'Six months after I started the job, I was in federal court pleading guilty to criminal charges:' A former GC recalls his experience negotiating an FCPA resolution
11 May 2018. By Phoebe Seers.
Not long after the US Securities and Exchange Commission, or SEC, subpoenaed Colorado-based chemical company Innospec over suspicions that it paid kickbacks to secure contracts under the United Nations oil-for-food program in Iraq, David Williams was brought on as the company’s general counsel and chief compliance officer. He spoke to MLex of the complexities involved in negotiating the first global settlement with authorities in the US and UK while juggling a new compliance program, a corporate monitor and the need to ensure that outside counsel were pulling their weight.
Williams joined the company in 2009, shortly after negotiations with authorities in the US and UK had started. That meant he wasn’t around at all between 2000 and 2008 when bribes — $4 million to the former Iraqi government, $1.5 million to the Iraqi oil minister and $2.9 million to the Indonesian government — were said to have been paid.
“I was an expert witness for matters that I wasn’t there for,” he said. To develop “substantive knowledge” of what had occurred, he sat with external counsel “for weeks…reviewing stacks of information.”
Nowadays, settlements involving multiple agencies in different countries are commonplace, even the norm. But this case was the first time a guilty plea was presented to a British criminal court as part of a global settlement that related to similar conduct prosecuted by authorities in the US.
Williams said it was critical that the criminal proceedings ran concurrently in the US and the UK. He didn’t want admissions in one set of proceedings to be levied in the other. And he was successful: the company’s UK subsidiary pleaded guilty in Southwark Crown Court the same day the negotiated settlement was announced by the US Department of Justice.
“Six months after I started the job, I was in federal court pleading guilty to criminal charges, while an external counsel in the UK was doing the same in as contemporaneous a fashion as possible.”
All in the public eye
One of the more difficult challenges was associated with the listed company’s disclosure obligations. “I was trained as a lawyer — where everything in negotiations is confidential.”
“However, we were advised that GAAP [generally accepted accounting principles] compliance required us to report offers and counter offers, and this established parameters the markets could digest. This is a simplistic explanation, but the negotiations occurred very much in the public eye,” Williams said.
The hardest part for him seems to have been the sheer volume and diversity of the tasks he faced. “Simultaneously dealing with all of the agencies and responding to ongoing requests; creating a new and improved compliance program…negotiating directors and officers cover for the individuals that were prosecuted, and for the numerous individuals interviewed — ensuring the insurance would cover every meeting, every interview, and that the assigned counsel was being paid….”
Williams, who has a commercial regulatory background, said it was his experience dealing with federal regulators and a prior role developing a policy on the US Foreign Corrupt Practices Act, or FCPA, that landed him the job. But it was his first live FCPA case.
Good cop, bad cop
On relationships with the regulators, he said he wanted outside counsel to be the advocate, to enable the CEO to negotiate. "As the dynamics shifted in that direction, we were better able to establish a rapport with the regulators and move the matter forward."
He was extremely impressed by the quality of the attorney and negotiators at the DOJ and the SEC, he said. “The SFO [UK Serious Fraud Office] was not so experienced — although they had quality lawyers in place. They were also under-resourced back then. Rightly, I think, they allowed the DOJ to take the lead.”
In 2010, the company reached a $40.2 million settlement with the DOJ, the SEC and the SFO. That settlement could have been a lot higher — more than $100 million was waived by the US authorities because the company said it couldn’t pay.
The SFO was criticized by judges who heard the case, who said — and this was four years before a formal deferred prosecution regime was introduced in the UK — the regulator didn’t have authority to enter into a plea bargain, and that the fine was “wholly inadequate.” Two former CEOs went to prison for three years and two years, respectively.
A corporate monitor was appointed for three years and the company was under a five-year probation. During that time, Williams said he kept up a dialogue with the authorities. “Questions arose, and we would tell the agency, ‘we’ve got this issue, and this is how we handled it.’ We had become pretty sophisticated in our dealings by then — the corporate culture was very receptive — and that approach worked for the agencies.”
Support from the top
Williams’ task was undoubtedly made easier by the support of the board and senior management. They were aware of the problems with the previous management and wanted to ensure things were being done the right way, he said. He said he remains loyal to the company.
He doesn’t say much about the previous management, just noting that there was a “different culture” then and that “mistakes were made.”
If he could have done one thing differently, he said he would have worked harder, earlier, to expand his staff. “An early failing with the monitor relationship was created because I did not sufficiently staff the process. There were not a lot of monitor relationships to draw from at the time, and I under-estimated the volume of response that would be required.”
“Once we were staffed — and I was able to find a terrific individual in the UK — the relationship improved, and the monitor-ship got back on track to a successful conclusion.
He stayed with the company until March last year, leaving to set up a compliance consulting platform, the Williams Compliance Group. So, would he do it all over again?
“Without hesitation,” he said, so long as he was working with a similarly minded team. “We were all in this together, and I had the full support of everyone. The tone from the board and management was clear, and the corporate culture reflects that compliance is not negotiable."