Nine years ago, on November 4, 2010, was Panalpina Settlement Day which made history for the single largest number of companies to simultaneously settle Foreign Corrupt Practices Act (FCPA)-related violations. It was led by the global logistics firm Panalpina World Transport (Holding) Ltd., its US subsidiary, Panalpina, Inc., and five of its oil and gas services customers, including Royal Dutch Shell plc, Tidewater Marine International Inc., Pride International Inc., GlobalSantaFe Corporation and Noble Corporation all resolved charges with the Department of Justice (DOJ) and Securities and Exchange Commission (SEC), and another Panalpina customer settled with the SEC only. The total amount in fines and penalties paid was $156.5 million in criminal fines and about $80 million in civil disgorgement, interest and penalties for a total of $236.5 million. It was certainly a stunning day.

Panalpina Settlement Day showed the DOJ and SEC had now understood that if they found a corrupt third-party, who was engaging in bribery for one customer in an industry, that third-party might well be doing so for other customers in the same industry. For the logistics firm Panalpina, it was shipping goods and products into Nigeria for a number of US based oilfield service companies. The same became true for corrupt third-party agents in other industries such as telecom and tech.

I. The Information

However, all of these may well pale beside the corruption engaged in by Unaoil, the Monaco based group of affiliated companies who once employed over 1400 persons to help facilitate bribery schemes around the globe. The facts finally came to light last week when it was announced that the former Unaoil Chief Executive Officer (CEO), Cyrus Ahsani, and former Chief Operations Officer (COO), Saman Ahsani, pled guilty in March to arranging millions in bribes to officials in at least ten countries, additionally a former Unaoil Business Development Director pled guilty in August last year. All of this was announced in a DOJ Press Release. It is one of the most significant DOJ Press Releases regarding FCPA enforcement and may well portend a rush of enforcement actions, including additional guilty pleas from a very large number of persons and entities.

The breadth and scope of the international bribery and corruption perpetrated by Unaoil was stunning as it was audacious. Unaoil was literally the ‘go-to’ fixer to engage in bribery and corruption for a wide variety of energy companies. The countries where Unaoil engaged in bribery and corruption included “bribe payments to government officials in Algeria, Angola, Azerbaijan, the Democratic Republic of Congo, Iran, Iraq, Kazakhstan, Libya and Syria.”

But even more than the number of countries involved was the customer list of Unaoil. In the Information it listed 27 (yes you read that right Twenty-seven) different entities that Unaoil paid bribes on behalf of in the above listed countries. By simply going through Unaoil’s customer list, the DOJ and SEC could make the Panalpina Settlement Day pale by comparison. This listed of 27 companies included two which have previously admitted violating the FCPA. They were Rolls Royce and SBM Offshore. While not named in the Information, another Unaoil client, TechnipFMC also pled guilty to FCPA violations this summer.

Yet beyond these three named entities there are 25 other companies, listed as Companies 1 through 25 which are identified in the Information. They are all identified by the location of their corporate headquarters, their industry and whether they are publicly traded or privately held. What’s more is that Unaoil engaged in bribery and corruption right up to 2016.

Further, the Press Release stated, “Additionally, court documents reflect Cyrus and Saman Ahsani laundered the proceeds of their bribery scheme in order to promote and conceal the schemes and to cause the destruction of evidence in order to obstruct investigations in the United States and elsewhere. Hunter participated in the conspiracy to violate the FCPA by, among other things, facilitating bribe payments to Libyan officials between about 2009 and 2015.”

With a scope of corruption this broad, it is not too surprising to see the international groups involved in the Unaoil investigation, which included “The governments of Australia, Canada, France, Guernsey, Italy, Monaco, the Netherlands, Portugal, Switzerland and UK provided significant assistance in this matter as did the U.S. Securities and Exchange Commission and Eurojust.” In the US, in addition to the DOJ, the FBI, IRS and US Postal Service were involved.

When it comes to fines and penalties it will be interesting to see if the One Pie, anti-piling on concept still applies. There has been significant cooperation by the various international and domestic enforcement agencies in this area and I would anticipate it would continue.

