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April 26, 2010
By Fiona Philip
Howrey LLP
A U.S. District Court judge has handed down “the longest-ever prison sentence” for a Foreign Corrupt Practices Act (FCPA) violation, according to the U.S. Department of Justice.
Judge Henry Hudson of the Eastern District of Virginia on April 19 sentenced Charles Jumet to 87 months in prison for conspiring to violate the FCPA and for making false statements to federal agents. 1/
Jumet, a vice president of Ports Engineering Consultants Corporation, pleaded guilty to paying more than $200,000 in bribes to high-ranking Panamanian government officials between 1997 and 2003 in exchange for maritime contracts, including maintenance of lighthouses and buoys along Panama’s waterways.
PECC’s president, John Warwick, also has pleaded guilty to the same conduct and is scheduled to be sentenced on May 14, 2010.
Besides being sentenced to more than seven years in prison, Jumet was sentenced to three years of supervised release and ordered to pay a $15,000 fine.
“Today’s sentence -- the longest ever imposed for violating the FCPA -- is an important milestone in our effort to deter foreign bribery,” Assistant Attorney General Lanny Breuer said. “As this case confirms, foreign corruption carries with it very significant penalties, which can include substantial prison time for individuals who violate the law.”
Neil MacBride, U.S. attorney for the Eastern District of Virginia, added: “Bribery isn’t just a cost of doing business overseas. Today’s sentence makes clear that this is a serious crime that the U.S. government is intent on enforcing.”
Targeting Individuals
These two statements succinctly illustrate the DOJ’s commitment to prosecute individuals who violate the FCPA. The sentence is just another example of the DOJ’s continuing efforts to enforce the FCPA against individuals. DOJ’s focus on individuals is growing and can be seen through, among other actions, the January 2010 FBI sting operation that resulted in indictments against 22 individuals in the arms industry; the conviction of Hollywood producers Gerald and Patricia Green, who await sentencing after being convicted for bribing Thai tourism officials; and the conviction and sentencing of former U.S. Rep. William Jefferson to 13 years in prison. In 2009 alone, there were three FCPA trials against four individuals -- that equals the total number of trials in the prior seven years.
Assistant Attorney General Breuer has made no secret that the “prosecution of individuals is a cornerstone of [the DOJ’s FCPA] enforcement strategy.” “Put simply,” Breuer said in a November speech, “the prospect of significant prison sentences for individuals should make clear to every corporate executive, every board member, and every sales agent that we will seek to hold you personally accountable for FCPA violations.” 2/
Background on FCPA Enforcement
The FCPA poses a hazard not just for corporate reputations and coffers but also for the individual executive. It is the principal weapon of the U.S. government to combat corruption in international business dealings, and the U.S. government is aggressively pursuing FCPA cases. In the last year, there have been billions of dollars of fines, sting operations and the pursuit of individuals around the world:
Hefty penalties are the order of the day: In the past year, companies have settled with regulators to the tune of billions of dollars in penalties, fines and disgorgement:
|  | Halliburton/KBR paid $600 million.
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| | Siemens paid $1.6 billion.
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| | BAE paid $450 million.
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| | It is reported that Daimler will pay an estimated $200 million.
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Not factored into those numbers is the cost of the investigations. Technip recently reported a charge of approximately $500 million related to government investigations into its involvement in the TSKJ joint venture in Nigeria (the Halliburton/KBR settlement). By contrast, investment in a comprehensive compliance program and FCPA due diligence on agents and consultants is an inexpensive way to protect the bottom line.
Sting operations: In a very aggressive move, DOJ, working with UK authorities in a sting operation, caught everyone by surprise. Using tactics usually reserved for crime syndicates, DOJ and UK police arrested 22 individuals who allegedly attempted to make improper payments to FBI agents posing as representatives of procurement officers for a top minister of an African country. The improper payments were intended to obtain the award of contracts to sell military and law enforcement supplies. In an unusual twist, no actual foreign officials were involved.
Intergovernmental cooperation: On February 5, 2010, BAE settled with both DOJ and the UK’s Serious Fraud Office. Besides pleading guilty to one count of conspiracy to making false statements to the U.S. government, BAE pled guilty to a charge that it failed “to keep reasonably accurate accounting records in relation to its activities in Tanzania.” BAE’s settlement included a payment of $400 million to the U.S. government and £30 million to the Crown Court (with a designated use to benefit the people of Tanzania). (The Siemens settlement of $1.6 billion included payment of approximately $560 million to the Munich Public Prosecutor’s Office for corporate failure to supervise officers and employees.)
The February 11, 2009 Halliburton/KBR settlement only resolved issues with U.S. regulators, and investigations by French, British and Nigerian authorities remain unresolved.
According to public reports, the U.S. Securities and Exchange Commission made more than 750 requests for assistance to foreign regulators in fiscal 2009, an increase of almost 200 requests over the prior year. Geographic and economic boundaries have all but dissolved, making it more difficult to hide corrupt payments in offshore entities and far-flung subsidiaries.
Increased scrutiny of agents and consultants: Companies subject to the FCPA need to ensure that they form business relationships with responsible and qualified agents and consultants. Regulators are pursuing the middlemen and agents (as in the Siemens and Halliburton investigations) used to conceal corrupt payments to government officials. DOJ has provided companies with a list of “red flags” that, if present, should trigger heightened scrutiny. Red flags include unusual payment patterns, high commissions, a refusal by the agent or consultant to provide FCPA certifications, a lack of qualifications or expertise to perform the services being offered, and a referral to the agent or consultant by an official of a potential governmental customer.
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For more information about the issues covered in this report, please contact Fiona Philip in our Washington office at 202-383-7482 or PhilipF@howrey.com or contact your Howrey attorney. For more information about Howrey's Construction Practice Group, click here.
ENDNOTES
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