This week I am mining the guilty pleas of the former Unaoil Chief Executive Officer (CEO), Cyrus Ahsani, and former Chief Operations Officer (COO), Saman Ahsani, for what they might mean for Foreign Corrupt Practices Act (FCPA) enforcement and compliance practitioners going forward. The breadth and scope of the corruption is simply stunning. Today I want to consider the bribery and corruption schemes, anti-competitive actions and other illegal acts identified in the Information.

Iraq

The countries where Unaoil engaged in bribery and corruption included bribe payments to government officials in “Algeria, Angola, Azerbaijan, the Democratic Republic of Congo, Iran, Iraq, Kazakhstan, Libya and Syria.” These bribery schemes went on from at least 1999 to 2016. In Iraq these actions included bribery and corruption to help Unaoil clients obtain or retain business and obtain improper business advantages. One of the more interesting aspects was the anti-competitive strands Unaoil used. For instance, two Unaoil clients were given information that allowed them to adjust their bids so they would win consecutive but separate contracts. These two companies not only funded the bribes but hired Unaoil selected subcontractors so the money would continue to flow to corrupt government officials. The total amount paid by these two companies (identified as Companies 8 & 9 in the Information) was approximately $8.25MM.

Kazakhstan

In Kazakhstan, the Ahsanis and Unaoil paid bribes to obtain improper business advantages and obtain or retain business. Their illegal acts included “bid-rigging, paying kickbacks and laundering of the proceeds of the corrupt schemes.” Some of the bribes included tangible goods such as car and furniture. One twist was that the $1.6MM bribe paid to the corrupt Kazakh government official was not paid until after he left the government. Additionally, the bribe was paid to a shell corporation controlled by the same corrupt Kazakh government official. Another bribe funding mechanism used in Kazakhstan was the hiring of a sub-agent who would pay bribes funded based upon a percentage of the contract proceeds to other corrupt Kazakh government officials. Finally, defendant S Ahsani coordinated with a high-ranking executive at “Company 7 to maintain a double set of books and records to disguise” bribe payments made on behalf of the entity.

Algeria

In Algeria, the Ahsanis and Unaoil facilitated illegal actions to obtain or retain business and obtain improper business advantages for their clients through bid-rigging, kickbacks and laundering money. Here one of the bribery schemes involved the use of a Sales Consultant Agreement through which a company would “pay $300,000 to an Intermediate Company, and that Intermediate Company would perform no services for Company 2, except that Intermediate Company would pass on a portion of the $300,000 payment to a shell company that itself had performed no work for Intermediate Company or Company 2.” For reasons not laid out in the Information, a portion of this $300,000 was then wired through the US banking system eventually landing in a shell bank account.

Another bribery scheme used in Algeria, closer to an anti-competitive model, was in bid-rigging. Here Unaoil conspired with three different companies to have two contracts awarded to two of the companies. The third company was paid to deliberately lose the bid for both projects. Moreover, kickbacks were then paid to executives of the two companies winning the bids.

Libya

In Libya, the Ahsanis and Unaoil facilitated illegal actions to obtain or retain business and obtain improper business advantages for their clients through kickbacks and laundering money. Here Unaoil was appointed as a company’s agent to obtain business. Unaoil approached a family member of a Libyan government official and promised to pay him if he convinced his relative to swing business towards Unaoil’s clients. The bribe was paid into a shell company controlled by this family member who is alleged to have passed this money on to the corrupt government official. Later, when a contract dispute arose over the contract procured through corruption and the company ceased making corrupt payments to the family member, Unaoil induced company officials to begin making the payments through a kickback to them personally of $100,000.

For the Chief Compliance Officer (CCO) or compliance professional there are multiple lessons from this Information on bribery schemes and other illegal acts. It seems well-known that Unaoil lied its way through substantive due diligence by providers such as Trace International, Inc. and well-known law firms. Even with these apparent cleans bills of (due diligence) health, there are still a wide variety of facts which should have caught the compliance eye of anyone who was looking. The collusion and anti-competitive behavior in Iraq and Libya should have raised red flags within any organization. In Iraq the adjustment of bids without negotiations from the customer clearly portends inside if not illegal information was gained by the companies involved. Moreover, the obvious red flag of two separate competitors winning two consecutive bids should be enough alone for someone to start asking some very pointed questions.

Finally, the traditional review of third-party contracts for agents, sub-agents and intermediaries would have revealed several very loud red flags. These included lack of sufficiently detailed contracts, no meaningful services delivered under these contracts and multiple payments to offshore accounts. When you agent ‘suggests’ or mandates you hire certain third parties is a huge red flag, particularly when they are connected to your corrupt agent. Once again, if anyone had been looking, the indicia of bribery and corruption was there to see.

Tomorrow, I will consider the Trace International, Inc. angle in this saga.

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