I conclude my review of Amec Foster Wheeler’s (Foster Wheeler) Foreign Corrupt Practices Act (FCPA) enforcement. Today I want to conclude with the result and some key lessons for the 2021 compliance professional. These facts are set out in the document from the Department of Justice (DOJ) Deferred prosecution agreement(DPA) and the Securities and Exchange Commission (SEC) Cease and desist order (Order). Also, a very big thumbs up to Stanford Law School, Foreign Corrupt Practices Clearinghouse which is by far the best academic resource for anything related to the FCPA. It’s free and if you’re the least interested in FCPA enforcement or compliance, you need to register on the site.
I. FCPA penalties
It is not known when or how this FCPA investigation began, but given that it involved Petrobras, it would not be too surprising for this case to be uncovered by Wash Jato. However, even though the bribery scheme was uncovered, it was not through self-disclosure, as the DPA noted that there had been no self-disclosure by any of the companies involved. Nonetheless, after the matter was brought to the attention of the reluctant parties, they saw the light and cooperated with the DOJ and the SEC. The Order stated that “Amec Foster Wheeler, and subsequently Wood [John Wood Group PLC], cooperated with the Commission’s investigation by identifying and timely production of key documents identified during its own internal investigation, providing the facts developed during its internal investigation and bringing current or former employees to available to Commission staff, including those who were to travel to the United States. “The DOJ DPA said,” The Company has received full credit for its cooperation and Wood’s cooperation with the Fraud Section. “This cooperation s ‘is translated by a 25% reduction in the fine imposed by the DOJ.
All parties involved have also remedied in depth. The order stated that âAmec Foster Wheeler’s and Wood’s turnaround efforts included firing employees responsible for the misconduct and improving its internal accounting controls. Amec Foster Wheeler, then Wood, strengthened their organization in terms of ethics and compliance; improved its code of conduct, policies and procedures regarding gifts and hospitality, and the use of third parties; created positions to deal with potential risks; and increased training of employees on anti-corruption issues. The DPA went further by noting that Wood has also remedied its compliance program for all “Wood Group companies.” This cooperation and corrective actions have provided companies with substantial benefits under the FCPA Enforcement Policy. This resulted in a reduction of approximately $ 6 million in the fine imposed by DOJ. Finally, Wood was not required to retain the services of an independent observer.
II. Lessons learned
a. Internal controls
As many reviewers have noted, this question originally arose in 2011. Perhaps things were different about 10 years ago and companies weren’t taking the FCPA as seriously as they were. Now or maybe Foster Wheeler and Wood just didn’t care about the law. However, when you have systemic corruption, at all levels of an organization, from a former chairman of the board to an active general manager (CEO), general counsel (GC) and director country, you clearly have a culture program in an organization. . Hopefully, in 2021, if a GC is asked to draft an agreement, even an interim agreement that violates a company’s internal controls for auditing and contracting with third-party agents, that GC will stop the process. But if not, there should be trigger wires that would alert people at the highest level of an organization that a key control has been overridden or bypassed. This of course means that the board needs to have visibility into the highest risks an organization faces and in the world of international business, a third party sales agent represents that level of risk.
But it is not just a set of controls in the creation and execution of contracts, it is also robust controls in the area of ââaccounts payable and finance. Finance, Accounts Payable, and other departments also have a role to play, so if a payment that is suspicious or outside the standard form of documentation appears, it should warrant further investigation. Even after everything that happened in Brazil, Foster Wheeler’s accounts payable could have raised questions about payments up to the chief financial officer (CFO) and possibly the audit committee or board of directors.
In addition, in 2021, these types of internal controls may be fully automated. In others, priority controls or blatant disregard can be avoided with a technological solution. There are several vendors in the compliance space that can do this and frankly, there is no excuse not to automate this process. As Matt Kelly noted in Radical compliance, âNow I understand that many Foster Wheeler executives turned a blind eye to the corruption here. This is precisely why compliance teams must implement automated third-party monitoring, along with rigorous exception request policies, so that when managers attempt to circumvent internal controls for nefarious purposes , these decisions stand out like a sore thumb.
b. Mergers and Acquisitions
There is one final key lesson to be learned from this enforcement action, and it concerns compliance roles in mergers and acquisitions (M&A). There were at least two acquisitions involved here where the acquiring entity; Amec first acquired Foster Wheeler (forming Amec Foster Wheeler), then second, John Wood Group PLC (acquiring Amec Foster Wheeler) failed to perform sufficient pre-acquisition due diligence or even audit post-acquisition of the company acquired high-risk businesses. Again, this concerned Petrobras who was well known for their corruption issues in 2014. There was no mention of Amec’s and Wood’s failures in M&A matters on this issue, but it is clear that something went unnoticed.
Since at least the 2012 FCPA Resource Guide, the DOJ and the SEC have specified compliance steps in mergers and acquisitions. It is the pre-acquisition due diligence that must form the basis of the post-acquisition integration. After the acquisition, there should be a full FCPA audit and forensic investigation, especially in high risk markets and with high risk companies. There must be comprehensive training on compliance and the integration of the acquired entity into the acquirer’s compliance regime.
Things could have been very different if these steps had been taken. Bada Bing, Bada Bang.