The UK resolution of the John Wood Group PLC (Wood) Corruption Act violation has been released. Wood found himself in the position of “carrying the box” for the corrupt conduct of Foster Wheeler and the company that acquired him, Amec (Amec Foster Wheeler). One can only marvel at how much worse the facts listed in the UK’s resolution documents were than in the US Foreign Corrupt Practices Act (FCPA) regulation.
The UK’s resolution came through a Deferred prosecution agreement (DPA). The DPA got an explosive reading because, unsurprisingly, much of Foster Wheeler’s business model was based on bribery and corruption. It turns out that this business model has been used by Foster Wheeler across the world, not just in Brazil. In the indictment, as set out by the Serious Fraud Office (SFO), Foster Wheeler engaged in acts of corruption in Saudi Arabia, Malaysia, Nigeria and India. This business model based on bribery and corruption dates back at least until 1996 and continued until the acquisition of Foster Wheeler by Amec. Given the pervasive nature of Foster Wheeler’s bribery and corruption as a business model, this makes Amec and later Wood’s failures in their pre-acquisition due diligence all the more remarkable.
While the FCPA’s U.S. resolution focused on the corrupt third-party agents Foster Wheeler got into bed with while doing business in Brazil, the British resolution focused on the equally corrupt leadership of the company after the discovery of bribes and corruption in Saudi Arabia, Malaysia and Nigeria via an internal investigation by the law firm Baker Boots LLP. The UK DPA has clearly demonstrated a pattern and practice of bribery and corruption that has reached the highest levels.
As Judge Edis noted in the UK DPA, “at any time during this period, FWEL [Foster Wheeler] had policies in place that should have prevented this from happening, but it turned out that those policies were not followed. He then quoted the SFO for the following: “The SFO investigation identified several occasions where the above policies and procedures were circumvented and violated, which led the SFO to conclude that it existed within FWEL a culture of non-compliance with compliance policies and procedures. Judge Edis then concluded: “I read this as a reference to all of the ‘policies above’ and as a description of a state of affairs which had persisted throughout the period of the Act. ‘charge. The policies have changed, but they never worked because FWEL [Foster Wheeler] didn’t want them. ” [emphasis supplied] In other words, a culture of corruption has been so ingrained in Foster Wheeler that it’s doubtful anything can be done.
Even with all this culture of corruption, there are many lessons to be learned. We start with the Foster Wheeler board of directors. Quite simply because the Council made the wrong decision and most certainly put its collective head in the sand when corruption allegations were made in 2007, via a Baker Botts report on corruption allegations in Malaysia; this does not mean that there are no lessons to be learned. Here I can think of at least two.
First, when allegations of bribery and corruption arise, a council has an obligation to do more than just say, “Thank you, sir. Can I have another ”at the law firm that uncovered the allegations. The DPA revealed: “At least four times [including Saudi Arabia] between 2007 and 2010, senior executives and directors of the Foster Wheeler group commissioned Baker Botts LLP to conduct internal investigations into suspicions that FWEL employees [Foster Wheeler] (including senior officials and directors) engaged in corrupt activities and in some cases covered up such activities. While these investigations have revealed evidence that senior executives and directors of FWEL may have violated applicable corruption and proper record-keeping laws, the Foster Wheeler Group has not reported the outcome of these investigations to authorities in ‘no jurisdiction, including the UK, at the time. Further, these reports were historical in nature in that in 2008 Baker Botts produced a report on the events in Malaysia, and in 2009 a report on the Nigerian events. These reports examined facts that had occurred. some time before, however, this activity failed to stop the corruption as the dates of the indictment reveal.
What was the Council’s response beyond doing nothing? They got a legal opinion that they didn’t have to report the driving. While this may have been a correct statement of the law, it was a devastating business decision. It cost a successor company twice removed from illegal driving more than $ 177 million in penalties. There is no doubt that the pre-settlement investigation and remedies have gone well beyond that cost. But beyond this insipid legal response, Judge Edis was clear in his conviction, declaring “here is a moral duty of all citizens in this regard which extends at least also to businesses. This failure of the FWL board of directors is deplorable. It is compounded by the fact that their efforts to fight corruption, even within their own organization, have been unsuccessful. In no time, the very similar offense in Brazil began.
For any company listed in the United States, this set of facts could well have led to criminal indictments of individual board members. At the very least, the company would pay millions of dollars in shareholder lawsuits based on violations of its policies. Maintenance mark functions. The Council’s decision allowed a multi-million dollar system of corruption to continue, corrupting several countries and businesses in its wake.
2. Mergers and acquisitions
It continues to amaze me that through two subsequent acquisitions, the endemic and culture of corruption at Foster Wheeler was never discovered during pre-acquisition due diligence. One might even wonder rightly if Amec or Wood have any pre-acquisition due diligence from a compliance perspective. In addition to the fact that Foster Wheeler’s board of directors ignored the results of multiple Baker Botts corruption investigations in multiple countries, the two acquiring companies also failed to uncover the reports. Apparently no one has spoken to Foster Wheeler’s Chief Compliance Officer (CCO), General Counsel (GC) or Chief Internal Auditor about the compliance issues.
But mergers and acquisitions have two parts, the pre- and post-acquisition phases. In the post-acquisition phase, the phase of a company is responsible for auditing the company it has acquired from a compliance perspective. It is not clear from the UK DPA whether this was done or not, but what is clear is that no entity involved in this mess has self-disclosed anything to the UK SFO. , the US Department of Justice (DOJ), or other enforcement agency. All of this is simply inexcusable.
Together the US DPA and UK DPA detailed a company so corrupt that their business strategy was based on corruption. One of the questions I have after reading all the US and UK documents is why the total penalty was so low? One can only credit the John Wood Group, which has not only accepted the responsibility of “carrying the box” for Foster Wheeler’s illegal acts, but has also largely remedied Amec Foster Wheeler and his other organizations far beyond what he was legally obliged to do.