For the first time in six years, the Department of Justice (DOJ) has released an Opinion Release, denominated 20-01. At first blush it appears to be a straight-forward recitation of the equivalent of black letter law in the world of the Foreign Corrupt Practices Act (FCPA) enforcement. However, a more expansive reading provides some very interesting insights into where both international anti-corruption and FCPA enforcement actions may well be headed.
The Requestor desired to purchase some assets of a foreign investment bank (Country Office A), which was “indirectly owned by a foreign government.” To facilitate this transaction, it enlisted the assistance of a different foreign subsidiary of the same foreign investment bank, (Country Office B). After the transaction was completed Country Office B sought compensation for their work in facilitating the transaction. Country Office B “provided various legitimate and commercially valuable services” and the fee sought was commercial reasonable. The payment would be made directly to Country Office B.
A quick review of the analysis demonstrated why this transaction was straight forward under the FCPA. First, the payment would be made to Country Office B and not any individual. Second, the payment was for legitimate services rendered and was commercially reasonable. At this point, most compliance practitioners would say the transaction is permissible under the FCPA.
Yet, there was another set of analysis which bears closer scrutiny. It read:
Second, based on the representations of Requestor, there is no indication that Requestor intends or believes the money will be diverted to any individual, and there is no indication that the money will, in fact, be diverted to any individual. The payment is transparent to the Country B Office and its management. Indeed, the Chief Compliance Officer of the Country B Office has certified to Requestor that the payment into the Country B Office’s corporate bank account will only be used for the benefit of the Country B Office, for general corporate purposes of the Country B Office, and will not be forwarded to any other entity. Even though the Country B Office is a wholly owned subsidiary of the foreign investment bank that, in turn, is indirectly majority owned by a foreign government, there are no indicia that Requestor’s payment to the Country B Office is intended to corruptly influence a foreign official. Moreover, the Requestor represents that there have been no corrupt offers, promises, or payments of anything of value, directly or indirectly, to any individual in connection with this transaction.
Why would these extra steps be taken when the transaction appeared to pass FCPA muster? It comes down to two words ENI/Shell and OPL 245 in offshore Nigeria. What was this transaction involving these two international energy concerns? As laid out in the TRACE Compendium, the concession for offshore oil block OPL 245, awarded to Eni and Shell by the Nigerian government in 2011 for a payment of $1.3 billion. “Emails published by Global Witness indicate that executives at Shell were informed and had reason to believe or know that part of the payment would go to then-President Goodluck Jonathan, as well as others in Nigeria, as bribes. President Goodluck Jonathan allegedly received between USD 200 million and USD 500 million. Emails also indicate that Shell was aware that the payment would go to Dan Etete. In a phone call recorded in 2016, Shell’s CEO Ben van Beurden and then-CFO Simon Henry expressed concern that the deal violated the FCPA.” Although denying any wrongdoing, both companies self-disclosed their actions to the DOJ. Both received declinations.
However, prosecutors in Italy had a different interpretation under Italian law. They brought criminal prosecutions against both companies and, according to a report by Reuters.com, “another 13 people are involved in the case including current Eni Chief Executive Claudio Descalzi and former Shell head of upstream Malcolm Brinded.” The prosecutors basic claim is that “Eni and Royal Dutch Shell were aware that most of the money they spent to buy a Nigerian oilfield in 2011 would go in corrupt payments to politicians and officials… They were kickbacks. And Eni and Shell knew it.” The Prosecutor “read out a series of emails between former Shell managers, including one saying it had been taken for granted Etete would have only kept a part of the price for himself, using the rest to pay off Nigerian politicians.”
So why make all the additional representations when they are not required under the FCPA? Put simply, the fact pattern in ENI/Shell and OPL 245 was that the purchasers wanted to buy government assets and pay the Nigerian government directly for those assets. That is exactly what the Relator in 20-01 wanted to do and did in the transaction at issue, which clearly was within the parameters of a legal transaction under the FCPA.
Does this mean the DOJ (and Securities and Exchange Commission (SEC)) will now look at the knowledgeof how a payment made directly to a foreign government or state-owned enterprise will be used by that foreign government or state-owned enterprise. Is a purchaser of assets from a foreign government or state-owned enterprise now required to obtain some type of certification, similar to the Requestor received from the Chief Compliance Officer (CCO) of Country Office B, that the payment made “into the Country B Office’s corporate bank account will only be used for the benefit of the Country B Office, for general corporate purposes of the Country B Office, and will not be forwarded to any other entity.” Does there need to be a certification that the payment will not be used to pay any individuals?
That about in jurisdictions outside the US? Could all the additional representations here have been made to protect the Requestor from an anti-corruption enforcement action from a country other than the US? After all the Requestor is a “multinational firm” so could it be the Requestor had (or even has) other jurisdictions to worry about.
Many commentators have downplayed 20-01. However, I find it to be very instructive of where international anti-corruption enforcement may well be headed. As Mike Volkov is want to say, the DOJ always communicates its position well in advance of taking actions. Opinion Release 20-01 could well be a tea leaf worth reading. It could also portend where international anti-corruption enforcement is heading.
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© Thomas R. Fox, 2020