First, it was Morgan Stanley in 2012. Now, for only the second time in the history of the Foreign Corrupt Practices Act (at least, that's been publicly reported), the Department of Justice this week exonerated a company from FCPA prosecution, despite guilty pleas by three of its top executives.
Typically, when the Justice Department brings charges of FCPA violations against company executives, charges against the company itself aren’t far behind. That is, unless you are Morgan Stanley—and now oil and gas company PetroTiger.
On June 15, the Justice Department said it has opted not to bring an enforcement action against PetroTiger over violations of the FCPA, “based on PetroTiger’s voluntary disclosure, cooperation, and remediation, among other factors."
The decision not to pursue charges of any kind is a marked departure from most FCPA cases, in which the Justice Department will give companies credit for strong compliance programs, often entering into non-prosecution agreements or deferred prosecution agreements, which almost always come with strings attached. It's rare that companies get complete exoneration.
The Justice Department’s announcement follows a guilty plea by, Joseph Sigelman, the former co-chief executive officer of PetroTiger for conspiring to pay bribes to a foreign government official in violation of the FCPA. Sigelman will be sentenced June 16.
At his plea hearing, Sigelman admitted to conspiring with co-CEO Knut Hammarskjold, PetroTiger’s former general counsel Gregory Weisman, and others to make illegal payments of $333,500 to David Duran, an employee of the Colombian national oil company, Ecopetrol. Sigelman admitted to making the payments in exchange for Duran’s assistance in securing a $45 million oil services contract for PetroTiger.
Sigelman is the third former PetroTiger executive to plead guilty in the case. In November 2013, Weisman pleaded guilty to conspiracy to violate the FCPA and to commit wire fraud. In February 2014, Hammarskjold pleaded guilty to similar charges.
The case was brought to the attention of the Justice Department through a voluntary disclosure by PetroTiger, “which fully cooperated with the Department’s investigation,” the agency stated.
As Compliance Week previously reported, the last time the Justice Department exonerated a company for FCPA violations occurred in April 2012.
The Morgan Stanley case arose from allegations of fraud committed by one of Morgan Stanley's managing directors, Garth Peterson. According to the SEC complaint filed in 2012 in U.S. District Court for the Eastern District of New York, Peterson circumvented the company's internal controls when he convinced Morgan Stanley to sell real-estate interest to Chinese state-owned entity Shanghai Yongye Enterprise. Unbeknownst to Morgan Stanley, Yongye was actually a shell company owned by Peterson and the chairman of Yongye.
Going forward, the hope is that the Justice Department will continue to provide examples like the PetroTiger and Morgan Stanley cases, and continue to give guidance in situations where the government declines to prosecute.