Bribery Cases Essay
U.K. Solicitor and Former Salesman Also Sentenced for Participation in Scheme to Bribe Nigerian Government Officials WASHINGTON – Albert “Jack” Stanley, a former chairman and chief executive officer of Kellogg, Brown & Root Inc. (KBR), was sentenced today to 30 months in prison for conspiring to violate the Foreign Corrupt Practices Act (FCPA) by participating in a decade-long scheme to bribe Nigerian government officials to obtain engineering, procurement and construction (EPC) contracts and for conspiring to commit mail and wire fraud as part of a separate kickback scheme, the Justice Department’s Criminal Division today announced.
U.S. District Judge Keith P. Ellison for the Southern District of Texas also ordered Stanley to serve three years of supervised release following the prison term and to pay $10.8 million in restitution to KBR, the victim of the separate kickback scheme. Stanley, 69, pleaded guilty on Sept. 3, 2008, to a two-count criminal information charging him with one count of conspiracy to violate the FCPA and one count of conspiracy to commit mail and wire fraud.
Two of Stanley’s co-conspirators also were sentenced by Judge Ellison. Today, Jeffrey Tesler, 63, a United Kingdom citizen and licensed solicitor, was sentenced to 21 months in prison, followed by two years of supervised release. Tesler also was ordered to pay a $25,000 fine and previously was ordered to forfeit $148,964,568. Yesterday, Wojciech J. Chodan, 74, a United Kingdom citizen and former salesman at KBR’s U.K. subsidiary, was sentenced to one year of probation and ordered to pay a $20,000 fine. Chodan previously was ordered to forfeit $726,885.
Tesler and Chodan were indicted on Feb. 17, 2009, and subsequently extradited to the United States from the United Kingdom. On Dec. 6, 2011, Chodan pleaded guilty to count one of the indictment charging him with conspiring to violate the FCPA. On March 11, 2011, Tesler pleaded guilty to one count of conspiracy to violate the FCPA and one count of violating the FCPA.
All three defendants fully cooperated with the department’s investigation, which resulted in more than $1.7 billion in penalties, disgorgement and forfeitures. The defendants’ substantial assistance in the investigation and prosecution of other defendants was reflected in the sentences the court imposed.
“Today’s prison sentences for Mr. Stanley and Mr. Tesler mark another important step in our prosecution of those responsible for a massive bribery scheme involving engineering, procurement and construction contracts in Nigeria,” said Mythili Raman, Principal Deputy Assistant Attorney General for the Criminal Division. “These sentences reflect not only the defendants’ illegal acts, but also their substantial cooperation with the government. As a result of this investigation, three individuals have been convicted of FCPA-related crimes, and five companies in four countries have paid substantial penalties and undertaken significant efforts to enhance their compliance programs. This case shows the importance the department places on putting an end to foreign bribery.”
According to court documents, KBR was a member of the TSKJ joint venture (named for the first letters of the names of the companies involved), along with Technip S.A., Snamprogetti Netherlands B.V., and JGC Corporation. Between 1995 and 2004, TSKJ was awarded four EPC contracts, valued at more than $6 billion, by Nigeria Liquefied Natural Gas (LNG) Ltd. to build the LNG facilities on Bonny Island. The government-owned Nigerian National Petroleum Corporation was the largest shareholder of NLNG, owning 49 percent of the company.
From approximately 1994 through June 2004, the joint venture companies, Stanley, Tesler, Chodan and others agreed to pay bribes to a wide range of Nigerian government officials in order to obtain and retain the EPC contracts. To pay the bribes, the joint venture hired two agents – Tesler and Marubeni Corporation, a Japanese trading company headquartered in Tokyo. The joint venture hired Tesler as a consultant to pay bribes to high-level Nigerian government officials, including top-level executive branch officials, and hired Marubeni to pay bribes to lower-level Nigerian government officials. At crucial junctures preceding the award of the EPC contracts, Stanley and other co-conspirators met with successive holders of a top-level office in the executive branch of the Nigerian government to ask the office holders to designate a representative with whom TSKJ should negotiate bribes to Nigerian government officials. TSKJ paid approximately $132 million to a Gibraltar corporation controlled by Tesler and $51 million to Marubeni during the course of the bribery scheme for use, in part, to pay bribes to Nigerian government officials.
