FCPA Case Dismissed, But With Leave To Replead

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Jonathan Strong v. Dean E. Taylor, et al. and Tidewater, Inc. (nominal Defendant), Civil Action No. 11-392 (E.D. La. 2012), addresses several international practice issues in the context of a motion to dismiss a derivative suit. 

As the District Court assumed for purposes of the motion to dismiss for failure to make a demand on the Board to investigate before suing, Tidewater renders offshore service vessels and marine support services to the global offshore energy industry. Tidewater provides these services in support of all phases of offshore exploration, field development, and production. Tidewater Marine International, Inc. (“TMII”) is a wholly‐owned subsidiary of Tidewater. Tidewater does business in Nigeria and Azerbaijan through TMII. 

Plaintiff alleges that Tidewater, via TMII,

violated the Foreign Corrupt Practices Act (“FCPA”) by paying $160,000 in bribes [for a total of $1.6 million] to officials in Azerbaijan to resolve tax audits in Tidewater’s favor, while knowing that some or all of the money would be paid to Azeri tax officials.  These bribes were falsely identified as legitimate expenses, such as tax payments and travel expenses.  Plaintiffs allege that the bribery took place in 2001, 2003 and 2005 when the Azeri Tax Authority initiated tax audits of TMII’s business operations in Azerbaijan. (citations to the complaint omitted)

Tidewater settled FCPA claims by the SEC for $8.1 million in disgorgement and interest and entered into a deferred prosecution agreement that included an additional $7.3 million penalty.  Yet even with that the Court imposed on the plaintiff the requirement of alleging facts showing that a demand on the Board would have been futile.  This, the Court found, the plaintiff had failed to do.  The plaintiff did not prove that a majority of the Board was not independent and disinterested.  

Although the Court found that it needed to go through the individual defendants one by one, the Plaintiff has failed to allege facts sufficient to permit the Court to do so.  This defect was fatal, though the Court gave the Plaintiff a last chance to supplement the complaint with the requisite allegations.

[View source.]

 

Published In: Administrative Agency Updates, Business Organization Updates, Civil Procedure Updates, Criminal Law Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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