Review of Samsung’s Bribery Scheme in Brazil (Part II of II)

Samsung’s recent FCPA settlement with the Justice Department capped yet another example of a company involved in bribing Petrobas in Brazil for valuable contracts.  The scope of the bribery scheme was focused on a contingent deal involving Samsung’s desire to build a drillship for Chartering Company in Houston, Texas. 

Beginning in 2007 and continuing until 2013, Samsung conspired with others  to violate the FCPA by paying approximately $20 million in commission payments to a Brazilian agent, knowing that portions of the funds would be paid to Petrobas officials.

At the bottom of the bribery scheme was the objective of having Petrobas enter into a contract with Chartering Company to supply a drill ship that Samsung was selling to the Houston offshore company.  Samsung took actions from its Houston office to further and implement the bribery scheme.

In 2007, Samsung entered into an option agreement with the Chartering Company in Houston, Texas.  The Chartering Company secured the right to purchase a drill ship from Samsung if Petrobas and Chartering Company entered into a related contract to charter the drillship to Petrobas.  Samsung and Chartering Company had an equal incentive to secure a drill ship contract from Petrobas.

Samsung hired an agent in Brazil (Agent 1) to help secure a contract for Chartering Company.  Samsung Manager 1 (SM1) was based in Houston, Texas and his/her supervisor, Samsung Manager 2 (SM2), was based in Seoul, South Korea.  SM1 also met with two Petrobas officials who were responsible for the drillship contract. 

After conferring with SM2, SM1 agreed to pay a commission of $20 million to help secure the contract for Chartering Company with Petrobas.  Samsung knew that Agent 1 would pay a portion of the $20 million commission to the Petrobas officials. 

To help make the bribery payments, Agent 1 hired an additional agent (Agent 2).  To fund the bribery scheme, Samsung increased the price it charged Chartering Company for the drillship.

To disguise the bribery commissions, Samsung agreed to pay the commissions to Agent 1 and Agent 2 through two specific intermediary companies.

In December 2007, SM1 wrote a specific email to Samsung officials and SM2 reporting on Petrobas expected award of a contract for a drillship to Chartering Company, and the arrangement to pay bribes to two Petrobas officials through Agents 1 and 2.

Samsung agreed to make payments consistent with the overall plan based on specific milestones.  Three sets of commission payments were made pursuant to invoices issued by intermediary companies 1 and 2 over a four-year period.  The total of the three payments made to each intermediary company was $10 million, respectively.

Agent 2 arranged briery payments to the Petrobas officials: one to a bank account in Switzerland; and another to a Switzerland bank account of a French businessman who entered into a sham loan agreement with one of the intermediary companies, and who then transferred the payment to a bank account in Monaco controlled by a Petrobas official.  Agent 1 also facilitated a payment to a Petrobas official with a bank account in Hong Kong. 

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