CDM Smith, Inc: The 2017 FCPA Declination

In the CDM Smith, Inc FCPA case, a June 21, 2017 declination letter required the company to give up $4,037,138 in profits from Indian contracts. The Justice Department’s Criminal Division, Fraud Section closed its Foreign Corrupt Practices Act investigation after describing approximately $1.18 million in alleged bribes paid through employees and agents of CDM Smith and its wholly owned Indian subsidiary, CDM India. The business at stake was highway construction supervision and design, along with a water project.

CDM Smith was a privately held engineering and construction company incorporated and headquartered in Boston, Massachusetts. For someone inside that business who knows a contract, a payment approval or an intermediary’s actual work, the important connection is between the money and the government decision it was meant to influence. That is where we begin with a potential whistleblower.

Indian Highway Contracts and Subcontractors Without Services

The Justice Department’s letter alleged that employees of CDM Smith’s division responsible for India and CDM India paid officials at the National Highways Authority of India to obtain contracts from approximately 2011 through approximately 2015. The authority was India’s state-owned highway management agency. The alleged payments therefore concerned officials awarding public highway work, with the engineering company seeking the supervision and design business attached to it.

According to the letter, the highway bribes generally amounted to 2% to 4% of the contract price. The employees routed them through fraudulent subcontractors that performed no actual services and understood that the payments were meant solely for the officials’ benefit. The Justice Department described a payment channel built into the contracting relationship: the subcontractor received money even though it supplied none of the work its role suggested.

For an engineer or project manager, that absence of work is a concrete point of comparison. Someone familiar with the project may know what a subcontractor was assigned, whether its staff ever contributed and who actually delivered the work. We look at that knowledge alongside the payment approval and the government contract it concerned. In the account the letter gives, the subcontractor’s commercial role was the cover for getting money to the officials controlling the award.

Goa Water Work and Management Approval

The letter also alleged that CDM Smith’s division responsible for India and CDM India paid $25,000 to local officials in Goa in connection with a water project contract. That account identifies a separate public project and a different set of officials from the highway authority. For a whistleblower who knows the water business, the relevant transaction is the local payment and its connection to that contract.

The Justice Department alleged that all senior management at CDM India knew about the bribes for CDM Smith and CDM India contracts and approved or participated in the misconduct. Those managers also acted as employees and agents of CDM Smith and signed contracts on its behalf. The letter specifically included the subsidiary’s country manager among them, connecting the local management role to the parent company’s contracts.

That alleged overlap matters when an insider knows who approved a subcontractor or signed a project agreement. An organization chart may separate the parent from the subsidiary, while the same manager acts for both in the transaction. We examine the capacity in which someone approved a payment and the contract that approval served, because a job title alone can leave that connection unexplained.

A Corporate Declination and the Underlying Transaction

The Justice Department tied its corporate declination to CDM Smith’s voluntary disclosure, internal investigation, cooperation and remediation. The letter credited the company’s disclosure of known relevant facts about the people involved and its agreement to continue cooperating in investigations of individuals. It also cited improvements to compliance and accounting controls and the termination of the executives and employees involved in the misconduct.

CDM Smith agreed to pay the profits identified in the letter to the United States Treasury. The agreement allowed payment in four installments, with the balance due within one year of execution. Those were the letter’s payment terms; the amount described here is the company’s obligation. The money was tied to profits from the Indian contracts, making the public work won through the alleged payments central to the financial resolution.

Behind that outcome, an insider may know the transaction: what the business wanted, who could deliver it and what the company authorized someone to pay. Those transaction details are what we examine when assessing information about Foreign Corrupt Practices Act cases.

The Project Records an Insider Knows

In an overseas project, the person approving a payment, the intermediary receiving it and the official controlling the commercial decision can sit in different organizations. A project employee may understand the promised work, while finance sees the invoice and compliance sees the approval file. Bringing those accounts together can explain a payment that looks ordinary when each department sees only its own part. The CDM Smith letter gives that comparison a specific focus: the alleged subcontractor payments, the missing services and the highway contracts they helped secure.

The useful FCPA whistleblower evidence connects the business decision to the benefit and the record used to explain it. For a project, that can mean a tender requirement, a consultant’s assignment, a payment authorization and the work actually delivered. The connection matters because the commercial decision can determine whether the company wins the work, receives an approval or gets its goods accepted.

The Justice Department’s September 2024 evaluation of corporate compliance programs asks about the business reason for hiring third parties, their compensation and whether they performed the work. Those questions reach beyond the approval signature. An employee who knows what a consultant actually did can explain why the description in the contract or invoice does not fit the transaction.

We look at the assignment and the payment together, including what happened after the agreement was signed. Deliverables, invoices, payment instructions, internal concerns and corrective action show how the arrangement operated. The person who understands the project may supply the explanation that a payment ledger leaves out.

You Know the Work Behind the Payment

If you know how a project payment connects to an official’s decision, speak with our whistleblower experts about what you saw. We shape your strongest FCPA whistleblower case around what you know, bring in FCPA whistleblower lawyers who understand overseas contracts and intermediary payments, and stay beside you through the process.