All of this means there are some major FCPA enforcement actions hanging out there. The Panalpina Settlement Day was a stunner back in 2010. Like the Jho Low forfeiture agreement, the announcement of these guilty pleas is a huge event in the anti-corruption enforcement world. The Jho Low forfeiture agreement was the largest in history. With Unaoil, it was the announcement of not simply one of the globe’s largest bribery scams but also the largest number of known entities that hired a third-party to engage in bribery and corruption on their behalf.

II. Are You On The List?

In honor of the recently conclude baseball season, I return to the rarely used but clear fan favorite, the Corruption Box Score to consider the twenty-five companies which were identified but not named in the Information. Equally importantly, even if your company is not on this Corruption Box Score you need to read through to the end as this information may well have important implications for your company going forward.

The breadth and scope of the international bribery and corruption perpetrated by Unaoil was stunning as it was audacious. Unaoil was literally the ‘go-to’ fixer to engage in bribery and corruption for this extremely wide variety of companies. The countries where Unaoil engaged in bribery and corruption included bribe payments to government officials in “Algeria, Angola, Azerbaijan, the Democratic Republic of Congo, Iran, Iraq, Kazakhstan, Libya and Syria.”

As these companies have been identified in the Ahsani’s Information that means that the Department of Justice (DOJ) knows about them. Additionally, as the Ahsanis’ guilty pleas were made back in March 2019, but they will not be sentenced until March 2020, it clearly means they were cooperating with the DOJ and their own personal sentences will depend on continued cooperation going forward.

If you read the above list and recognized either your organization or where you might be doing business you need to immediately assess if your company has self-investigated the matter. If you have done so, I hope you self-disclosed as that is factor Number 1 under the FCPA Corporate Enforcement Policy announced back in November 2017. If you have not performed an internal investigation you had better begin so ASAP because it will not be long before the DOJ and/or Securities and Exchange Commission (SEC) comes knocking. You need to try and get ahead of this situation as much as you can, even at this late stage in the game.

What if your company does not appear on the list but you have done business in any of the countries identified in the Information; those being, Algeria, Angola, Azerbaijan, the Democratic Republic of Congo, Iran, Iraq, Kazakhstan, Libya and Syria? The first thing you need to do is rescrub your transactions in these countries to see if there are any indicia of bribery and corruption. In Syria, you also need to consider the trade sanctions perspective. This review would include whether you did business with Unaoil directly or indirectly.

By this I mean, did you do business with any of those companies identified in the Information? (It is not hard to determine who those companies are.) For instance are you in any local joint ventures (JVs) in those countries with the identified companies who used Unaoil? Are you in other types of business relationships such as Teaming Agreements, Farm Out Agreements, Production Sharing Agreements or simply sub-contractors to any of those companies? Conversely, are any of those companies sub-contractors to your company?

Now consider another angle. What if your organization lost out on contracts to any of these companies in any of the countries listed in the Information? Do you now have a claim for restitution under the Mandatory Victims Restitution Act, (MVRA) which affords restitution to victims in a variety of cases and most ominously, applies to conspiracies to violate the FCPA. As reported in a Davis Polk Client Memorandum this is the situation that Och-Ziff finds itself under in a court in New York “where investors in the Canadian mining company Africo Resources Ltd. (“Africo”) sought restitution under the MVRA, arguing that they are entitled to up to $1.8 billion because of OZ Africa’s bribery scheme.” The District Court’s Order found that the Och-Ziff bribery scheme involved the use of state instrumentalities to “expropriate Africo’s mining rights without Africo’s knowledge,” which was an “offense against property” that was “committed by fraud or deceit, within the scope of the MVRA.” The Court also ruled that the Africo investors qualify as “victims under the MVRA”.

Recognizing there is a unique fact pattern under the Och-Ziff matter, it still may serve as a bellwether for aggrieved companies bringing federal claims for restitution. Even if your company does not fall under MVRA restitution, there is still a civil tort claim for unfair competition against any company that wins business through bribery and corruption. Further, as such claims are tort claims, most generally punitive damages are available and if there is anything to get a jury excited to award punitive damages on, it is one company defrauding the market by engaging in bribery and corruption.

