Sargeant Marine – The FCPA Enforcement Action

Thomas Fox
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Compliance Evangelist

Recently we saw one of the most blatant cases of bribery and corruption brought by the Department of Justice (DOJ) in the form of a guilty plea by Sargeant Marine Inc. (Sargeant Marine), an asphalt company, related to conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA) and agreed to pay a criminal fine of $16.6 million to resolve charges stemming from a scheme to pay bribes to foreign officials in three South American countries.

The case was stunning in that apparently Sargeant Marine had incorporated the payment of bribes directly into its business strategy through the creation of multiple shell companies, use of corrupt third-parties and creation of related entities through which Sargeant Marine could launder its illegal bribe payments. The case is also noteworthy in that six individuals formerly employed by or associated with Sargeant Marine have previously pled guilty to FCPA violations. We will discuss the individual guilty pleas in a subsequent blog post.

The bribery and corruption was widespread throughout the Latin American region. According to the Information, Sargeant Marine engaged in an eight-year scheme to bribe government officials in Brazil, Venezuela, and Ecuador as well as employees of the state-owned energy companies in those countries. In Brazil, the bribery scheme involved corrupt payments to a government Minister, a high-ranking member of the Brazilian Congress, and senior executives at Petróleo Brasileiro SA (Petrobras) to obtain valuable contracts to sell asphalt.

A Brazilian consultant believed that a competitor of Sargeant Marine was winning contracts from Petrobras because that competitor was favored by a particular Brazilian politician and was likely paying bribes to that politician. In an effort to win that business from Petrobras for Sargeant Marine, the Brazilian consultant arranged a dinner with a Petrobras Official and Brazilian Politician, a powerful member of the Brazilian Congress at the time. At the dinner, Brazilian consultant told the Petrobras Official and Brazilian Politician that if they assisted Sargeant Marine with winning business from Petrobras, they would be paid bribes on the resulting contracts. Both the Petrobras Official and Brazilian Politician agreed to the scheme and the Petrobras Official directed his subordinates in the asphalt department to give business to Sargeant Marine.

To facilitate the bribery scheme and to conceal the bribe payments Sargeant Marine entered into a fake consulting agreement with a shell company controlled by corrupt Brazilian consultants. In total, Sargeant Marine and its affiliated companies, including Asphalt Trading and Sargeant Marine Affiliate, paid more than $5 million into offshore bank accounts held in the names of shell companies controlled by corrupt Consultants.

The bribery scheme was similar in Venezuela. Prior to 2012, PDVSA refused to sell asphalt to Sargeant Marine or related companies. To circumvent this prohibition, Sargeant Marine and Swiss Asphalt Company agreed that Swiss Asphalt Company would purchase asphalt from PDVSA at the request and direction of Sargeant Marine, and then resell that asphalt to Sargeant Marine at a small premium. To make this happen, Sargeant Marine agreed to offer and pay bribes to PDVSA Officials. To facilitate the bribe payments and to conceal the bribe payments, Sargeant Marine and its co-conspirators entered into fake consulting contracts with corrupt Venezuelan Consultants. Payments were then routed through offshore bank accounts to pay the bribes. Amazingly enough, Sargeant Marine started payments within the US banking system.

But in Venezuela, it was more than the sale of asphalt. Here Sargeant Marine paid bribes to PDVSA officials, in exchange for receiving non-public information from PDVSA and to obtain a competitive advantage in obtaining and retaining business with PDVSA. To demonstrate (once again) the idiotic nature of both Sargeant Marine officers and employees and bribe payors in general, to facilitate the scheme and to conceal the scheme its participants used the code word “Chocolates” to refer to the confidential information that was obtained through the corrupt bribery scheme. As Mrs. Gump continually reminded us “Stupid is as stupid does.”

A similar bribery scheme was used in Ecuador where bribes were paid to “secure an improper advantage in order to obtain and retain business with Petroecuador and win lucrative contracts with Petroecuador.” Sargeant Marine created fake consulting agreements, fake invoices and made payments from the US to offshore bank accounts controlled by corrupt third-parties in Ecuador.

Tomorrow we will consider the Plea Agreement, fine and penalty and the future of Sargeant Marine.

[View source.]

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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