On December 11, 2013, the Department of Justice issued a press release regarding a $32 million dollar penalty imposed against the German engineering firm Bilfinger SE for alleged violations of the Foreign Corrupt Practices Act (FCPA). The monetary penalty is the latest government action taken in the investigation of an alleged large-scale bribery scheme relating to the development of oil and gas projects in Nigeria. The FCPA investigation has already resulted in a $22 million dollar penalty against another entity allegedly involved, as well as three convictions against former employees. One employee that has been charged is currently considered a fugitive.

Willbros International, Inc., a wholly-owned subsidiary of Willbros Group, Inc., operated three subsidiaries in Nigeria.  For the EGGS project it partnered with Bilfinger SE to win the bid for the project.  Willbros Group and Willbros International are organized under the laws of the Republic of Panama, and as mentioned above, Bilfinger is a German entity.

The alleged scheme dates as far back as 2003 with the commencement of the Eastern Gas Gathering System (EGGS) project, a natural gas pipeline system designed to relieve existing pipeline capacity restraints in Nigeria. The project was valued at approximately $387 million. According to legal documents, employees of Willbros and Bilfinger bribed Nigerian officials in order to obtain the bid to the EGGS project.

At first glance, it may be difficult to ascertain how the United States maintains jurisdiction over these entities. However, Willbros Group maintains its principal place of business in the United States, as does Willbros International, and shares of Willbros Group are traded on the New York Stock Exchange (NYSE) under the symbol “WG.”  Authority under the FCPA extends to entities incorporated under foreign laws if shares are traded on the NYSE.  Moreover, because the entities held their principle places of business in the United States, they opened themselves up to U.S. jurisdiction.  According to the statute itself, Willbros Group is deemed as an “issuer” under the Act (15 U.S.C. 78dd-1(a)), whereas Willbros International is considered a “domestic concern” (15 U.S.C. 78dd-2(h)(1)(B)).

This case brings up an interesting example of how a completely foreign entity can be  held liable under the Foreign Corrupt Practices Act.  Specifically, Bilfinger appears to be implicated under a “guilty by association” theory. Because Bilfinger partnered with Willbros in the EGGS project, they’ve been looped into the alleged bribery conspiracy and are now facing a $32 million dollar fine, which is actually higher than what was imposed on Willbros.

It is not uncommon for foreign entities and their subsidiaries to partner with U.S. corporations for large scale energy projects. However, in this case Bilfinger probably thought it was working with a non-U.S. entity, since Willbros not only had several subsidiaries operating in Nigeria, but is incorporated in Panama. Nevertheless, the reach of the FCPA, and its criminal violations, needs to be a concern for not only U.S. entities working on projects overseas, but their foreign counterparts as well.

The author of this blog is Margaret S. Ververis, an attorney specializing in Federal Criminal Defense matters with the law firm of Ferrari & Associates, PC. If you have any questions please contact her at 202-440-2581 or ververis@ferrariassociatespc.com.

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