SEC blotter: Former KBR CEO pleads in Nigerian bribery case

Yesterday, the SEC charged former Kellogg, Brown & Root, Inc. (KBR) executive Albert Jackson Stanley with participating in a “scheme” to win more than $6 billion in construction contracts by bribing Nigerian government officials. According to the SEC, “The contracts were awarded to a four-company joint venture of which The M.W. Kellogg Company, and later KBR, was a member.

The SEC’s complaint in the case — filed at Houston, in the U.S. District Court for the Southern District of Texas — can be accessed here and the SEC’s press release, here.

The Foreign Corrupt Practices Act is a legacy of the Jimmy Carter era and was prompted, back in the mid 1970’s, by evidence uncovered during the Watergate investigation that American companies were in the habit, like everyone else in the world, of paying bribes to win business in many countries around the world, but especially developing ones.

For over two decades following enactment of the FCPA, the United States was virtually alone in the world in legislating against such bribes. Then, in December 1997, 37 other OECD nations signed the OECD’s Anti-Bribery Treaty. The treaty, which roughly mirrors the U.S. FCPA, began entering into force in 1999. By 2000, most other countries began denying income tax deductions for foreign bribes but some continued to allow them. For example, in 2006, Finland, Japan and the Netherlands finally legislated such deductions out of existence in their countries.

With respect to Mr. Stanley, the SEC’s press release notes:

Stanley has pleaded guilty to one count of conspiring to violate the FCPA and one count of conspiring to commit mail and wire fraud (unrelated to the FCPA charge). He faces seven years in prison and payment of $10.8 million in restitution.

When prosecutors are unable to find sufficient evidence to charge a defendant with actually committing a “real” crime, they will often use “conspiracy” as a fall back litigation strategy. Conspiracy is more easily proven since completion of the underlying criminal act is not a necessary element of the offense and a conspirator can be held responsible for a co-conspirators’ actions.