U.S. v. Metcalf & Eddy, Inc. Case Summary

Metcalf & Eddy International Inc. is an environmental engineering firm, headquartered in MA.  M&E paid “things of value” to an Egyptian public official (Chairman of the Alexandria General Organization for Sanitary Drainage - AGSOD) to induce the official to use his influence to support contracts and contract extensions between the US AID and M&E of which AGSOD was the beneficiary. The Chairman of AGSOD could influence the selection process through direct communications with USAID regarding his preference.

The Phase I project involved infrastructure development, and the final contract was increased by an additional $600,000.  The Phase II project involved the provision of architectural and engineering services to AGSOD, and the final contract price was increased by an additional $2.6 million for the contract extension.

The AGSOD chairman traveled twice to the US at the invitation of M&E Int’l during periods of time in which the awarding of the Phase I and Phase II contracts, and the corresponding extensions, were under consideration by USAID.  The Chairman’s wife and two children accompanied him on both trips at M&E’s expense.

· The first trip, from October 5-25, 1994, included travel to Boston, Washington DC, and Chicago, during which time the chairman was invited to a water conference in Chicago.

· The second trip, from September 13-26, 1996, involved travel to Paris, Boston and San Diego

On both trips, the Chairman received 150% of his estimated per diem expenses in a lump sum prior to leaving Egypt.  AID authorized the 150%  based upon M&E’s false representation that no accommodations were available within the ordinary expense.  In addition, an officer of M&E obtained two undocumented cash advances immediately prior to and during the Chairman’s 1996 trip, which funds were apparently expended in connection with the Chairman’s trip.  M&E paid for most of the travel and entertainment expenses incurred by and on behalf of the Chairman and his family, despite the fact that the Chairman had already received funds for his own expenses.

Complaint:  The following payments of cash and things of value violated the FCPA:

· The provision of the per diem advance, including the extra 50% per diem, with the full knowledge that the Chairman would not be expected to pay for any of his expenses while in the U.S.;

· the first class upgrade of the Chairman on both trips;

· the provision of first class airfare to the Chairman’s wife and family; and

· the payment of undocumented expenses on the 1996 trip

Further, M&E failed to make and keep books and records which in reasonable detail, accurately and fairly reflected the payment of money and things of value to and for the benefit of the Chairman.

Consent:  In December 1999, M&E consented to:

· maintain a compliance and ethics program designed to detect and prevent violations of the FCPA and other applicable foreign bribery laws.

· It will provide a copy of all corporate resolutions and other documents describing and implementing such compliance and ethics program

· The compliance and ethics program shall include, at a minimum, the following components:

-  a clearly articulated corporate policy and the establishment of compliance standards and procedures;

-  the assignment to one of more senior M&E corporate officials of responsibility for oversight of compliance. 

-  Such official shall have the authority and responsibility to implement and utilize monitoring and auditing systems reasonably designed to detect violations;

-  where appropriate, to retain outside counsel and independent auditors to conduct investigations and audits. 

-  In addition, such official shall be charged with making any necessary modifications to the compliance program to respond to detected violations

· The establishment and maintenance of a committee to review:

-  the retention of any agent, consultant or other representative for the purposes of business development in a foreign country

-  all contracts related thereto

-  the suitability of all prospective JV partners and the adequacy of due diligence performed relating to the selection of the JV partner and continued suitability

-  due diligence in connection with the retention of sub-agents and consultants by the JV partner for purposes of business development

The majority of the committee shall be comprised of persons who are not subordinated to the most senior officer of the department or unit responsible for the relevant transaction

· Clearly articulated corporate procedures to ensure that M&E exercises due care to assure that:

-  substantial discretionary authority is not delegated to individuals who have a propensity to engage in illegal activities;

-  necessary and prudent precautions are taken to ensure that M&E has formed business relationships with reputable and qualified agents, consultants and other representatives for purposes of business development.  Such policy shall require that evidence of such a “due diligence inquiry” be maintained in M&E’s files

· Effective communication of policies and standards through regular training, on a periodic basis, on the FCPA and other applicable foreign bribery laws to personnel and agents/other reps involved in foreign projects

· Implementation of appropriate disciplinary mechanisms

· Establishment of reporting systems

· The inclusion in all contracts and contract renewals with agents and subs of FCPA reps, certifications and termination rights

· Implement financial and accounting procedures to be certified by the company’s CFO, designed to ensure that:

-  accurate books and records are kept

-  adequate system of internal accounting controls

· Investigate and report any alleged violations to DOJ

· Periodic review (not less than once every five years) of corporate policies and compliance programs to be conducted by independent legal and auditing firms.