1st FCPA Case Under Biden Offers Compliance Reminders | Lowenstein Sandler LLP

Law360 – July 21, 2021

The first Foreign Corrupt Practices Act case underneath President Joe Biden’s administration reinforces some well-known dangers for corporations topic to the FCPA — specifically, elevated U.S. and worldwide enforcement and cooperation in addition to the dangers associated to public contracting and tenders, the usage of third-party brokers, successor legal responsibility following merger and acquisition exercise, and the U.S. authorities’ aggressive assertion of jurisdiction in worldwide corruption circumstances.

Case Summary

In 2011, Foster Wheeler AG, because it was then recognized, was a subsidiary of a Swiss-based and Nasdaq-traded firm. Foster Wheeler sought to ascertain a enterprise presence in Brazil’s oil and fuel trade, and a major a part of this enterprise enlargement effort centered on a bid for a contract to design a gas-to-chemicals advanced for Petróleo Brasileiro SA, or the Petrobras Project, the Brazilian state-owned oil firm.[1]

In order to win the general public tender for the Petrobras Project, Foster Wheeler engaged two brokers, who corruptly obtained confidential, nonpublic Petrobras paperwork and data as a way to assist Foster Wheeler win the bid.

On June 25, Amec Foster Wheeler Limited, as it’s now referred to as and at present a subsidiary of John Wood Group PLC, or Wood, a U.Ok.-based world engineering firm, resolved a U.S. Department of Justice and U.S. Securities and Exchange Commission investigation into violations of the FCPA in Brazil by paying $41 million in penalties and disgorgement and by coming into right into a three-year deferred prosecution settlement with the DOJ.[2]

The identical day, the corporate entered into an settlement in precept with the U.K. Serious Fraud Office to enter right into a separate DPA, which an English courtroom subsequently permitted, and the corporate agreed to pay £103 million in penalties and prices.

Key Takeaways

Increased Enforcement Activity

This is the primary FCPA enforcement motion underneath the Biden administration, however one ought to anticipate that this is not going to be the final.

  • In a June 2 speech, Nicholas McQuaid, the DOJ’s performing assistant legal professional common said that FCPA circumstances are a precedence and that “there’s extra to return in 2021.”[3]
  • The subsequent day, on June 3, the Biden administration introduced that combating worldwide corruption is a “core nationwide safety curiosity.”[4]

Accordingly, corporations topic to the FCPA ought to anticipate elevated scrutiny and enforcement exercise from the U.S. authorities going ahead.

Continued International Cooperation

Over the previous a number of years, cross-border, interagency legislation enforcement cooperation has develop into extra frequent.

The underlying information and circumstances of this case had been prosecuted by regulators in three international locations: the U.Ok. SFO, the U.S. authorities, and the Ministério Público Federal in Brazil, the Brazil Comptroller General’s Office and the Brazil Solicitor General.[5]

As demonstrated by the decision of this case, multinational firms could be prosecuted by a number of legislation enforcement businesses.

In addition to Brazil, the U.Ok. and the U.S., cross-border anti-corruption enforcement seems to be selecting up steam in 2021. For instance, final month:

Accordingly, as multilateral worldwide organizations, such because the OECD and U.N., proceed to push anti-corruption enforcement on the world stage, multinational corporations can anticipate that additional worldwide cooperation will improve the chance that corrupt conduct not solely can be uncovered but additionally investigated and punished.

Access to Confidential Information

Paying a authorities official to acquire confidential info in violation of that official’s responsibility constitutes acquiring an improper benefit underneath the FCPA.[8]

Here, Foster Wheeler, by way of its third-party brokers, obtained inner, confidential info associated to the Petrobras Project by utilizing a Petrobras worker, who occurred to have $200,000 in private money owed owed to one of many brokers, to acquire confidential paperwork, inside info and secretive help in resolving contracting disputes in Foster Wheeler’s favor throughout inner Petrobras conferences. The brokers additionally paid bribes to different Petrobras officers.[9]

Including this case, there have been 4 FCPA enforcement actions over the previous 12 months during which defendants corruptly obtained confidential info as a way to win public tenders and enterprise from state-owned enterprises.[10]

Prior to submitting a bid, corporations engaged in public contracting, public tenders and public requests for proposal ought to vet the provenance and the legitimacy of all the info that it makes use of to organize the bid — particularly the place the data is provided by a 3rd social gathering fairly than developed by way of its personal inner and proprietary analysis and evaluation.

