Recently we saw one of the most blatant cases of bribery and corruption brought by the Department of Justice (DOJ) in the form of a guilty plea by Sargeant Marine Inc. (Sargeant Marine), an asphalt company, related to conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA) and agreed to pay a criminal fine of $16.6 million to resolve charges stemming from a scheme to pay bribes to foreign officials in three South American countries. In addition to this rare corporate criminal plea, there have been six individuals, previously associated with Sargeant Marine, who have previously pled guilty. None have been sentenced nor is there any information as to their individual facts they have pled to.

Yet the Sargeant Marine FCPA enforcement action has several instructive points which are largely laid out in the Plea Agreement. It has not yet been disclosed how Sargeant Marine came to the attention of the DOJ. From the Plea Agreement we know that the company did not self-disclose. Yet the company did receive a 25% discount off the minimum range of the US Sentencing Guidelines for both extensive cooperation and extensive remediation.

What type of cooperation engendered such a discount? From the Plea Agreement, the company conducted a thorough investigation, made witnesses available to the DOJ, proactively identified facts and issues to the DOJ which were uncovered in the investigation. The company provided to the DOJ “all relevant facts known to it, including information about individuals involved in the misconduct” which assisted the DOJ in obtaining the six guilty pleas.

When it came to the remediation, the company’s response was equally robust. It engaged in “extensive remedial measures”; provided compliance training, made enhancements to “internal controls and compliance program, including a new anti-corruption policy, a new employee manual and new third-party due diligence and onboarding procedures.”

Certainly, it is worth noting that Sargeant Marine pulled out of doing business in Brazil, Venezuela and Ecuador. It is not clear if the company did so to curry favor, because the Sargeant Marine name was so besmirched in those countries that it had no hope of being commercially viable or in the case of Venezuela, there is not only no business to be had, there is no way of getting money out of the country. It is somewhat unusual for a company to withdraw from the jurisdictions that it engaged in the illegal conduct but this is a remedy which should perhaps be more often employed by the DOJ. For Sargeant Marine, given the scope and nature of their multi-year bribery and corruption schemes, it was clearly a smart business move to make. When you can engage in a remediation measure which is also a smart business move, it is one which perhaps more companies should consider.

Perhaps, most astoundingly, the company was not required to sustain a monitor. It would appear that the message from the Benczkowski Memo has finally gotten out to companies, or at least the outside counsel who represents them. I do not personally know the Sargeant Marine counsel but one can only assume they were able to persuade the DOJ that the company was earnest in its assertions of creating a culture of compliance at the company.

The other unusual component of this FCPA enforcement action was the final penalty assessed against Sergeant Marine. As calculated in the Plea Agreement, Sargeant Marine received a benefit from its bribery and corruption program of over $38 million in pecuniary gain. Based upon the US Sentencing Guidelines the range of fines was between $120 million to $240 million. As previously noted, Sargeant Marine did receive a fine reduction of 25% under the FCPA Corporate Enforcement Policy for its extraordinary cooperation and extensive remediation. That would have brought the fine down to $90 million.

However, the final penalty paid was $16.6 million. The reason? According to the 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” Further, “The Defendant has represented and the Fraud Section and Office have independently verified that the Defendant has an inability to pay a criminal fine in excess of $16.6 million over 8 months.” The DOJ stated that it had “with the assistance of a forensic accounting expert, conducted an ability to pay analysis considering a range of factors in the Justice Department’s Inability to Pay Guidance”. Factors included the sale of the corrupt joint venture (JV) which received most of the ill-gotten gains and the lack of financing available to Sargeant Marine.

It is clear that Sargeant Marine has no one to blame its financial situation on other than itself. It engaged in a multi-year deliberate campaign of bribery and corruption and now finds that it can no longer do business in the energy space because it was so corrupt. Why would any company ever trust Sargeant Marine again? Sort of like Wells Fargo, do you really think they got rid of all the corrupt management? Yet this FCPA enforcement action once again shows that not only will the DOJ work with a company which follows the prescripts of the FCPA Corporate Enforcement Policy but that it will work with a company in dire financial straits. The clear message for any Board of Directors is that if you want the best deal you can get, self-disclose, cooperate in the investigation, remediate fully and give up all the evidence needed to convict the guilty parties.

Tomorrow we will consider the Individuals who have pled guilty.

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© Thomas R. Fox, 2020