The Department of Justice yesterday unsealed charges against five individuals for violations of the Foreign Corrupt Practices Act for their alleged participation in a scheme to pay bribes to foreign government officials for the benefit of a U.S.-based Rolls-Royce subsidiary, including to secure a contract to supply equipment and services to power a gas pipeline from Central Asia to China.
The charges are yet another example of the increasing focus that the Department of Justice is placing on individuals, and individual accountability, beyond just the companies themselves. As Acting Assistant Attorney General Kenneth Blanco stressed: “The charges announced…against executives, employees, and third parties affiliated with Rolls-Royce, is another example of the Criminal Division’s commitment to holding individuals—and not just corporations—accountable for violating the FCPA.”
The charges follow an $800 million global resolution that the British engineering giant reached with the U.S. Department of Justice, U.K., and Brazilian authorities in January concerning a long-running scheme to bribe government officials in exchange for government contracts. Rolls-Royce further entered into a deferred prosecution agreement (DPA) as part of that settlement.
Those who pleaded guilty before Chief Judge Edmund Sargus of the Southern District of Ohio and faced FCPA charges, which were unsealed Nov. 7, are:
Petros Contoguris, founder and chief executive of a Turkish oil and gas company advisory firm called Gravitas & CIE. International Ltd (Contoguris also faced money laundering charges);
James Finley, a former senior executive in Rolls-Royce’s energy sales division;
Aloysius Johannes Jozef Zuurhout, a former employee for a Dutch subsidiary of Rolls-Royce.;
Andreas Kohler, managing director of engineering and consulting firm cdi.energy.consult gmbh (which the Department of Justice did not actually name); and
Keith Barnett, a former Rolls-Royce regional energy director.
According to the indictment and information unsealed, these individuals allegedly conspired to pay bribes to foreign officials in exchange for directing business to Rolls-Royce Energy Systems (RRESI). RRESI was a U.S.-based indirect subsidiary of Rolls-Royce plc, the United Kingdom-based maker and distributor of power systems for the aerospace, defense, marine, and energy sectors.
The fraud scheme. The indictment alleges that Contoguris, working with employees of an international engineering consulting firm (Technical Advisor), including Kohler, devised a scheme with Rolls-Royce executives and employees—including Zuurhout, Barnett, and Finley—whereby Rolls-Royce would pay kickbacks to the Technical Advisor employees, and bribes to at least one foreign official, and disguise these payments as commissions to Contoguris’s company, Gravitas, in exchange for helping Rolls-Royce win contracts with Asia Gas Pipeline (AGP).
According to the indictment, AGP was created to build and connect a gas pipeline between Central Asia and China, and the Technical Advisor purported to provide independent engineering consulting advice and other services to AGP. The indictment further alleges that after AGP awarded Rolls-Royce a contract in November 2009, worth approximately $145 million, Rolls-Royce made commission payments to Gravitas, and Contoguris then passed a portion of those commission payments onto the Technical Advisor employees knowing that they would share that money with a foreign official consistent with their corrupt agreement.
In pleading guilty, Finley, Barnett, and Zuurhout admitted that they each participated in a conspiracy, going as far back as 1999 and continuing into 2013, to engage commercial advisors who would use their commission payments from Rolls-Royce to bribe foreign officials in several countries to help Rolls-Royce secure an improper advantage and obtain and retain business with foreign governments and instrumentalities across the globe.
Global investigation. The global nature of the FCPA investigation is also notable. The U.S. Postal Inspection Service and the FBI’s International Corruption Squad in Washington, D.C., investigated the case. In 2015, the FBI formed International Corruption Squads across the country to address national and international implications of foreign corruption.
According to the Department of Justice, the Criminal Division’s Office of International Affairs provided “significant assistance” in this matter. The U.K.’s Serious Fraud Office also provided “significant cooperation and assistance” in this matter, as did law enforcement colleagues in Brazil, which both coordinated with the Justice Department to reach simultaneous resolutions with Rolls-Royce. The Justice Department also thanked its law enforcement colleagues in Austria, Germany, the Netherlands, Singapore, and Turkey.
The participation of the U.S. Postal Inspection Service in this case is also notable, which has “an extensive history of successfully investigating complex fraud and corruption cases,” said Inspector in Charge Regina Faulkerson of the U.S. Postal Inspection Service’s Criminal Investigations Group. “Anyone who engages in deceptive practices should know they will not go undetected and will be held accountable. The collaborative investigative work conducted by postal inspectors and our domestic and international law enforcement partners illustrates our efforts to protect the United States and the international marketplace.”
SFO update. In a Nov. 8 statement, the U.K. SFO said its investigation concerning the conduct of individuals in Rolls-Royce Civil, Defence, Marine, and former Energy Divisions continues. The SFO and Department of Justice continue to cooperate in their parallel investigations, it stated.