DOJ–Louis Berger, Two Executives Resolve FCPA Charges

by Dorsey & Whitney LLP

The DOJ resolved another FCPA action with the company entering into a deferred prosecution agreement, paying a criminal fine and agreeing to the imposition of a monitor after self reporting and cooperating. Two of the firm’s senior executives pleaded guilty to criminal conspiracy charges and are awaiting sentencing. U.S. v. Luis Berger International, Inc., Mag. No. 15-3624 (D. N.J.).

Louis Berger International, Inc. is a privately held international consulting firm that provides engineering, architecture, program and construction management services. It is based in New Jersey. Richard Hirsch was a Senior Vice President with the firm who at times oversaw the operations of the firm in, among other locations, Indonesia and Vietnam. James McClung was also a Senior Vice President with the firm. He was based in India where at times he oversaw the firm’s operations in Vietnam and India.

The criminal complaint alleges conspiracy to violate the FCPA bribery provisions, centered on the payment of bribes to government officials in India, Indonesia, Kuwait and Vietnam to obtain business. The bribes totaled over $3.9 million. The bribes were generally paid through employees and agents. They were referred to in emails and other communications as a “commitment fee,” “counterpart per diem,” “marketing expenses” and similar terms.

Louis Berger commenced operations in Indonesia in 1967 and closed its office in Jakarta in June 2011. Through employees and agents the firm paid “commitment fees” and “counterparty per diems” in connection with government contracts. The arrangements are reflected in a number of e-mails involving Mr. Hirsch beginning as early as August 2003 and continuing through 2010.

The conduct in Vietnam reflects a similar pattern. There the company began operations in the early 1990’s. Mr. Hirsch was involved in payments beginning in 2003. Two years later Mr. McClung assumed responsibility for the area. At that time Mr. Hirsch explained he would “need to find a new way to generate bribe money for foreign officials because the Foundation [a conduit for bribe payments] would soon cease operations,” according to the criminal complaint. The arrangements continued through 2010.

In India the company began operations in 1998. There the firm was apparently a consortium partner in 2009 and 2010 revolving around one project. A tracking schedule prepared by a partner stated that the company had paid $976,630 in bribes in connection with the Goa Project up to that point.

Finally, in Kuwait LBI secured a $66 million road construction project with the Kuwait Ministry of Public Works. To obtain the project the firm, through its employees and agents, made a series of payments to an official with the Ministry of Public Works totaling about $71,000. Those payments were labeled “business development.” The arrangement is reflected in part through an e-mail from a joint venture partner.

To resolve the charges LBI entered into a deferred prosecution agreement. That agreement requires the appointment of a monitor for three years. The firm will also pay a $17.1 million criminal fine which is the bottom of the sentencing guideline range of $28.5 million to $17.1 million.

The DOJ acknowledged the cooperation of the company which included: 1) Self-reporting; 2) voluntarily making U.S. and foreign employees available for interviews and collecting, analyzing and organizing evidence and information for investigators; 3) engaging in extensive remediation which included terminating the officers and employees who were responsible for the payments; and 4) it committed to improving compliance and internal controls.

Messrs. Hirsch and McClung each pleaded guilty to one count of conspiracy to violate the FCPA and one substantive count of violating the Act. Sentencing is scheduled for November 5, 2015.

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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