Metcalf & Eddy (1999)

              Facts: 

--  Privately held U.S. company

--  Travel and entertainment expenses paid for official in Egyptian instrumentality with power to influence decisions regarding pending USAID-funded contracts in Egypt

--  Payments included travel, lodging, and per diem expenses for two trips to various destinations for official, his spouse and children

-- Per diem payments were made in addition to direct payments of travel expenses, at 150% of approved USAID rates; the 50% premium was not reported to USAID

              How the Alleged Violations Came to Light

--  USAID audit

              Enforcement Action Taken:

-- DOJ brought civil action alleging that per diems paid over and above expenses were “unrestricted cash payments”

-- DOJ cited M&E’s failure to maintain adequate books and records of the payments, despite Metcalf’s status as a non-issuer not covered by those provisions of the Act

              Penalties Imposed:

--  DOJ civil consent decree

--  $400,000 civil fine; $50,000 additional fine to cover DOJ costs of investigation

--  Permanent injunction against future violations applying to Company, officers and agents

-- Mandatory compliance program imposed by consent decree, including certain punitive measures and accounting and recordkeeping requirements

For more detail see Metcalf Case Summary.

              Saybolt (1999)

              Facts: 

--  U.S. subsidiary of Dutch company

--  Paid a $50,000 bribe to Panamanian official

--  Payment to secure lease and other concessions    

              How Violation Came to Light:

--  Began as investigation of violation of Clean Air Act regulations

--  Internal e-mail correspondence provided critical evidence

              Enforcement Action Taken:

--  Company indicted

--  Top U.S. official indicted

--  First foreign national (Dutch chairman of the U.S. company)

--  indicted for FCPA violations

              Penalties Imposed:

--  Company pled guilty in January 1999

--  $1.5 million fine for FCPA violations

--  5 years probation

--  Company agreed to cooperate in prosecution of individuals

--  Foreign national fled prosecution and remains at large

--  Saybolt’s former top U.S. official convicted and sentenced to 4 months in prison, 4 months home detention, 3 years probation, and $20,000 personal fine

-- The case was the subject of a 1999 CNN/Fortune report entitled “Dirty Dealing.”

              IBM (1997-1999)

              Facts: 

--  Argentine subsidiary of IBM

--  Alleged bribes to Argentina Minister of Finance

--  Payments made through technology subcontractor contracts

--  Contracts paid to dummy corporations controlled by a third party

--  Third party partner was unqualified for work being subcontracted to it

              How the Alleged Violations Came to Light

--  Began as routine tax audit of Argentine company

              Enforcement Action Taken:

--  DOJ investigation U.S. parent closed without action

--  SEC pursued civil enforcement action against U.S. parent

--  30 senior IBM subsidiary executives charged with intent to defraud Argentine government

--  10 individuals, including President of IBM Argentina indicted on bribery charges in Argentina

              Penalties Imposed:

--  IBM subjected to SEC cease and desist order; consented to entry of civil judgment finding violation of Rule 13(b)-2; paid $300,000 civil fine

--  Parent terminated most of subsidiary’s senior management

--  IBM temporarily debarred from future Argentine government contracting

--  Local criminal prosecutions pursued

--  Numerous articles on the investigations appeared in major newspapers

              Triton Energy (1997)

              Facts: 

--  Triton Indonesian subsidiary

--  Payments to Indonesian officials to reduce tax liability

--  Falsified records to hide the payments as routine business expenses

--  Legitimate “facilitating payments” also mischaracterized as “tax 

consulting fees” and “entertainment expenses”

--  Parent did not expressly authorize payments or falsification

--  Senior management suppressed internal audit report

              How Violation Came to Light:

--  Whistleblower employee raised it in wrongful discharge claim

              Enforcement Action Taken:

--  SEC filed civil injunction action against parent

--  SEC filed civil injunction action against individual officers

--  DOJ investigated, but did not prosecute

--         Conduct at issue dated from 1980s (problems of proof)

--         Triton no longer owned the subsidiary

--         Subsidiary personnel no longer with Triton

              Penalties Imposed:

--  Triton consented to $300,000 SEC penalty

--  SEC permanent injunction against future violations

--  One company official consented to $50,000 fine and injunction

--  Second official charged has yet to settle charges

--  Four other officers consented to cease and desist order

--  Cooperation by new management of parent company reduced

penalties

              Baxter International

This case was ultimately resolved as an antiboycott violation.  Illegal payments issues arose, but were never the subject of a formal enforcement action.  Nonetheless, the case illustrates the potentially devastating collateral effects of an enforcement action in the corruption arena.

              Facts:

--  Baxter improperly provided information to Syrian and Saudi officials as part of its efforts to get off the Arab blacklist of companies doing business with Israel

--  Baxter also failed to report requests for boycott-related information

--  $700,000 in payments to Syrian consultant, who consulted with Syrian officials and arranged plan for Baxter to persuade officials to remove company from black list by employing local businesses to build large local facility

              Penalties Imposed:

--         Company paid $6 million Department of Commerce fine

--         Two-year denial order for exports to Syria and Saudi Arabia

--         $500,000 DOJ criminal fine

--         General Counsel paid $100,000 fine

              Specific Collateral Damage:

            --   General Counsel resigned

            --   President resigned

            --   Export licensing denial order

            --   Significant decrease in stock value (+/- 15%)

            --   New York State contracts cancelled

            --   Debarment from Veterans Administration contracts

            --   Lost contracts with Premier Hospital Alliance, major customer

            --   Letter-writing campaign against company official sitting on Yale University board

--   Letter-writing campaign calling for major stockholder to divest

              Lockheed (1995)

              Facts: 

--  $1 million in commission payments to agent

--  Payment to assist with aircraft sale to Egyptian government

--  Agent became official during term of commission agreement
--  Employees circumvented normal compliance procedures

--  Company filed false certification with DOD and Egyptian government stating that no commissions would be paid on the sale

              How Violation Came to Light:

--  Began as investigation of false certification to U.S. government under DOD regulations

              Enforcement Action Taken:

--  Company indicted

-- conspiracy to violate the FCPA

-- violating the FCPA

-- conspiracy to defraud the U.S. government

--  US Attorney obtained extradition of S. Nassar from Syria

--  Two company officials indicted

              Penalties Imposed:

--  Plea agreement:  $25 million fine for $1 million “bribe”

-- fine equaled twice the profit realized on the sale

--  Suleiman Nassar pled guilty, sentenced to:

-- 18 months

-- $125,000 fine

--  Allen Love pled guilty to one misdemeanor count

-- agreed to cooperate against company

-- fined $20,000

--  First use of Sentencing Guidelines

--  First use of alternative fines provisions

--  First prison term for individuals

--  Extensive international cooperation between U.S., Swiss, and Syrian authorities

--  Risk of collateral consequences induced settlement

              Specific Collateral Damage:

--  Company successfully fought DOD debarment proceedings

--  Company successfully fought suspension of export licensing

--  Former Company official filed $55 million wrongful discharge suit claiming discharge was retaliation for testimony against Compan