French oil and gas developer Total S.A recently agreed to pay over $398 million in fines, disgorgement, and prejudgment interest to settle allegations that it violated the Foreign Corrupt Practices Act (FCPA). The settlement amount is one of the biggest in FCPA history, and provides yet another example of how eager the U.S. Department of Justice and Securities and Exchange Commission are to penalize foreign companies for overseas corruption activities with little or no connection to the United States.
The settlement stems from charges that Total bribed an Iranian official to use his influence to secure development rights in the Siri A and E and South Pars oil and gas fields for the company. The official was the Chairman of a state-owned Iranian engineering company, and previously held a position in the National Iranian Oil Company (NIOC). Using an employee of a Swiss bank and a British Virgin Islands limited liability corporation as intermediaries, the official had Total funnel approximately $60 million to him over a nine year period through dubious consulting and services agreements. Total disguised these payments as “business development expenses” in its records. The contracts the company received resulted in approximately $150 million in profit.
Total’s American Depository Receipts are listed on the New York Stock Exchange, making it an “issuer” under the FCPA and subject to the regulations. Consequently, the U.S. agencies charged the company with not only violating the FCPA’s anti-bribery provisions, but also its books and records provisions and accounting requirements for disguising and failing to prevent the corrupt payments respectively. As previously discussed in this newsletter, the penalties for violating the FCPA’s books and records and accounting provisions are considerably more severe than those associated with bribery.
Of the $398 million overall settlement amount, $245.2 million is a monetary penalty, with the balance attributable to disgorgement and prejudgment interest. Total is also required to retain an independent corporate compliance monitor as well as a compliance consultant, both for a three year period, the length of the deferred prosecution agreement. That deferred prosecution agreements are on the rise in this area is noteworthy, as is foreign company willingness to enter into them. The staggering penalty amounts in this case come as no surprise, as the U.S. government has made a concerted effort over the last several years to aggressively target both entities and nations with commercial ties to the Iranian petroleum sector.
For more information about the contents of this newsletter, or about Kelley Drye's International Trade Practice, please contact practice group chair Kathleen Cannon or partner Paul Rosenthal, who acts as editor of this publication.