18 January 2018

Settlements in brief – third-party payments could lead to severe fines

Enforcement actions by criminal and supervisory authorities are settled regularly. In light of these developments, companies are advised to take appropriate measures. This month we highlight the recent USD 422 million settlement of Keppel Offshore & Marine Ltd and its US subsidiary with US, Brazil and Singapore authorities. This settlement is the first coordinated FCPA resolution with Singapore and shows the U.S. Department of Justice’s willingness to work with different enforcement partners abroad. We also highlight the settlement of container company MOL Europe with the Dutch Public Prosecution Service. MOL Europe has agreed to pay approximately EUR 800,000 to settle alleged bribery irregularities in Ghana and Ivory Coast. This settlement illustrates that over the years, Dutch companies run the risk of becoming subject to criminal investigation and prosecution because of possible bribery-related conduct that may have wholly or largely taken place at a foreign subsidiary.

Keppel Offshore & Marine settles with US, Brazil and Singapore authorities to resolve FCPA violations

On 22 December 2017, Singapore-based Keppel Offshore & Marine Ltd (Keppel) and its US subsidiary (Keppel USA) settled charges of corruption with authorities in the US, Brazil and Singapore by paying USD 422 million in fines to these three jurisdictions. Keppel is a company operating shipyards and repairing and upgrading shipping vessels, and is the world’s biggest builder of oil rigs. Keppel was charged with conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA), as it had allegedly made USD 55 million in corrupt payments to officials at Brazil’s state-owned oil company Petrobas. The alleged bribes had allegedly been paid by a former agent from 2001 until 2004 and provided Keppel with 13 contracts.

Keppel USA pleaded guilty to the FCPA offences in federal court, while its parent company Keppel reached a Deferred Prosecution Agreement (DPA) with the DOJ. Keppel USA will pay a USD 4.75 million criminal fine, which will be subtracted from the amount Keppel owes the US government. The DPA will be in effect for three years and provides that 50% of the penalty will be paid in Brazil under a settlement with the Ministério Público Federal, and 25% in Singapore under a settlement with the Attorney General’s Chambers. The latter means that this is the first coordinated FCPA resolution with Singapore. During the three-year term, Keppel must fulfil certain requirements, such as paying the fines, providing annual reports regarding its improved corporate compliance measures, and demonstrating further cooperation with the DOJ.

Keppel received the maximum cooperation and remediation credit allowed, namely a 25% discount on the applicable fine range under the US sentencing guidelines. However, the total fine of USD 422 million still places Keppel on the FCPA Top Ten list. Keppel is now in seventh place, right below Teva Pharmaceutical with its USD 519 million settlement in 2016.

In addition, a guilty plea by a former senior member of Keppel’s legal department was unsealed on 29 August 2017. The lawyer pled guilty to one count of conspiracy to violate the FCPA by writing contracts that overpaid a Keppel agent in Brazil, who allegedly used the overpayments to bribe Brazilian officials. He is awaiting sentencing.

This case once again shows that the DOJ, while finding more and more law enforcement partners abroad, will continue to hold corporations and individuals who seek to enrich themselves through corruption responsible for their actions.

MOL Europe settles with Dutch Public Prosecution Service for private bribery and forgery offences

Netherlands-based container company MOL (Europe) B.V. (Mol Europe) reached a settlement with the Dutch Public Prosecution Service (DPPS) to resolve a commercial bribery and forgery issue that took place in Ghana and Ivory Coast. Mol Europe agreed to pay approximately EUR 800,000. From 2005 to 2015, bribes were allegedly paid to employees of the companies located in Ghana and Ivory Coast. These bribes had allegedly been covered up in cost-accounting systems since 2013.

Following a report of the Dutch Revenue Service, the Dutch Fiscal Information and Investigation Service (FIOD), under the DPPS’s lead, started an investigation into possible irregularities at MOL Europe in 2016. According to the DPPS’s statement of facts (Dutch only), the investigation revealed payments of EUR 168,381 to employees of MOL Europe clients in Ghana from 2005 to 2015.  The same applied to Ivory Coast, where a total of EUR 112,812 was paid to employees of MOL Europe clients from 2010 to 2015. In return, ships leaving from West Africa transported cargo for MOL Europe.

The payments to local employees were allegedly made on behalf of the parent company via local subsidiaries. MOL Europe approved these payments. From 2005 to 2013, the payments were recorded in the administration of the local subsidiaries. The payments stopped, however, after a warning from an external accountant in 2013. MOL Europe then instructed the local subsidiaries in Ghana and Ivory Coast to stop the payments. Turnover subsequently dropped, however, and MOL Europe ordered the African subsidiaries to increase business, resulting in the payments being resumed. In addition, the payments were falsely recorded. False invoices from third parties were also submitted.

According to the DPPS, MOL Europe had been sufficiently aware of the payments since 2013. The DPPS however also deemed several mitigating factors to be present, such as that MOL Europe cooperated with the investigation, provided information from their internal investigation, and terminated the shipping route in August 2015. MOL Europe’s wish to end and prevent further offences, and the global compliance measures it took in this regard, were also taken into consideration. These facts and factors resulted in a fine of EUR 800,000, which led to a total settlement amount of EUR 832,169. Individual employees and managers did not benefit from the bribery, according to the DPPS. Of the individuals possibly involved in the corruption, none had Dutch nationality or still works for MOL Europe in the Netherlands.

Since the Netherlands was criticised by the OECD in 2014, an increasing number of Dutch companies have been subject to criminal investigation and prosecution because of possible bribery-related conduct that wholly or largely may have taken place at a foreign subsidiary. This case shows that Dutch authorities are eager to fight corruption. As the DPPS says in its press release, corruption affects the free market and international stability. Corruption, bribery, forgery and other crimes can lead to severe fines and possible prosecution of individuals. As companies are or could be held responsible for the criminal behaviour of their foreign subsidiaries, it is advisable to implement a compliance programme at the group level, with top management setting the tone.