Compliance lessons from Wood Group’s $177M global bribery settlement

Wood also entered a three-year deferred prosecution agreement (DPA) with the U.S. Department of Justice; a three-year DPA with the U.K. Serious Fraud Office (SFO); a cease-and-desist order with the U.S. Securities and Exchange Commission (SEC); and 18-month leniency agreements with the Brazil Controladoria-General da Uniᾶo (CGU)/Advocacia-Geral da Uniᾶo (AGU) and the Ministério Publico Federal (MPF).

The resolutions arose out of a bribery and corruption scheme related to the use of third-party agents to win an approximately $190 million oil and gas engineering and design contract, known as the “UFN-IV project,” from Brazilian state-owned oil company Petrobras. According to the SEC’s order, one of these third-party agents had failed Foster Wheeler’s due diligence process but was allowed to continue working “unofficially” on the project.

“Continuing to use an agent who presented a significant corruption risk so that Foster Wheeler could expand its business and win a contract in Brazil demonstrates a fundamental flaw in the corporate compliance program,” said Tracy Price, deputy chief of the SEC Enforcement Division’s Foreign Corrupt Practices Act (FCPA) Unit.

According to the company’s admissions in its DPA with the Justice Department, the bribery and corruption scheme occurred between 2011 and 2014. The company, through certain of its employees and agents, took action to further the scheme while located in New York and Texas, earning at least $13 million in profits from the corruptly obtained business.

This conduct occurred before Amec acquired Foster Wheeler in November 2014 and prior to the combined firm’s acquisition by Wood in October 2017. “Wood cooperated fully with all authorities in their investigations, which is reflected in the cooperation credit that Wood received from the authorities in their respective resolutions,” the company stated.

Settlement terms

Amec Foster Wheeler agreed to pay a criminal penalty of approximately $18.4 million in its resolution with the Justice Department for violating the FCPA. Additionally, under the terms of the DPA, the company agreed to continue to cooperate with the U.S. government in any ongoing or future criminal investigations concerning Amec Foster Wheeler or its executives, employees, or agents. Amec Foster Wheeler and Wood agreed to enhance their compliance programs and report to the government on implementation.

“Continuing to use an agent who presented a significant corruption risk so that Foster Wheeler could expand its business and win a contract in Brazil demonstrates a fundamental flaw in the corporate compliance program.”

Tracy Price, Deputy Chief, SEC FCPA Unit

Aggravating factors in the resolution included the company’s failure to voluntarily and timely disclose the conduct that triggered the investigation, as well as the nature and seriousness of the offense, which spanned multiple years and involved a high-level executive.

However, the company was credited for its cooperation and remedial measures, including terminating an individual involved in the misconduct and adopting heightened controls and anti-corruption procedures. The criminal penalty was reduced by 25 percent as a result.

Because of Wood’s remedial measures and compliance improvements to date, “none of the resolutions require the appointment of an independent compliance monitor,” the company stated.

The Justice Department’s Fraud Section and the Eastern District of New York said they will credit up to 25 percent ($4.6 million) of the criminal penalty owed to the United States to payments the company makes pursuant to its resolution with the SFO and up to 33 percent ($6.1 million) to payments the company makes pursuant to its Brazilian resolutions.

In its civil settlement with the SEC, Amec Foster Wheeler consented to a cease-and-desist order for violations of the anti-bribery, books and records, and internal accounting controls provisions of the FCPA and agreed to pay approximately $22.7 million in disgorgement and prejudgment interest. The SEC’s order provides for offsets for up to $9.1 million of any disgorgement paid to the CGU/AGU and the MPF in Brazil and up to $3.5 million of any disgorgement paid to the SFO. Therefore, the company’s minimum payment to the SEC would be approximately $10.1 million.

In the United Kingdom, Wood agreed to pay £103 million (U.S. $142 million) as part of a three-year DPA approved July 1. The agreement includes the SFO’s costs of £3.4 million and payment of compensation to the people of Nigeria of £210,610.

Wood will also report annually to the SFO on its group-wide ethics and compliance program.

“The company subverted the rule of law and harmed the integrity of the economy in the United Kingdom,” said SFO Director Lisa Osofsky in a statement. “We will continue to deliver justice for the taxpayer by punishing such actions and forcing companies to change for the better.”

Compliance lessons

“The potential for a new market cannot be a siren’s song that overwhelms good corporate governance,” said Charles Cain, chief of the SEC’s FCPA Unit.

Steven D’Antuono, assistant director in charge of the FBI’s Washington Field Office, said the DPA with the Justice Department “should serve as a warning to companies that even using a third-party intermediary to pay bribes will not preclude them from being held responsible for international corruption.”

“The resolutions underline why we attach such importance to upholding the highest standards of ethics and compliance in all parts of the world where we operate and why we continue to invest in strengthening our governance in this area.”

Roy Franklin, Chair, John Wood Group

Wood stated it has since improved its compliance processes. As part of these efforts, Wood “continually reviews and enhances its compliance program to mitigate the risk of recurrence of similar conduct and now prohibits the use of sales agents, or similar, unless required by law,” the company stated.

“The investigations brought to light unacceptable—albeit historical—behavior that I condemn in the strongest terms,” said Wood Chief Executive Officer Robin Watson in a statement. “Although we inherited these issues through acquisition, we took full responsibility in addressing them, as any responsible business would.”

“The historical conduct that led to these investigations does not reflect the values of Wood that unite us as a global team,” Wood Chair Roy Franklin stated. “The resolutions underline why we attach such importance to upholding the highest standards of ethics and compliance in all parts of the world where we operate and why we continue to invest in strengthening our governance in this area.”

In March, Wood announced it had set aside $197 million for the global settlement. The total was more than four times the $46 million it originally earmarked in 2019.

“Since our acquisition of Amec Foster Wheeler, we have cooperated fully with the authorities and have taken steps to further improve our ethics and compliance program from an already strong foundation,” Watson said. “I’m pleased that, subject to final court approval in the United Kingdom, we have been able to resolve these issues and can now look to the future.”

Editor’s note: This story was updated July 2 to reflect the terms of Wood’s DPA with the U.K. Serious Fraud Office.