Saturday, August 6, 2005

FCPA Investigations Hit DaimlerChrysler and Oil Companies

Investigations of possible violations of the Foreign Corrupt Practices Act are hitting major international companies.  DaimlerChrysler has been under investigation since August 2004 for possible bribes paid by its Mercedes division, an investigation triggered by a lawsuit filed by an accountant for the company who claimed he was fired because he tried to blow the whistle on secret accounts used to pay foreign officials (see New York Times story here).  The payments were out of Germany, where Mercedes operates, which had long resisted efforts to extend the FCPA.  Because DaimlerChrysler's shares are listed on the New York Stock Exchange, it is subject to SEC disclosure rules and the FCPA. 

The investigation now includes the Department of Justice, and according to the company's most recent earnings release (here): "In connection with its internal investigation, DaimlerChrysler has identified certain of these accounts, transactions and related payments in connection with certain foreign business activity that are the subject of special scrutiny and that have been disclosed to the SEC and the DOJ. The internal investigation is ongoing and DaimlerChrysler has not yet reached any definitive conclusions as to whether, or to what extent, these transactions and payments may constitute violations of applicable laws."  Of course, it's not the company's conclusion on the legality of the transactions that controls the situation, and it would certainly not be surprising to see a settlement of criminal and civil FCPA claims in the near future.

On a different front, the public filings of Amerada Hess (here) and Devon Energy (here) disclose -- buried deep within their 10-Qs, of course -- that the SEC has bumped up its inquiry into payments related to oil projects in Equatorial Guinea to a formal investigation.  A story in USA Today (here) indicates that oil giants ExxonMobil, ChevronTexaco, and Marathon Oil are also involved in the SEC investigation.  Interestingly, the genesis of the FCPA investigation was the money laundering and bank secrecy investigation of Riggs Bank, which had a number of accounts for foreign leaders, including Equatorial Guinea's leaders and their family members, that were suspected of being used to hide corrupt payments.  Riggs has since been acquired by PNC Financial, but investigations often take on a life of their own, as noted in the USA Today story that a former Riggs officer responsible for the Equatorial Guinea accounts is the target of a grand jury investigation (ph)

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Tracked on Aug 7, 2005 5:36:33 PM