International Client Alert - August 2004

Contents:

ABB AFFILIAES PLEAD GUILTY TO†BRIBING NIGERIAN OFFICIALS

FINAL RULES ON EXPORTS TO IRAQ ANNOUNCED

PROPOSED RETALIATORY SANCTIONS AGAINST JAPAN ANNOUNCED

U.S. SUPREME COURT DENIES FALSE ARREST CLAIM UNDER ALIEN†TORT CLAIM ACT

ABB AFFILIAES PLEAD GUILTY TO BRIBING NIGERIAN OFFICIALS

Two affiliates of global construction and technology company ABB pleaded guilty on July 7 to charges of bribing Nigerian government officials in violation of the U.S. Foreign Corrupt Practices Act (the "FCPA"), and each agreed to pay a separate fine of $5.25 million (for a total of $10.5 million). The plea agreement ended a Department of Justice ("DOJ") investigation into ABB's oil, gas and petrochemicals business. In addition, ABB separately resolved civil charges brought by the†Securities and Exchange Commission ("SEC") arising out of the FCPA†violations in Nigeria and agreed to pay an additional $5.9 million fine.†Among other things, the FCPA prohibits U.S. companies and their agents or consultants from making illicit payments†to foreign government officials in order to obtain business or to secure some wrongful advantage.

According to DOJ documentation, the two companies ó ABB Vetco Gray Inc., a U.S. company ("Vetco US"), and†ABB Vetco Gray (UK) Ltd., a U.K. entity ("Vetco UK") ó sought to obtain improper advantages while bidding on†a series of oil-related government contracts in Nigeria by paying bribes and providing gifts to various Nigerian†officials. Both companies are part of ABB's oil, gas and petrochemicals division. The DOJ alleged that commencing†in 1998, the Vetco companies were preparing to bid on a contract to provide equipment for a Nigerian oil exploration†project. The companies were apparently approached by officials of National Petroleum Investment Management†Services ("NPIMS"), a Nigerian government entity responsible for overseeing investment in petroleum exploration†and production. The officials reportedly advised the Vetco companies that they should show their "appreciation" to†NPIMS officials in order to bolster their chances of obtaining government contracts.

Thereafter, Vetco US and Vetco UK employees are reported to have provided numerous gifts (including an automobile†and several shopping trips), travel, entertainment and cash payments in excess of $1 million to officials at NPIMS in†connection with several petroleum projects. In some cases, the benefits were provided directly to the NPIMS officials†by Vetco employees. However, a substantial amount of money was funneled to the officials with the help of a Nigerian†sales agent. To put funds in the agent's hands, the Vetco companies entered into several consulting contracts with†various businesses owned by the Nigerian agent. The agent then paid the funds received under the consulting†contracts to NPIMS officials.

The ABB case is particularly noteworthy because the charges were brought not only against Vetco US but also directly†against Vetco UK. In 1998, Congress amended the FCPA to allow enforcement directly against a foreign person or†foreign company or any "officer, director, employee, or agent . . . acting on behalf of such person" that has sought to†bribe foreign government officials "while in the territory of the United States." The DOJ's allegations against Vetco†UK do not suggest that Vetco UK employees undertook any activities in the United States. Rather, the DOJ action†appears to be based on an assertion that certain Vetco US employees were acting as "agents" for Vetco UK. In several†instances, a Vetco US employee took NPIMS officials on expensive shopping excursions while such officials were in†the United States. In each case, Vetco UK employees in the United Kingdom approved reimbursing the Vetco US†employee's expenses.

In addition, Vetco UK worked with a Vetco US employee to provide cash and gifts to various NPIMS officials with†the help of the Vetco sales agent in Nigeria. The Vetco US employee provided approximately $140,000 in payments†and benefits (such as pedicures and paying for medical procedures) to Nigerian officials. The Vetco US employee†would then submit invoices for reimbursement to the Nigerian agent. The agent would in turn submit invoices to†Vetco UK for payment. Vetco UK would wire the funds to bank accounts†held by one of the agent's companies. Finally, the Nigerian agent would send†the funds to the Vetco US employee by check or wire transfer.

The ABB case suggests that the DOJ intends to use a broad interpretation†of the 1998 amendments against foreign companies. As indicated above,†there is no indication in the court records that Vetco UK employees†conducted activities related to the Nigerian scheme while in the United†States. Moreover, there is no suggestion that Vetco US employees were actually Vetco UK employees. Rather, the case†against Vetco UK ó and the resulting $5.25 million fine ó rests on the suggestion that the Vetco US employees were†agents of Vetco UK, and...

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