Marsha Z. Gerber, Richard Craig Smith, Kimberly Sullivan Walker and Fatema Merchant
April 8, 2011
On April 6, 2011, the U.S. Department of Justice (“DOJ”) announced that JGC Corporation resolved FCPA allegations, agreeing to pay $218.8 million in penalties for its role in an alleged decade-long conspiracy to bribe Nigerian government officials. The JGC resolution is the last in a series of four settlements involving partners of TSKJ, a Nigerian joint venture that allegedly bribed various Nigerian officials to secure lucrative construction contracts. All totaled, the TSKJ-related settlements have resulted in over $1.5 billion dollars in criminal and civil penalties and represent four of the ten largest FCPA settlements of all time. The JGC resolution also highlights the FCPA’s expansive jurisdictional reach as well as continuing and expanding cooperation among international enforcement agencies.
JGC, a Japanese engineering and construction firm, was one of four partners of TSKJ, the Nigerian joint venture that was awarded construction and engineering contracts between 1995 and 2004 valued at more than $6 billion to build liquefied natural gas facilities on Bonny Island, Nigeria. According to court documents, TSKJ hired two agents to funnel bribes to Nigerian officials in order to assist TSKJ in securing the Bonny Island contracts. TSKJ allegedly paid approximately $180 million in bribes through its agents to Nigerian officials over the course of the scheme, occasionally using correspondent bank accounts in the United States.
As part of the resolution, the DOJ and JGC entered into a two-year deferred prosecution agreement under which JGC agreed to pay a $218.8 million criminal penalty. The DOJ also filed a two-count criminal information in the Southern District of Texas charging JGC with one count of conspiracy to violate and one count of aiding and abetting to violate the FCPA, which will be dismissed if JGC abides by the terms of the DPA. The DPA, in part, directs JGC to retain an independent compliance consultant for two years to assist in reviewing and enhancing JGC’s current compliance program and to cooperate with ongoing investigations.
The JGC case is notable not only for its size—the sixth largest monetary penalty ever imposed in FCPA history—but also as yet another example of the enforcement agencies’ ability to continually broaden their jurisdictional scope under the FCPA . Unlike most corporate defendants in FCPA enforcement actions, JGC is neither a domestic concern nor an issuer, and was not alleged to have been the agent of a domestic concern or issuer. Instead, the DOJ’s criminal information bases JGC’s FCPA liability upon theories of: (1) conspiring to execute the bribery scheme with other partners in TSKJ, who were either domestic concerns or issuers; and (2) aiding and abetting a domestic concern in the bribery scheme.
Interestingly, the criminal information included allegations suggesting FCPA liability could also be based upon a “territorial jurisdiction” theory resulting from JGC’s use of correspondent bank accounts to execute the alleged bribery scheme. Specifically, the criminal information alleged that defendant JGC aided and abetted its domestic concern co-conspirator in causing corrupt U.S. dollar payments to be wire transferred from an account in Amsterdam to bank accounts in Switzerland via correspondent bank accounts in New York. Essentially, such transfers are foreign transactions between two foreign banks, passing through the U.S. along the way. While FCPA liability premised on the use of correspondent bank accounts has never been tested in the courts or exclusively relied upon by the DOJ, the DOJ has been including allegations related to this theory in other recent cases, which may be an indication the DOJ deems such a minimal connection with the United States sufficient to satisfy the territorial nexus, trigger FCPA jurisdiction and thus trigger liability. The DOJ’s use of aiding and abetting along with conspiracy theories of liability, while less novel, are clear indications that any company or person involved in a scheme to bribe foreign officials faces FCPA liability, and that liability may well be significant. As Mythili Raman, the Principal Deputy Assistant Attorney General of the DOJ’s Criminal Division noted regarding the final resolution involving the TSKJ venture: “The approximately $1.5 billion in criminal and civil penalties that have been imposed on the members of the joint venture far exceeds their profits from the scheme. Foreign bribery is a serious crime, and as this case makes clear, we are investigating and prosecuting it vigorously.”
The JGC resolution is also notable in that it confirms the continuing trend of widespread cooperation among international enforcement authorities in FCPA cases. In its release announcing the JGC settlement, the DOJ acknowledged the assistance of authorities in France, Italy, Switzerland, and the United Kingdom.
In light of the JGC settlement, and the U.S. enforcement agencies’ demonstrated determination to aggressively prosecute FCPA violations, utilize expansive jurisdictional theories, and avail themselves of enforcement assistance worldwide, companies engaged in international business should ensure that they have effective compliance policies and procedures in place to prevent and detect potential FCPA violations. Additionally, global companies should be cognizant of the potential FCPA risks in how and where they do business as well as the risks associated with international business partners and relationships, and structure their compliance programs to alleviate those risks.
This article was prepared by Marsha Z. Gerber (firstname.lastname@example.org or 713 651 5296), Richard C. Smith (email@example.com or 202 662 4795), Kimberly S. Walker and Fatema Merchant (firstname.lastname@example.org or 202 662 4626) from Fulbright’s White Collar Crime Practice Group, Fulbright's FCPA and International Anti-Corruption Practice Group and Fulbright's Investigations Practice Group.
Fulbright’s White Collar Crime Practice Group
Fulbright’s White Collar Crime Practice Group is experienced in the management of complex federal and state civil and criminal litigation on behalf of U.S. companies, including Fortune 500 corporations, their officers and directors, international corporations and entities, and individuals. Fulbright’s White Collar Crime Practice Group also is experienced in the practice of preventative counseling and compliance programs. From a strategic perspective, this is important for reducing the risk of civil and criminal litigation. Our representation includes all phases of governmental investigations and criminal and civil litigation.
 See Criminal Information at ¶ 22, United States v. JGC Corporation, No. 11-CR-260 (S.D. Tex. April 6, 2011).
 See, e.g., DOJ Criminal Information at ¶ 20.e, Case No. 09-CR-071 (S.D. Tex. Feb. 6, 2009) (noting that over $1.5 million was transferred to consultants via a correspondent bank account in New York).
Marsha Z. Gerber
Richard Craig Smith
Kimberly Sullivan Walker