DOJ Announces DPA And Guilty Plea Involving Netherlands-Based Energy Services Firm That DOJ Claims Failed To Promptly Report Alleged FCPA Violations
On November 29, 2017, the U.S. Department of Justice (“DOJ”) announced that SBM Offshore N.V. (“SBM”), a Netherlands-based maker of offshore drilling equipment for the energy industry, entered into a deferred prosecution agreement (“DPA”) to resolve criminal charges alleging that SBM violated the Foreign Corrupt Practices Act (“FCPA”). United States v. SBM Offshore N.V., Crim. No. 17-686 (S.D. Tex). The DOJ alleged that SBM executives made payments in excess of $180 million to intermediaries knowing that intermediates would use some of that money to bribe foreign officials in Brazil, Angola, Equatorial Guinea, Kazakhstan, and Iraq. According to the DOJ, officials in those countries proceeded to award SBM contracts valued at $2.8 billion. SBM agreed to pay a $238 million criminal penalty, including a $500,000 criminal fine and $13.2 million in criminal forfeiture, to the United States settle the charges. Moreover, its U.S. subsidiary, SBM Offshore USA Inc. (“SBM USA”), agreed to plead guilty to one count of conspiracy to violate the FCPA’s anti-bribery provisions. Three years ago, SBM settled charges with the Dutch Public Prosecutors over related conduct, and paid the Netherlands $200 million in disgorged profits and a $40 million fine.
As alleged in the DPA, executives at SBM and its Houston-based subsidiaries, including SBM USA, engaged in a bribery scheme with foreign intermediaries to obtain contracts from state-owned oil and gas companies, such as Brazil’s Petroleo Brasileiro S.A. (“Petrobras”) and Angola’s Sociedade Nacional de Combustiveis de Angola, E.P. (“Sonangol”). According to the DOJ, from 1996 to 2012, SBM funneled more than $180 million through Swiss bank accounts to the intermediaries, which in turn directed a portion of those payments to officials at the state-owned enterprises. SBM allegedly included these payments in its line-item budgets, describing the payments as “commissions.” Additionally, SBM allegedly hired the relatives of several Angolan officials and paid for officials in Brazil, Angola, and Equatorial Guinea to travel to and attend unspecified sporting events.
SBM executives were allegedly deeply involved in the company’s efforts to bribe foreign officials. According to the DPA, one unnamed SBM executive left the company to become an intermediary himself and personally represented SBM in dealings with government officials in Equatorial Guinea and Angola. Moreover, SBM executives allegedly gave the company’s sales and marketing staff discretion to pay smaller bribes to foreign officials, thereby eliminating the need for intermediaries. Lower-level SBM sales and marketing employees were allegedly allowed to deliver jewelry and electronics to government officials without first obtaining approval from SBM executives.
The DOJ credited SBM for having cooperated with the Department’s investigation and for engaging in remedial measures, including the termination of two employees who participated in the scheme. In light of these mitigating factors, the DOJ reduced SBM’s total penalty by 25 percent off of the bottom range of U.S. Sentencing Guidelines. However, that discount likely would have been greater if DOJ had concluded that SBM immediately informed authorities upon learning of the misconduct. According to the DPA, SBM did not receive voluntary disclosure credit, as it waited approximately one year before informing authorities of the bribery scheme.
The DOJ’s refusal to extend voluntary disclosure credit and its decision to demand a guilty plea, particularly after the Dutch Prosecutor’s Office had already settled charges, underscores the DOJ’s continued effort to encourage self-disclosure by companies, as reflected in its recent announcement of a revised FCPA Corporate Enforcement Policy.