FCPA Investigation Follows Allegations Of Improper Payments To Customs Officials In Kazakhstan

Author:Ms Lindsay Meyer, William H. Devaney, Ashley W. Craig and Jana Del-Cerro
Profession:Venable LLP

Several major international oil exploration companies and a logistics provider have allegedly initiated internal investigations in response to allegations of bribery involving a joint venture entity and Kazakh Customs officials, according to a recent Wall Street Journal ("WSJ") article. E-mails received by Karachaganak Petroleum Operating BV ("KPO") detailed payments allegedly transmitted by KPO and its logistics provider to Customs officials in Kazakhstan. As described in the WSJ, the payments, often valued at the equivalent of US$400, were intended to avoid paperwork challenges and shipment delays in the clearance of goods through Aksai City. The logistics provider's employees allegedly referred to these payments as "extra verification" payments.

KPO is a joint venture between BG Group, ENI, Chevron and Lukoil and was established for exploration and development of the Karachaganak field, one of the world's largest gas condensate fields, located in northwest Kazakhstan.

Neither the Department of Justice ("DOJ") nor the Securities and Exchange Commission ("SEC") has publicly confirmed whether they are investigating. However, KPO confirmed that it has begun a full internal investigation into the matter. Spokespersons for ENI and BG Group also reported that separate internal investigations were underway. The logistics provider has hired an outside audit firm to assist in its own internal investigation.

The Foreign Corrupt Practices Act ("FCPA") broadly prohibits providing anything of value to a foreign official, which includes Customs officials of any rank, to influence an official act that assists a company in retaining or obtaining business. As such, payments in connection with foreign customs issues, including licenses, permits and paperwork challenges, have been frequent targets of FCPA enforcement activity. Moreover, the logistics industry is particularly susceptible to FCPA risk, especially with regard to its operations in corruption-prone areas. Past settlements from such enforcement actions, such as the $70.56...

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