonstrates that while Petrobras itself may have settled the fallout will long continue. The Petrobras corruption scandal may eventually be exceeded on the world’s stage yet the corruption was so pervasive it may take some time to do so. This FCPA enforcement also drives home the requirement that compliance practitioners need to have greater and more visibility into significant transactions. Petrobras heralded the first time the customer itself was fully in on the bribery scheme.
There were multiple instances cited in the DPA where bribes were demanded by Petrobras officers and directors or members of the Brazilian Workers Party and they were routinely paid by TechnipFMC. The bribe payments were then charged directly to the contracts which TechnipFMC held with Petrobras. These bribe payments were approximately 1% of the contract value but when you have a contract valued at $1 billion or more, the monies add up quickly. This final point brings up two critical issue for the compliance professional. First, do you have visibility into the contracting process for high value contracts? Second, do you have visibility into the contract chargebacks which are paid by the customer? Finally, for payments routed out of the company, do you have visibility into those through your Accounts Payable (AP) function?
As the bad guys become more sophisticated, this type of bribery scheme where the customer is in on it will proliferate. Most companies do not have a mechanism for performing due diligence on their customers. However, as the Petrobras matter (and several others since that time) demonstrate, having a crooked customer is a known risk for which you must account going forward.
The TechnipFMC rounds out the first half of 2019 in the FCPA enforcement year. It has certainly been an eventful six months. I cannot wait to see what the second half brings.
© 2019. Thomas R. Fox. This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at email@example.com.