Last week there was the TechnipFMC plc (TechnipFMC) Foreign Corrupt Practices Act (FCPA) enforcement action, which was settled via a Deferred Prosecution Agreement (DPA)for TechnipFMC and a guilty pleafrom the company’s US subsidiary, Technip USA Inc. (Technip USA). The settlement documents include an Informationfor Technip USA and an Informationfor 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.
TechnipFMC (when it was only Technip before its merger with FMC) was a part of the great Petróleo Brasileiro S.A. (Petrobras) bribery scheme. It had a straight-forward bribery scheme where third-party consultants were paid commissions which were then passed on to Petrobras employees as bribes. There were also direct payments to members of the then ruling party of Brazil, the Workers Party. While the facts surrounding the Petrobras bribery scheme were almost routine, the fact that Petrobras itself was in on the bribery scheme bears mentioning for the compliance professional.
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.
One of the interesting TechnipFMC factors was its creative use of a joint venture (JV) with Keppel Offshore & Marine Ltd. (KOM), a Singapore based company which has previously gone through a FCPA enforcement action. This led to other parts of the scheme where the monies paid by Petrobras for the good and services was then remitted back to corrupt Petrobras officers and directors as well as members of the Brazilian Workers Party. In this instance, the TechnipFMC/KOM JV took a portion of the profits and sent it to Technip USA as a portion of their profits. From there Technip USA paid money to the corrupt third-party consultants through a Swiss bank account. Later this scheme was changed so that KOM made the payments directly to the third-party consultant and then billed the charges back to Technip USA as legitimate JV expenses. Once again there was no compliance oversight on any of these steps.
Further, TechnipFMC used the timed honored approach of hiring children of Petrobras officials as corrupt actions. The DPA does not report if TechnipFMC used a spreadsheet to keep track of the profits directly attributable to the hiring of sons and daughters of government officials. However, the actions were enough to warrant inclusion in the DPA and Information.
FMC (once again before it merged with Technip) engaged in some old-fashioned bribery tactics in Iraq. The company made corruption payments to obtain seven contracts which brought monetary value of only $5.3 million to the company. Yet the facts surrounding FMC demonstrate that even when you have a corrupt payment baked into an agreement as a fixed commission rate, corrupt officials always have the collective hands out asking for more. Every time that FMC would get close, another level of bureaucracy would pop up and ask for additional corrupt payments. Sometimes this was done through the avenue of additional review and sometimes it was done through the mechanism of playing one corrupt bidder off against another. You might have thought at some point FMC would have wised up and said it was not going to play along any more but it apparently did not do so.
The business units knew they were violating internal company procedures when, at one point, an agent wanted his commission rate increased to 12%. The Business Development (BD) representative noted he would need a business justification to push the increase through and came up with a false justification. Once again, the monies were wired from the US to Monaco to the third party which distributed the funds as corrupt payments.
Tomorrow we will consider what the company(ies) did in response to this pervasive nature of corruption.
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 firstname.lastname@example.org.
© Thomas R. Fox, 2019