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$3.5 Billion in Global Penalties, Most Ever, to Resolve Foreign Bribery Case

Wednesday, December 28, 2016
Sandler, Travis & Rosenberg Trade Report

The Department of Justice reports that a global construction conglomerate and a petrochemical company have agreed to pay a combined total penalty of at least $3.5 billion to resolve bribery charges with authorities in the U.S. and two other countries.

According to a DOJ press release, the construction conglomerate “engaged in a massive and unparalleled bribery and bid-rigging scheme” in which it paid approximately $788 million in bribes to government officials, their representatives, and political parties in a number of countries over more than a decade to win business. As part of this scheme the company and its co-conspirators created and funded an elaborate, secret financial structure within the company, including a separate division that effectively functioned as a stand-alone bribe department. In all, this conduct resulted in corrupt payments and/or profits totaling approximately $3.34 billion.

The petrochemical company admitted to paying approximately $250 million into the conglomerate’s bribe payment system over the course of eight years and to receiving benefits such as preferential rates for the purchase of raw materials and favorable legislation and government programs that reduced the company’s tax liabilities. This conduct resulted in corrupt payments and/or profits totaling approximately $465 million.

For their roles in this conspiracy the construction conglomerate agreed that the appropriate penalty is $4.5 billion (though actual sentencing, scheduled for next April, will be subject to further analysis of the company’s ability to pay) and the petrochemical company agreed to pay a total criminal penalty of $632 million. The petrochemical company also settled with the U.S. Securities and Exchange Commission, which it will pay $325 million in disgorgement of profits. In addition, both companies will be required to continue their cooperation with law enforcement (including in connection with the investigations and prosecutions of individuals responsible for the criminal conduct), to adopt enhanced compliance procedures, and to retain independent compliance monitors for three years. 

The DOJ states that these settlements were based on a number of factors. On one hand the DOJ cited the failure to voluntarily disclose the conduct; the nature and seriousness of the offense, which spanned many years, involved the highest levels of the companies, occurred in multiple countries, and involved sophisticated schemes; and the lack of an effective compliance and ethics program at the time of the conduct. On the other hand, the DOJ gave credit for each company’s respective cooperation, including 25 percent off the bottom of the U.S. Sentencing Guidelines fine range for the conglomerate’s full cooperation and 15 percent off for the petrochemical company’s partial cooperation. The DOJ also noted that both companies have engaged in remedial measures, including terminating and disciplining individuals who participated in the misconduct, adopting heightened controls and anti-corruption compliance protocols, and significantly increasing the resources devoted to compliance.

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