This Week in Compliance

This Week in Compliance: Petrofac Faces Lawsuit After Guilty Plea of Former Executive

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  • Petrofac faces GBP 400 million lawsuit after guilty plea of former executive: Oil services firm Petrofac is facing a GBP 400 million lawsuit after one of its former executives pleaded guilty to bribery and corruption charges last week. David Lufkin, the company’s former global head of sales, admitted to making corrupt payments in an attempt to secure contracts worth USD 3.5 billion in Saudi Arabia and USD 730 million in Iraq. Petrofac’s shares fell by 29 percent last Thursday after the admission was published by the SFO. A litigation fund representing large UK and US-based pension funds has launched legal action against the company, claiming that they suffered substantial losses because of Petrofac’s involvement in the bribery scheme. The shareholders claim Petrofac failed to disclose compliance policies and issued false and misleading statements related to the alleged fraud. Petrofac’s chairman confirmed that no charges were brought against the company by the SFO.

Business

  • Hawaiian businessman pleads guilty to bribing Micronesian official:The DOJ said Tuesday that Frank James Lyon, a Hawaiian businessman, pleaded guilty to conspiracy to violate the anti-bribery provisions of the FCPA and to commit federal program fraud by bribing a Micronesian official. The Micronesian official was also charged by the DOJ with one count to conspiracy to commit money laundering. The DOJ said that Lyon’s engineering and consulting company bribed officials at the Federated States of Micronesia (FSM) Department of Transportation, Communications and Infrastructure. The bribery was committed between 2006 and 2016 with the purpose of obtaining and retaining contracts worth nearly USD 8 million. Lyon and his accomplices paid around USD 440,000 in bribes. Lyon will be sentenced on May 13.
  • U.S. DOJ investigates U.S. based oil trader over Petrobras bribery scheme: Rodrigo Garcia Berkowitz, a Houston-based oil trader, is under investigation by the U.S. Attorney’s office for the Eastern District of New York for allegedly accepting millions of dollars in kickbacks for himself and others. The scheme allegedly involves multiple large internal commodity companies. Berkowitz is wanted on charges in Brazil. An Interpol red notice for Berkowitz’s arrest was issued in early December. The move by U.S. prosecutors is seen as a new phase of U.S. involvement in the “Operation Car Wash” probe, which has ensnared multiple Brazilian presidents and led to over 130 politicians and businessmen being jailed.
  • TechnipFMC subject of French corruption probe: It was reported this week that French oil services company TechnipFMC is the subject of a legal probe in France over alleged corruption in Brazil and Africa. French magazine Le Point reported that the French financial prosecutor had launched the probe in late 2017, following an investigation by the U.S. Department of Justice (DOJ) started in 2016. A spokesperson for the company indicated the company was cooperating with the DOJ in its investigation.

Government

  • Canadian Prime Minister under investigation over SNC-Lavalin case:Canada’s Ethics Commissioner revealed this week that his office is investigating whether Prime Minister Justin Trudeau broke ethics rules by pressuring the former attorney general to help SNC-Lavalin settle corruption charges out of court. The office is investigating whether Trudeau or his staff violated a section of the Conflict of Interest Act which prohibits “a public office holder from seeking to influence a decision of another person so as to improperly further another person’s private interests.” Canada’s new attorney general, David Lametti, indicated he may still intervene in the case of the engineering and construction giant. The investigation could spell trouble for Trudeau, who is seeking a renewed mandate from the electorate later this year.
  • Norway’s USD 1 trillion sovereign wealth fund divests from companies posing corruption risks: Norway’s sovereign wealth fund divested from 30 companies last year based on a risk assessment of corruption and money laundering risks. This comes on top of the 13 companies it publicly excluded last year based on ethical criteria. The divestments are undisclosed and made on a precautionary basis when not enough information is available. Other factors considered in the fund’s divestment program are risks related to human rights, water management, and climate change. Since the fund started its risk-based divestment program, a total of 240 companies have been excluded.
  • Study finds Chicago is the most corrupt U.S. city: A new report from the University of Illinois at Chicago concluded this week that the Chicago metropolitan area is the most corrupt U.S. city. The report looked at corruption convictions between 1976 and 2017. Chicago had 1,731 convictions in that timeframe, while the Central District of California had 1,534. The Manhattan area had 1,327 and Miami had 1,165, according to the report. Washington, D.C. had 1,159. In 2017, 25 public figures were convicted of corruption charges in the Chicago metropolitan area.
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