In short, you need to take a detailed look at the 25 identified companies in the Ahsanis’ Information. If you are on the list, you need to mobilize immediately, if you have not yet done so. Even if you are not on the list, you need to see if your organization has any exposure from doing business with the identified companies or in the named countries where Unaoil engaged in bribery and corruption. Finally, you should see if your company lost any business in the named countries and do you have any potential claims for restitution or unfair competition?

III. The Corruption Schemes

Next, we review the bribery schemes, anti-competitive actions and other illegal acts engaged in by Unaoil, the Ahsanis and their clients. I will break down the schemes by country.

A. Iraq

The countries where Unaoil engaged in bribery and corruption included bribe payments to government officials in “Algeria, Angola, Azerbaijan, the Democratic Republic of Congo, Iran, Iraq, Kazakhstan, Libya and Syria.” These bribery schemes went on from at least 1999 to 2016. In Iraq these actions included bribery and corruption to help Unaoil clients obtain or retain business and obtain improper business advantages. One of the more interesting aspects was the anti-competitive strands Unaoil used. For instance, two Unaoil clients were given information that allowed them to adjust their bids so they would win consecutive but separate contracts. These two companies not only funded the bribes but hired Unaoil selected subcontractors so the money would continue to flow to corrupt government officials. The total amount paid by these two companies (identified as Companies 8 & 9 in the Information) was approximately $8.25MM.

B. Kazakhstan

In Kazakhstan, the Ahsanis and Unaoil paid bribes to obtain improper business advantages and obtain or retain business. Their illegal acts included “bid-rigging, paying kickbacks and laundering of the proceeds of the corrupt schemes.” Some of the bribes included tangible goods such as car and furniture. One twist was that the $1.6MM bribe paid to the corrupt Kazakh government official was not paid until after he left the government. Additionally, the bribe was paid to a shell corporation controlled by the same corrupt Kazakh government official. Another bribe funding mechanism used in Kazakhstan was the hiring of a sub-agent who would pay bribes funded based upon a percentage of the contract proceeds to other corrupt Kazakh government officials. Finally, defendant S Ahsani coordinated with a high-ranking executive at “Company 7 to maintain a double set of books and records to disguise” bribe payments made on behalf of the entity.

C. Algeria

In Algeria, the Ahsanis and Unaoil facilitated illegal actions to obtain or retain business and obtain improper business advantages for their clients through bid-rigging, kickbacks and laundering money. Here one of the bribery schemes involved the use of a Sales Consultant Agreement through which a company would “pay $300,000 to an Intermediate Company, and that Intermediate Company would perform no services for Company 2, except that Intermediate Company would pass on a portion of the $300,000 payment to a shell company that itself had performed no work for Intermediate Company or Company 2.” For reasons not laid out in the Information, a portion of this $300,000 was then wired through the US banking system eventually landing in a shell bank account.

Another bribery scheme used in Algeria, closer to an anti-competitive model, was in bid-rigging. Here Unaoil conspired with three different companies to have two contracts awarded to two of the companies. The third company was paid to deliberately lose the bid for both projects. Moreover, kickbacks were then paid to executives of the two companies winning the bids.

D. Libya

In Libya, the Ahsanis and Unaoil facilitated illegal actions to obtain or retain business and obtain improper business advantages for their clients through kickbacks and laundering money. Here Unaoil was appointed as a company’s agent to obtain business. Unaoil approached a family member of a Libyan government official and promised to pay him if he convinced his relative to swing business towards Unaoil’s clients. The bribe was paid into a shell company controlled by this family member who is alleged to have passed this money on to the corrupt government official. Later, when a contract dispute arose over the contract procured through corruption and the company ceased making corrupt payments to the family member, Unaoil induced company officials to begin making the payments through a kickback to them personally of $100,000.

For the Chief Compliance Officer (CCO) or compliance professional there are multiple lessons from this Information on bribery schemes and other illegal acts. It seems well-known that Unaoil lied its way through substantive due diligence by providers such as Trace International, Inc. and well-known law firms. Even with these apparent cleans bills of (due diligence) health, there are still a wide variety of facts which should have caught the compliance eye of anyone who was looking. The collusion and anti-competitive behavior in Iraq and Libya should have raised red flags within any organization. In Iraq the adjustment of bids without negotiations from the customer clearly portends inside if not illegal information was gained by the companies involved. Moreover, the obvious red flag of two separate competitors winning two consecutive bids should be enough alone for someone to start asking some very pointed questions.

