We Say Good-Bye To The Secretary Of Defense And Total Says Hello To Two Monitorships – Total Part III

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Today I finalize my review of the Total SA (Total) Foreign Corrupt Practices Act (FCPA) enforcement action. However, before I do so, I would like to commemorate this date and one person who left us this week. The date is of course, D-Day, June 6, 1944 which signaled the end of Nazi Germany, at least on the Western Front. There are fewer and fewer veterans of that invasion alive so I ask that you honor them in your own way today. The person who left us this week was Deacon Jones, nicknamed the ‘Secretary of Defense’ and left end of the Los Angeles Rams vaunted ‘Fearsome Foursome”. For my money he was the greatest defense end of all-time and his unit’s name was also the greatest moniker given to any defense in the long history of pro football.

In addition to the minimum best practices compliance regime which Total agreed to institute, it agreed to two separate ongoing oversight programs. The first is under the Cease and Desist Order (the Order) entered into with the Securities and Exchange Commission (SEC) which mandates a Compliance Consultant. The second is an Independent Compliance Monitor, whose role is described in Attachment D of the Deferred Prosecution Agreement (DPA) with the Department of Justice (DOJ). What makes this arrangement unusual is that there are two oversight persons (or entities), with different focuses reporting to two separate agencies.

Compliance Consultant

The Compliance Consultant could be either (a) a French nation; (b) a French law firm; or (c) a French accounting firm and term of the Compliance Consultant will be three years. Compliance Consultant is mandated (the “Mandate”) to evaluate “the effectiveness of Total’s internal controls, record-keeping, and financial reporting policies and procedures as they relate to Total’s current and ongoing compliance with the books and records, internal accounting controls and antibribery provisions of the FCPA.”

The Compliance Consultant is required to prepare an initial report which is to be delivered to the Total Board and the relevant French Authority. This French Authority will transmit these annual reports to the SEC, consistent with French law. Total is required to accept and adopt all recommendations in the annual report within 120 days after receiving the report or object in writing to “any recommendations Total considers unduly burdensome, inconsistent with local or other applicable law or regulation, impractical, unduly expensive, or otherwise inadvisable.” The Compliance Consultant’s annual reviews for years 2 and 3 is designed to “(a) complete the review; (b) certify whether the compliance program of Total, including its policies and procedures, is reasonably designed and implemented to detect and prevent violations within Total of the anti-corruption laws; and (c) report on the Compliance Consultant’s findings…”

If the Compliance Consultant discovers “questionable or corrupt payments or corrupt transfers of property or interests may have been offered, promised, paid, or authorized by any entity or person within Total, or any entity or person working directly or indirectly for Total, or that related false books and records may have been maintained”, such conduct is to be reported to Total’s General Counsel (GC) or Audit Committee for further action. If such conduct is a significant violation of law, the Compliance Consultant is required to report it to the French Authority.

Independent Corporate Monitor

The Independent Corporate Monitor’s (Monitor) term is also for three years but the only requirement listed for the Monitor is that he or she has “demonstrated expertise in helping companies comply with the Foreign Corrupt Practices Act”. In addition to monitoring Total’s compliance with both US and French anti-corruption laws, the Monitor is to assess the effectiveness of the company’s internal controls, record keeping and financial reporting policies and procedures as they relate to the FCPA. Most interestingly, the Monitor is to make an assessment of the Total Board of Directors and the senior management’s commitment to and the effective implementation of the best practices compliance program as described in the DPA’s Attachment C (discussed in yesterday’s blog post).

Similar to the Compliance Consultant, the Monitor is required to prepare an initial report, “setting forth the Monitor’s assessment and recommendations reasonably designed to improve the effectiveness of Total’s program, policies and procedures for ensuring compliance with anti-corruption laws”. This report is also to be delivered to the Total Board and the relevant French Authority. This French Authority will transmit these annual reports to the DOJ, consistent with French law. Total is required to accept and adopt all recommendations in the annual report within 120 days after receiving the report or object in writing to “any recommendations Total considers unduly burdensome, inconsistent with local or other applicable law or regulation, impractical, unduly expensive, or otherwise inadvisable and has the obligation to “propose in writing to the Monitor an alternative policy, procedure, or system designed to achieve the same objective or purpose. The  Monitor’s annual reviews for years 2 and 3 is designed to “(a) complete the review; (b) certify whether the compliance program of Total, including its policies and procedures, is reasonably designed and implemented to detect and prevent violations within Total of the anti-corruption laws; and (c) report on the Monitor’s findings…”

If the Monitor discovers “questionable or corrupt payments or corrupt transfers of property or interests may have been offered, promised, paid, or authorized by any entity or person within Total, or any entity or person working directly or indirectly for Total, or that related false books and records may have been maintained” such conduct is to be reported to Total’s General Counsel (GC) or Audit Committee for further action. If such conduct is a significant violation of law, the Monitor is required to report it to the DOJ or if such report is prevented under French law, then to the relevant French Authority, which can transmit the matter to the DOJ.

Discussion

At Compliance Week 2013, there were several panels which dealt with corporate monitorships. All of the panelists at the sessions made clear that it is quite a bit of work for a company to get through an external monitorship and something to be avoided if at all possible. While it may be difficult to know precisely why Total received not one but two monitors; it would appear that the company did not engage in the robust remediation efforts that several large US entities did while they were under investigation and before their FCPA matters were resolved. Eli Lilly, Parker Drilling and Pfizer all come to mind as companies which worked very hard during the pendency of their FCPA investigations to institute a best practices compliance program.

This would also seem to be a clear example of Paul McNulty’s Maxim No. 3 of “What did you do when you found out about it?” McNulty said this was the third question that he would pose to a company when he was at the DOJ. Once again, this thinking was echoed in the FCPA Guidance released last November, which said that three keys were to “prevent, detect and remediate” any FCPA violation.

On one final note, Bloomberg reported that the indicted the Chief Executive Officer (CEO) of Total, who the Paris Prosecutor has recommended, together with the company itself, face trial on corruption charges, denied that Total paid bribes for contracts. Christophe de Margerie was quoted as saying, “What we did wasn’t illegal according to French law,” on LCI television yesterday, “We didn’t pay bribes, we didn’t pay Iranian authorities. Our contracts weren’t illegal.” Total had no comment.

Topics:  Compliance, Consultation, Deferred Prosecution Agreements, FCPA, SEC, Secretary of Defense

Published In: General Business Updates, Criminal Law Updates, Energy & Utilities Updates, International Trade Updates, Securities 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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