Third-Party Risk

Approximately 90% of all FCPA enforcement actions contain third-party intermediaries, and this case was no totally different.[11] Here, the defendant used two third-party brokers, together with one which failed due diligence, to safe a contract from a state-owned oil firm.

All corporations topic to the FCPA ought to have processes and procedures in place to conduct due diligence and vet all third-party brokers, specifically brokers in high-risk international locations or brokers interacting with high-risk clients, equivalent to Petrobras.

As a finest observe, due diligence must be accomplished earlier than the agent is engaged not after the actual fact as occurred on this case.

Merger and Acquisition Risk

Although a stand-alone firm on the time of the misconduct, the defendant and its Brazilian subsidiary had been bought twice within the time interval between the corruptly obtained public contracts in Brazil and the last word enforcement motion.

By the time of the second acquisition in 2017, the Brazilian Federal Police’s “Operation Car Wash” investigation into widespread corruption at Petrobras ought to have raised due diligence pink flags the place the goal lately used third-party brokers to win Petrobras contracts.

In truth, Wood apparently knew that Foster Wheeler was underneath investigation, however:

the SFO investigation was not factored into the valuation as a result of it was introduced after the supply was made … Wood will in the end pay the liabilities arising underneath the DPA and that it has additionally been put to substantial prices by coping with the investigation and the DPA. This outlay was not brought on by any fault on its half. Wood is the company which is able to carry the can for the actions detailed within the assertion of information, and it was totally harmless of them.[12]

The case serves as a reminder that buying corporations ought to conduct sturdy pre- and post-closing due diligence, together with a post-closing audit and an expeditious compliance integration plan to make certain that they didn’t purchase FCPA legal responsibility along with the goal’s different property.

Moreover, buying corporations ought to embody contractual protections to allow themselves to desert the deal if important compliance points come up between supply, deal signing and shutting.

Here, Wood realized of an SFO investigation into the goal’s actions after providing to amass Foster Wheeler however continued with the acquisition anyway. Years later, Wood is in the end answerable for paying fines in three international locations as a way to resolve the “historic conduct within the legacy Foster Wheeler enterprise.”[13]

Wood just isn’t the primary buying firm to have inherited regulatory publicity following a company acquisition. Indeed, there have been 76 FCPA enforcement actions associated to merger and acquisition exercise, roughly 15% of all circumstances.[14] As said by Charles Cain, chief of the SEC’s FCPA enforcement unit, “[t]he potential for a brand new market can’t be a siren’s tune that overwhelms good company governance.”[15]


In this case, a Swiss-based firm owned by a U.Ok.-based mother or father firm engaged brokers in Brazil and Italy, who bribed Brazilian officers to win a contract in Brazil.

Nevertheless, the U.S. authorities asserted jurisdiction as a result of the defendant traded on Nasdaq on the time of the historic misconduct and since some acts in furtherance of the conspiracy occurred within the U.S., equivalent to electronic mail correspondence utilizing a U.S.-based electronic mail server, passing paperwork by way of a supervisor at a New York clothes retailer and the usage of correspondent financial institution accounts in New York.

For non-U.S. individuals, this is a vital reminder that even minimal contacts or fleeting actions within the U.S. can set off U.S. jurisdiction and that the U.S. authorities will assert jurisdiction in cross-border corruption circumstances aggressively.

[1] See United States v. AMEC Foster Wheeler Ltd., 21-cr-298 (KAM) (E.D.N.Y. June 25, 2021) (Statement of Facts at para. 17).