Finally, the traditional review of third-party contracts for agents, sub-agents and intermediaries would have revealed several very loud red flags. These included lack of sufficiently detailed contracts, no meaningful services delivered under these contracts and multiple payments to offshore accounts. When you agent ‘suggests’ or mandates you hire certain third parties is a huge red flag, particularly when they are connected to your corrupt agent. Once again, if anyone had been looking, the indicia of bribery and corruption was there to see.

IV. The Fraudulently Obtained Certifications

Next, I want to consider the certifications obtained by Unaoil through illegal acts the company engaged in which are identified in the Information. One of the key questions which will eventually need to be answered is how Unaoil was able to operate with a business model based on bribery and corruption for so long. After all, even if an organization did not suspect that Unaoil was corrupt, the organization would put Unaoil through a due diligence review based upon the high-risk nature of where and whom Unaoil was doing business. Yet none of the due diligence reviews were able to pick up the corrupt nature of the company. The Information began to explain how the company was able to do so.

It stated that from 2006 to 2016 the Ahsanis “conspired with others to conceal the ongoing bribery and money laundering schemes on behalf of itself and its intermediary companies.” The defendants used “code words when communicating about the corrupt scheme, made false statements over international wires to the United States to obtain necessary compliance certifications, caused false certifications to be made in official proceedings and took efforts to conceal the discovery of incriminating information by law enforcement in the United States and elsewhere.”

Moreover, these actions were specifically designed to frustrate due diligence efforts. As further stated in the Information, the defendants “conspired with others to make false statements, through interstate and international wire communications to “Due Diligence Organization,” an anti-bribery organization headquartered in the United States whose identity is known to the United States and defendants. Due Diligence Organization offered companies due diligence services, including screenings and certifications, which were designed to signal whether a company had met certain anticorruption standards.”

This company referred to in the Information is TRACE International, Inc. (TRACE) and from the time the Unaoil story broke back in 2016, TRACE has been a part of the story. In its original groundbreaking story, The Age noted, “Since 2007, Unaoil has been certified by anti-corruption agency Trace International.” However, TRACE was defrauded by a conspiracy of Unaoil, the Ahsanis and corrupt Unaoil customers by providing false and fraudulent information to Trace.

As further noted in the Information, the defendants “and others agreed to cause false and misleading information to be transmitted, through interstate and international wire, to Due Diligence Organization in the United States, including false statements that [Unaoil and the Ahsanis] were not involved in the payment of bribes to foreign officials. Further Defendants C. Ahsani and S. Ahsani and others provided Due Diligence Organization with business references, including executives at Company 3, Company 7, and Company 18 who knew that Intermediary Company paid bribes to win business for Company 3, Company 7 and Company 18, respectively.” Unaoil itself filed false statements with TRACE during the certification process as well.

Alexandra Wrage, President of TRACE, was cited in an article in Raconteur, for the following, “Ms Wrage claims that Unaoil made material misrepresentations to TRACE International during the due diligence process. Their certification was revoked on these grounds.” Wrage’s assertion was backed up in the Information by the following. A Business Executive from Company 18 who was aware that Unaoil was paying bribes on his companies behalf and who was also receiving kickbacks from Unaoil, “executed a Business Reference, in which the executive wrote Unaoil’s “Business Ethics and reputation is among all their Peers of the Highest Standard” and” To my knowledge…there is no family or financial ties between any [Intermediary Company] employee, managers, owner and government agencies/officials.”

Perhaps most ominously for the Business Executive involved the Information then states, “The executive at Company 18 then caused this business reference to be emailed, through interstate and international wire, to Due Diligence Organization.” Why is it ominous? Because 18 U.S.C. § 1343 (prohibiting wire fraud) provides:

Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both.

This Wire Fraud Statute is above and beyond the obvious conspiracy of Unaoil, the Ahsanis, Executive of Company 18 and all the other persons who lied to TRACE and provided fraudulent misrepresentations in writing and wired through interstate and international wire, all of which violate the FCPA itself. These persons could well be prosecuted under the Wire Fraud Statute as well as perhaps the companies they work for could be prosecuted as well.