In a related criminal case, KBR’s successor company, Kellogg Brown & Root LLC, pleaded guilty in February 2009 to FCPA-related charges for its participation in the scheme to bribe Nigerian government officials. Kellogg Brown & Root LLC was ordered to pay a $402 million fine and to retain an independent compliance monitor for a three-year period to review the design and implementation of its compliance program.
In another related criminal case, the department filed a deferred prosecution agreement and criminal information against Technip in June 2010. According to that agreement, Technip agreed to pay a $240 million criminal penalty and to retain an independent compliance monitor for two years. In July 2010, the department filed a deferred prosecution agreement and criminal information against Snamprogetti, which also agreed to pay a $240 million criminal penalty. In April 2011, the department filed a deferred prosecution agreement and criminal information against JGC, in which JGC agreed to pay a $218.8 million criminal penalty and to retain an independent compliance consultant for two years. In January 2012, the department filed a deferred prosecution agreement and criminal information against Marubeni, in which Marubeni agreed to pay a $54.6 million criminal penalty and to retain a corporate compliance consultant for two years
The criminal cases were prosecuted by Assistant Chief William J. Stuckwisch and Deputy Chief Patrick F. Stokes of the Criminal Division’s Fraud Section, with investigative assistance from the FBI-Houston Division. The Criminal Division’s Office of International Affairs and the SEC’s Division of Enforcement provided substantial assistance. Significant assistance was provided by authorities in France, Italy, Switzerland and the United Kingdom. Investigative assistance with the prosecution of Stanley was also provided by the Internal Revenue Service’s Criminal Investigations Division in Houston.
Kellogg Brown & Root
This company, now known as KBR, Inc., was spun off from a subsidiary of Halliburton. It is one of the largest engineering and construction firms in the world and has been connected to large U.S. military contracts. According to the New York Times, in 2009, the Department of Justice charged the company with offenses under the FCPA, including paying hundreds of millions of dollars to secure a natural gas plant construction contract to Nigerian officials. KBR pleaded guilty, as did its CEO Albert Jack Stanley, and paid $402 million in fines, as well as $177 million to the SEC. Stanley was sentenced to 2.5 in prison, beginning in 2012.
SIEMENS AG BRIBERY CASE
This case discusses the bribery scandals that were unearthed at Siemens AG (Siemens) in 2006 and 2007. There were a series of scandals that involved some of the company’s employees bribing foreign officials to gain contracts and creating slush funds for this purpose.
In another case, the company was accused of bribing labor representatives on the suprvisory board in order to gain their support for its policies. After the German authorities conducted raids on Siemens’offices in Germany, investigations were initiated on Siemens in several other countries like the US, Greece, Italy and Switzerland for possible misconduct.| | As a fallout of this scandal, the CEO of the company, Klaus Kleinfeld, and the chairman of the supervisory board, Heinrich von Pierer, had to resign even though they were not directly implicated.
With bribery scandals surfacing in Siemens and many other German companies like Volkswagen, questions were also raised about the effectiveness of the Co-determination law in Germany, which advocated a system in which a supervisory board governed the management board and at least half the
supervisory board seats had to be filled by labor representatives.
In such a system, critics contented that the management always needed the labor representatives’support to be in job and gain support for company policies, which led to a suspicious alliance between them. The case also highlights the opinions of several analysts on the issues related to bribing by the German companies and Siemens in particular and the challenges the new CEO is likely to face at Siemens. |
This €1 billion was in addition to the billions of euros that it paid in fines, back taxes and late interest charges by 2007.4
Peter Loescher (Loescher), who joined as the CEO of Siemens in 2007 following the major bribery scandal that broke out in the company, said, “We regret what happened in the past. But we have learned from it and taken appropriate measures. Siemens is now a stronger company.”5
On May 14, 2007, a German court convicted two former managers of Siemens AG (Siemens) for diverting the company’s money to bribe employees of Enel SpA6 (Enel), an Italian energy company.7| | Both the former managers admitted that they had bribed employees at Enel who had demanded money in return for contracts. They also said that they had not done anything wrong as they did it for the benefit of the company and not for any personal gain.
Moreover, there was no other way to win contracts in several countries abroad where bribing for contracts was a Around the same time as the Siemens cases came out, unethical practices surfaced in other German companies including Volkswagen AG (Volkswagen), Deutsche Telekom AG, Deutsche Bahn AG and Deutsche Post AG. At Volkswagen, a senior executive was fined €576,000 and received a suspended prison sentence in January 2007 for bribing labor representatives with money, foreign trips and prostitutes.
