Over several blog posts last week, I reviewed the Amec Foster Wheeler Foreign Corrupt Practices Act (FCPA) resolution, primarily through the lens of the Deferred Prosecution Agreement (DPA) and Cease and Desist Order (Order) entered into with the Securities and Exchange Commission (SEC). The facts listed in both the DPA and Order made quite damning reading about both the actions and culture at first Forster Wheeler and later Amec Foster Wheeler. Now the UK resolution has been released and one can only marvel at how much worse the facts listed in the UK resolution documents were regarding the corrupt conduct of Foster Wheeler.

Perhaps not too surprisingly, much of Foster Wheeler’s business model was based on bribery and corruption. It turns out this business model was used by Foster Wheeler across the globe, not simply in Brazil. In the Indictment, as laid out by the Serious Fraud Office (SFO), Foster Wheeler engaged in bribery and corruption in Saudi Arabia, Malaysia, Nigeria and India. This business model based upon bribery and corruption extended back until at least 1996 and was carried forward up to the acquisition of Foster Wheeler by Amec. Given the pervasive nature of bribery and corruption by Foster Wheeler as a business model it makes the failures of Amec and later John Wood Group PLC in their pre-acquisition due diligence even more remarkable.

Lord Justice Edis, in his Judgment, also identified what he termed a “Cleansing” by the Foster Wheeler Board of Directors after having received a report on bribery and corruption in Saudi Arabia from the law firm Baker Botts LLP. This Cleansing was an effort by the Foster Wheeler Board to hide the underlying facts in the report, not self-disclose and equally importantly not remediate but to go on with its bribery scheme unabated across the globe. Indeed, it now appears that if Foster Wheeler’s conduct in Brazil had not been uncovered via Lava Jato, none of Foster Wheeler’s conduct might have come to light.

Nigeria

According to the Indictment, as far back as March 1996 and continuing through June 2004, Foster Wheeler employees conspired with others to make corrupt payments to officials in the Nigerian National Petroleum Company, the Eleme Petrochemical Company Limited, and the Central Bank of Nigeria, as an inducement to secure transactions for the benefit of Foster Wheeler. Later, between November 2003 and May 2004, Foster Wheeler employees conspired with others to make corrupt payments to Nigerian police and tax officials as an inducement and to settle an allegation of tax evasion against Foster Wheeler (Nigeria) Limited.

Saudi Arabia

According to the Indictment, between June 2004 and 2007, Foster Wheeler employees conspired with others to make corrupt payments, namely 403,000 Saudi Arabian Riyals, to “officials in the Saudi Arabian Ministry of Labour Offices, as inducements and / or rewards to ensure that block visas were granted and / or processed more quickly for FOSTER WHEELER ENERGY LIMITED and/or Foster Wheeler Arabia, Ltd” projects in Saudi Arabia. In another corrupt scheme, between April 2007 and May 2007, in addition to the bribery scheme set out above, Foster Wheeler employees conspired with “others to make corrupt payments, namely 400,000 Saudi Arabian Riyals to officials in the Saudi Arabian Ministry of Labour Offices, as an inducement and / or reward to ensure that block visas were granted for FOSTER WHEELER ENERGY LIMITED and / or Foster Wheeler Arabia, Ltd”.

Malaysia

According to the Indictment, between March 1997 and January 2005, Foster Wheeler employees conspired with “others to make corrupt payments to one or more officials in the Malaysian state oil company Petronas, as inducements and / or rewards to ensure that Petronas would award Foster Wheeler (Malaysia) Sdn. Bhd. a contract for services under the Central Utility Facility project.” In another corruption scheme in Malaysia, between September 2002 and March 2005, Foster Wheeler employees conspired with “others to make a corrupt payment, namely GBP 819,338, to one or more officials in the Malaysia state oil company Petronas, as a reward for Petronas awarding to Foster Wheeler (Malaysia) Sdn. Bhd. a contract for services under the MLNG Tiga Plant project.” In a final bribery scheme in Malaysia, between 2002 and 2010, Foster Wheeler employees and others to made corrupt payments “to one or more officials in the Malaysia state oil company Petronas, as inducements and / or rewards to ensure that Petronas would award to Foster Wheeler (Malaysia) Sdn. Bhd. a contract for services under the Melaka Co-Generation project.”

India

The corruption also extended to India. According to the Indictment, between 2005 and 2012, Foster Wheeler employees conspired with “others, to make corrupt payments to officials in the Indian Oil Corporation Limited as inducements and / or rewards in order that the Indian Oil Corporation Limited would award to FOSTER WHEELER ENERGY LIMITED, and assist them in retaining, a contract for the provision of Front End Engineering and Design services on the Paradip Refinery Project.”

Cleansing

Justice Edis left his most damning language for the actions of the Foster Wheeler Board after it was made aware of the allegations of corruption in Brazil. He wrote about a Foster Wheeler Board Minute from November 5, 2007, at which the directors of Foster Wheeler received and discussed the report of Baker Botts into the Saudi Arabian bribery and corruption scheme. Apparently five of the Foster Wheeler personnel were named as participating or having knowledge of the scheme and, as noted by the Court, they were “very senior.” The Court went on to state, “The offending is all extremely serious and its persistence despite what the Board discovered in 2007-2009 makes it all the more so.”

Justice Edis went on to state, “This material suggests to me that the main Board of FWL was primarily concerned to minimise the adverse consequences of the offending for the Group.  In my judgment the proper course for it to have adopted, not as a matter of legal duty, but as a matter of ethical corporate governance was to report the known facts to the SFO.” Baker Botts made another report in July 2008, regarding “potential corruption in four other countries. The Baker Botts report into the Malaysian offending is dated October 2008.  The fact that no report was made of any of its discoveries at the time by the company means that it may be more difficult to investigate and prosecute individual offenders now. I accept that there was no legal requirement to report suspected crime to the authorities, but there is a moral duty on all citizens in this respect which extends at least equally to corporations.  This failure by the Board of FWL was deplorable.  It is compounded by the fact that their efforts to address corruption even within their own organisation were unsuccessful.” [emphasis supplied]

Join us tomorrow as we continue to explore the John Wood Group PLC settlement with the SFO.

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