[2] A portion of the DOJ and SEC fines and penalties are offset by penalties paid in Brazil and the U.Ok. See, e.g., In the Matter of AMEC Foster Wheeler Ltd., Admin. Pro. File No. 3-20373 at para. IV(B) (SEC June 25, 2021) (offering for a disgorgement offset as much as $9.1 million for disgorgement paid to Brazilian authorities and as much as $3.5 million for disgorgement paid to the U.Ok. SFO).

[3] Clara Hudson, “FCPA enforcement is ‘in a wholly new’ place, says performing felony division chief,” Global Investigations Review (June 2, 2021), https://globalinvestigationsreview.com/just-anti-corruption/fcpa/fcpa-enforcement-in-entirely-new-place-says-acting-criminal-division-chief.

[4] See The White House, “Memorandum on Establishing the Fight Against Corruption as a Core United States National Security Interest (Presidential Actions June 3, 2021), https://www.whitehouse.gov/briefing-room/presidential-actions/2021/06/03/memorandum-on-establishing-the-fight-against-corruption-as-a-core-united-states-national-security-interest/.

[5] John Wood Group plc, “Wood Reaches Resolution on Legacy Investigations,” Press Release (June 25, 2021), https://www.woodplc.com/news/latest-press-releases/2021/wood-reaches-resolution-on-legacy-investigations.

[6] See United Nations General Assembly, “United Against Corruption 2021 – Special Session of the General Assembly towards Corruption 2021” (New York, NY June 2-4, 2021), https://ungass2021.unodc.org/ungass2021/index.html.

[7] See OECD, “Turkey ought to urgently implement key reforms to spice up struggle towards international bribery, together with to protect independence of investigations and prosecutions (Paris, France June 29, 2021), https://www.oecd.org/newsroom/turkey-should-urgently-implement-key-reforms-to-boost-fight-against-foreign-bribery-including-to-preserve-independence-of-investigations-and-prosecutions.htm.

[8] See 15 U.S.C. 78dd-1 et seq. (emphasis added).

[9] See United States v. AMEC Foster Wheeler Ltd., 21-cr-298 (KAM) (E.D.N.Y. June 25, 2021) (Criminal Information at paras. 35-38).

[10] See, e.g., United States v. Vitol Inc., 20-cr-539 (E.D.N.Y. Dec. 3, 2020) (Criminal Information) (corruptly acquiring confidential Petrobras info referring to inner import and export forecasts to profit Vitol in its buying and selling with Petrobras and acquiring confidential info referring to rivals’ bids as a way to win public tenders); United States v. Sargeant Marine, 20-cr-363-ENV (E.D.N.Y. Sept. 22, 2020) (Criminal Information) (acquiring confidential info as a way to win bids from the state-owned Venezuelan oil firm PdVSA); In the Matter of Alexion Pharmaceuticals, Admin Pro. 3-19852 (SEC July 2, 2020) (paid bribes to Turkish authorities officers as a way to safe regulatory approvals and to acquire confidential info associated to the standing of regulatory submissions).

[11] See, e.g., Stanford Law School Foreign Corrupt Practices Act Clearinghouse, https://fcpa.stanford.edu/advanced-search.html.

[12] SFO v. Amec Foster Wheeler Energy Ltd., (Crown Court at Southwark July 1, 2021) (Judgment at para. 30), https://www.sfo.gov.uk/download/amec-foster-wheeler-energy-limited-deferred-prosecution-agreement-judgment/.

[13] John Wood Group plc, “Wood Reaches Resolution on Legacy Investigations,” Press Release (June 25, 2021), https://www.woodplc.com/news/latest-press-releases/2021/wood-reaches-resolution-on-legacy-investigations.

[14] See, e.g., Stanford Law School Foreign Corrupt Practices Act Clearinghouse, https://fcpa.stanford.edu/advanced-search.html.

[15] SEC, “SEC Charges Amec Foster Wheeler Limited With FCPA Violations Related To Brazilian Bribery Scheme,” Press Release 2021-112 (June 25, 2021) https://www.sec.gov/news/press-release/2021-112.

Reprinted with permission from the July 21, 2021, challenge of Law360. © 2021 Portfolio Media, Inc. All Rights Reserved.

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