Since several of the corruption scandals involved the bribing of labor representatives on the boards of German companies, some analysts felt that the Co-determination law or Mitbestimmung in Germany was flawed…| Siemens AG
Foreign companies that do business onshore in the U.S. also fall under the provisions of the FCPA. According to reports from the New York Times and the SEC, Siemens AG, a German engineering firm, ran afoul of the law in 2008 when it was charged for paying $16 million to the president of Argentina to secure a contract for making Argentinean identity cards. The contract was worth $1 billion to Siemens AG. In total, the company was accused of paying more than $100 million in total to government officials. Eight former employees and contractors continue to face charges in the scheme. Siemens settled with the Department of Justice and paid $1.6 billion in fines in
BAE SYSTEMS BRIBERY CASE
The UK Government’s decision to drop the SFO’s investigation into allegations of bribery and corruption at BAE Systems was lawful. BAE have announced an implementation programme of the Woolf Committee recommendations on ethical policies and processes. BAE Systems is a British manufacturer and distributor of military equipment. It was investigated by the SFO for accusations that it paid Prince Bandar of Saudi Arabia close to £1 billion over a ten year period in connection with Al-Yamamah, a £43 billion arms deal. The investigation was dropped in December 2006, with the UK Government citing national security reasons. It was reported that the decision was prompted by a threat from Saudi Arabia to withdraw all cooperation on security and intelligence regarding terrorism as well as ending other business deals with UK companies. There was considerable debate questioning the lawfulness of the decision to drop the investigation, but in July 2008 the House of Lords decided the decision was lawful.
In June 2007, BAE’s Board appointed Lord Woolf, former Lord Chief Justice of England and Wales, to chair a committee, the Woolf Committee, to report upon its current ethical policies and processes. The Woolf Committee published its report in May 2008 and in July 2008 BAE announced a three-year programme to fully implement and embed all 23 recommendations to deliver its goal to achieve benchmark standards of governance in the conduct of its day-to-day business. Since June 2007, there has been an ongoing investigation into Al-Yamamah by theUS Department of Justice. BAE Systems is to pay up to $450m (£288m) in fines after it pleaded guilty to false statements and accounting practices, notably over deals with Saudi Arabia and Tanzania, in a landmark settlement between the defence giant and the US and UK authorities.
The Serious Fraud Office also dropped proceedings last night against Count Alfons Mensdorff-Pouilly, who was charged with making illegal payments to government officials to win jet deals for BAE just last week. BAE’s settlement with the SFO will see it pay £30m – a record criminal fine for a company – specifically relating to “failing to keep reasonably accurate accounting records relating to its activities in Tanzania”. The defence giant sold a radar system to the African country in 1999, and its chairman Dick Olver yesterday admitted it made “commission payments to a marketing adviser and failed to accurately record such payments in its accounting records”. He added that the company “failed to scrutinise these records adequately to ensure that they were reasonably accurate and permitted them to remain uncorrected”.
The $400m settlement with the DoJ saw BAE admit to a charge of conspiring to make false statements to US authorities in relation to the sale of arms to Saudi Arabia in the 1980s and 1990s. This is understood to be connected to payments that were made to an unnamed Saudi official as part of the £40bn al-Yamamah arms deal between the UK and Saudi Arabia. The US DoJ said BAE had admitted “intentionally failing to put appropriate, anti-bribery preventative measures in place, despite telling the US government that these steps had been taken”. A separate investigation by the SFO into bribery allegations involving BAE and al-Yamamah was controversially dropped in 2006 after the Government insisted the inquiry could upset UK relations with the Arab kingdom and posed a threat to national security. Shares in BAE firmed 5.4p, or 1.6 per cent, to 345.9p last night as the company said the settlement drew a line under any further action by the DoJ and SFO against the defence company.
Mr Olver also stressed that all the activities BAE was investigated for related to activities that happened before 2002 and that none of the activity related to its actual US business. The SFO confirmed that no further prosecutions would be brought against BAE, given the measures it has taken to implement ethical and compliance reforms and as a result of its agreement with the DoJ. Richard Alderman, the SFO’s director, said: “This is a first and it brings a pragmatic end to a long-running and wide-ranging investigation.” He added: “I’d also like to acknowledge the efforts made by BAE to conclude this matter and I welcome its declared commitment to high ethical standards.” Yesterday Mr Olver said: “The company very much regrets and accepts full responsibility for these past shortcomings.
