September 29, 2023

Chemical manufacturer settles FCPA investigation for $218 million

On September 29, 2023, the US Department of Justice and the Securities and Exchange Commission announced concurrent resolutions of their investigations into the bribery of foreign government officials by Albemarle Corporation, a publicly-traded chemical manufacturer with headquarters in North Carolina.  The company agreed to pay $218 million as part of these settlements.  With respect to the DOJ’s investigation, the company entered into a three-year non-prosecution agreement.  The terms of the NPA, summarized below, may be extended by one year if Albemarle fails to fulfill its obligations under the agreement.

As described in the NPA, Albemarle paid bribes to government officials in Vietnam, Indonesia, and India to obtain and retain business at the countries’ state-owned oil refineries.  In India in 2009, Albemarle was, according to the NPA, at risk of being blacklisted from continued business with the Indian Oil Corporation Limited (“IOCL”), an Indian state-owned and state-controlled oil company.  To avoid losing its business with the IOCL, Albemarle engaged an intermediary who said it could assist.  Albemarle did this even though, according to the NPA, one of Albemarle’s managers expressly told others in the company that “it was clear. . . that the Consultant [will] be using part of the commission to handle” an IOCL official and that the intermediary’s actions might violate the FCPA.  The company paid approximately $1.14 million in “commissions” to the intermediary, was able to retain IOCL business, and profited by more than $11 million between 2009 and 2011, according to the NPA.

In Indonesia, as described in the NPA, Albemarle switched its third-party sales agent at the request of an official at Indonesia’s state-owned oil company, PT Pertamina, and later used the intermediary to pay bribes to Pertamina officials in order to obtain samples of a competitor’s product.  The NPA also stated that Albemarle ultimately paid the intermediary approximately $1.28 million (some of which was passed to a close relative of a Pertamina official) and obtained over $18 million in profits through this scheme.

In Vietnam, as stated in the NPA, Albemarle engaged a sales agent in 2012 for the purpose of obtaining catalyst business with a state-owned refinery, the Vietnam Oil and Gas Group (doing business as PetroVietnam).  The intermediary initially agreed to a 4.25 percent commission.  However, after introducing  Albemarle employees to an official at PetroVietnam, the intermediary began pressuring Albemarle to increase the commission in order to “settle down” PetroVietnam officials, according to the NPA.  Albemarle resisted this pressure until May 2014, when it agreed to increase the commission to 6.5 percent and expanded the products on which the sales agent worked, which further increased the amount of commissions paid.  Following this, Albemarle obtained business with BSR, a refinery managed by PetroVietnam.  Albemarle also used the same sales agent to corruptly obtain business at another state-owned refinery, according to the NPA.  The DOJ found that Albemarle obtained more than $69 million in profits from these contracts between 2013 and 2017, having paid $3.5 million in commissions to the intermediary.

As part of the NPA, Albemarle must conduct an annual review (three in total) of its internal controls, policies, and procedures relating to the FCPA, and issue reports to the DOJ regarding the reviews’ findings.  The reviews must also follow work plans approved by the DOJ.  The DOJ imposed a criminal monetary penalty of $98,236,547, and forfeiture of $98,511,669, with a credit for the $81,856,863 disgorged to the SEC (see below).  The monetary penalty reflects a discount of 45 percent off the bottom of the applicable US Sentencing Guidelines fine range.  It also reflects an additional discount of $763,453 under the DOJ’s March 2023 Compensation Incentives and Clawbacks Pilot Program, as the Company withheld bonuses in that amount to (1) employees engaged in wrongdoing or (2) employees who (a) had supervisory authority over those committing the misconduct and (b) knew of or were willfully blind to the misconduct.  Although the company received credit for cooperating with the DOJ’s investigation, accepting responsibility for its criminal conduct, and taking timely and extensive remediation measures, the DOJ found that Albemarle’s voluntary disclosure of the conduct was not “reasonably prompt” within the meaning of the Criminal Division Corporate Enforcement and Voluntary Self-Disclosure Policy and the Sentencing Guidelines.  The DOJ stated that the Company learned of allegations of misconduct in Vietnam about 16 months prior to disclosure, and had gathered evidence substantiating such misconduct at least nine months prior to disclosure.

The company’s resolution with the SEC stems largely from the same conduct.  The SEC found that Albemarle and its subsidiaries paid bribes through agents to officials at state-owned oil refineries in Vietnam, India, and Indonesia.  The SEC also stated that Albemarle paid bribes to employees at private-sector refineries, and that these payments, along with the payments to public officials, were improperly recorded in Albemarle’s books and records.  In addition, according to the SEC, Albemarle failed to address deficiencies in its internal accounting controls regarding third party agents and distributors in Vietnam, India, Indonesia, China, and the United Arab Emirates, even once such deficiencies had been identified.  Agents were paid without comprehensive due diligence, and without executed contracts that contained appropriate anti-corruption provisions, according to the SEC Order.

The SEC considered Albemarle’s cooperation, its remediation, and its initial self-disclosure and self-reporting of potential violations discovered in the course of the company’s internal investigation in calculating the appropriate penalty.  Under the settlement, the company agreed to pay a total of $103,618,310 to the SEC, composed of $81,856,863 in disgorgement and $21,761,447 in pre-judgment interest.

DOJ press release | NPA | SEC press release | Order