In the Information, the Department of Justice (DOJ) claims to know the identities of the corrupt executives who provided the false and fraudulent information to TRACE. Those persons may well face a lengthy prison term. After all, the Ahsanis pled guilty back in March 2018 and as Mike Volkov noted, “The Unaoil executives’ pleas were placed under seal while they cooperated with law enforcement investigations. The unsealing and scheduling of sentencing reflects the fact that the executives have completed their cooperation.”

The Raconteur article further cited to Wrage for the following, “Wrage conceded that no due diligence review or compliance policy is a guarantee against wrongdoing.” Every compliance practitioner needs to take that message to heart and understand that even with a company certified to some compliance standard, you must still maintain vigilance and manage the relationship with your third-parties after the contract is signed.

V. Conclusion

There were 25 companies identified in the Information by industry, venue of headquarters, FCPA status and corrupt acts engaged in. In addition to those identified, two companies were named and several others were named in other news reports. By my count at least 30-35 companies have been tied to corrupt acts by Unaoil and only Dick Cassin on the FCPA Blog even bothered to ask who were the companies which retained Unaoil and who worked with the Ahsanis. With a client list such as the one Unaoil had, you might think there would be more interest in this week. As we are now 9 years and several days after Panalpina Settlement Day, I wonder when we might have Unaoil Settlement Day?

The Information provided a wealth of data on how the corruption was conducted. Not only was there specific information on how the bribes were paid but there was also information on how Unaoil corrupted company officials. There were several instances where kickbacks were paid to corrupt company officials so they would engage in anticompetitive behavior such as bid rigging. This is serious criminal conduct from the antitrust perspective in addition to the FCPA, money-laundering, wire fraud, criminal tax evasion and several violations of other criminal law.

In addition to the personal liability of those corrupt company officials identified in the Information as well as others not identified, it gives one pause to consider how well a company is monitoring its own employee ranks when people predisposed to lying, cheating, stealing and risking their very liberty to take kickbacks; what else were they illegally doing (in addition to violating the FCPA). I would certainly expect the FBI to be visiting several of these people very early one morning with something along the lines of “We need to ask you some questions, could you come with us.”

That also brings up a new criminal offense which may well come out the Unaoil matter: lying to provide a business reference. How could such actions become a federal crime? Recall that several corrupt company officials were identified in the Information. They were all using Unaoil to engage in bribery and corruption, and, when asked by Unaoil, they provided glowing references for the company; so much so that Unaoil received compliance certified status. To do so, they received kickbacks or other inducements from Unaoil. But, most importantly, they sent the fraudulent information via email so that the Wire Fraud Act was implicated.

This may mean that these corrupt company officials are on the legal hook for this action as well. But now consider this in the context of references or other information going forward. If the information is fraudulent and it is devised or intended …to defraud... and is transmitted by means of a wire… in interstate or foreign commerce; it may well violate 8 U.S.C. § 1343, which prohibits wire fraud. It would be rare that someone would engage in such fraud out of the goodness of their heart so that would mean they were paid or otherwise received a benefit to do so, even if that benefit was continued bribery and corruption. As Grace Slick said at Woodstock, “It’s a new dawn.”

The fraudulently obtained certifications also bring up a key point that many practitioners misapprehend due diligence and the overall management of third parties. Due diligence is but one part in a five-step process in the management of third parties. The steps are (1) business justification, (2) questionnaire, (3) due diligence and its evaluation, (4) compliance terms and conditions and (5) management of the relationship after the contract is signed. That final step is the most difficult but also the most important. A certification is but one part of due diligence and must be treated as only one part. It is not the be all and end all.

This leads to the final point that the Unaoil case and the Ahsani Information makes clear. That the process of a best practices compliance program is to prevent, detect and remediate on an ongoing basis. It does not stop because a company was cleared or a contract was signed. If you are doing business in a high-risk jurisdiction or in a high-risk industry you must not only remain ever vigilant, but you must also continually monitor third-parties, your own employees and transactions. For it is only through the operationalization of compliance, that you can begin to fully stop such actions before they become FCPA violations.