These settlements enable the company to deal finally with significant legacy issues.” “While it’s a substantial figure, it’s less than the worse case scenario,” said Tina Cook, an analyst at Charles Stanley. “It also removes an overhang on the share price caused by uncertainty about the investigations.” Commentators also said the settlement was significant as it sets a precedent for co-ordinated, cross-jurisdiction action in other corportate corruption cases. Gavin Cunningham, the head of corruption investigations at accountancy firm BDO Stoy Hayward, said the SFO penalty “sends out a powerful message to UK business that corruption is going to be investigated and pros BAE Systems
The British aerospace company has been under investigation by British authorities since 1989, making it one of the longest fraud investigations in history. The main concern surrounded a deal between Britain and Saudi Arabia to supply fighter jets. The investigation spread to BAE’s dealings in South Africa, Tanzania, Chile, Romania, the Czech Republic and Qatar. The investigation focused on payments made by BAE through a “go-between” company to foreign officials. The British version of the Department of Justice dropped most of the investigations, citing national security concerns, but U.S. authorities picked up the ball in 2007. According to the Telegraph, BAE settled with U.S. courts and paid a $400 million fine.
Kerry Khan and Michael Alexander Bribery Case
A former program manager for the Army Corps of Engineers and his son pleaded guilty Thursday to federal charges in a scheme that paid out more than $30 million worth of bribes and kickbacks as payments for steering multimillion dollar government contracts, federal prosecutors said. Kerry F. Khan, 54, of Alexandria, pleaded before Judge Emmet G. Sullivan in the U.S. District Court in the District to charges of bribery and conspiracy to commit money laundering, officials said in a statement. “Today, the ringleader of the largest bribery and bid-steering scheme in the history of federal contracting accepted responsibility for his crimes,” U.S. Attorney for the District Ronald Machen said in the statement. “For his shocking abuse of his position of power, Kerry Khan faces more than two decades in prison.” Ads by Google
* Avoid an FCPA ViolationAnti Corruption Screening Software For your Legal and Compliance TeamsWorldCompliance.com Kahn’s son, Lee A. Kahn, 31, of Fairfax also pleaded guilty to a charge of conspiracy to commit money laundering. The elder Khan worked for the Army Corps of Engineers from 1994 until he was arrested by federal authorities in October 2011. His position gave him authority to place orders for products and services through federal contracts, and he also certified that work orders were completed, officials said. The father and son were among four men arrested in October on charges of conspiring to commit bribery and wire fraud. Authorities accused the men of inflating invoices during a four-year period and then collecting tens of millions of dollars for themselves and co-conspirators.
Prosecutors said Kerry Khan signed a statement of offense that said that in or around 2006, he and colleagues agreed to work together to obtain government contracts for corrupt contractors who would reward them with bribes. Authorities said their investigation continues, but they have found eight people to have have been part of this scheme. Among others, Kerry Khan and Michael A. Alexander, also an Army Corps of Engineers program manager, worked with Harold F. Babb, a contractor, on their plot to use a company called EyakTek as a vehicle for channeling contracts awarded by the Army Corps of Engineers.
EyakTek then hired subcontractors that submitted fraudulently inflated estimates or prices for equipment and services, authorities said. The subcontractors kicked back a significant portion of the excess funds to Kerry Khan and Alexander as bribes for keeping the money flowing their way, officials said. Prosecutors said Khan and his son admitted to establishing multiple corporations and shell companies to hide the money and purchase real estate, including several houses and condos. Lee Khan managed the portfolio of properties and automobiles purchased using the bribe money, by leasing the homes to tenants or selling vehicles, officials said.
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* Avoid an FCPA ViolationAnti Corruption Screening Software For your Legal and Compliance TeamsWorldCompliance.com A sentencing date has not been set for either man. Kerry Khan faces a maximum 15-year sentence for the bribery charge and up to 20 years in prison for the conspiracy charge. Babb and Alexander pleaded guilty to federal charges earlier this year. The men will remain held through the sentencing, officials said.
Kerry Khan and Michael Alexander
Individuals can also find themselves charged for bribery and fraud. According toe Lubbock Online, in October 2011, two U.S. Army Corps of Engineers employees were arrested and charged with fraud for taking kickbacks, estimated at over $20 million. Kerry Khan and Michael Alexander are accused of taking bribes from contractors in exchange for being awarded lucrative government contracts, and of inflating invoices to the government and skimming the difference. Khan and Alexander remain in jail pending trial and face maximum sentences of 25 to 40 years.
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 24 December 2016
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