HMT LLC: The Company’s 2016 Declination
The HMT LLC FCPA case involved approximately $500,000 in bribes that secured $2,719,412 in net profits, according to the Justice Department’s September 29, 2016 declination letter. HMT agreed to the letter’s facts and conditions, including returning those profits, while the government closed its investigation of the company.
HMT manufactured, supplied and serviced aboveground liquid storage tanks for the petroleum, oil and gas industries. The Texas-based company’s employees and intermediaries paid officials in Venezuela and China to influence purchases of its products. Its corporate declination followed disclosure, cooperation and changes inside the business, even though the letter described managers who had notice of the bribery.
The Company’s Outcome and the Whistleblower’s Information
A company can benefit from disclosing its own conduct. The Securities and Exchange Commission’s whistleblower program separately pays eligible individuals a share of the money collected through successful enforcement. We assess the potential whistleblower case around what you know about the transactions and decisions inside the business.
A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. We assess foreign-bribery information under the separate agency award programs that apply to it.
What the Price and Payment Records Can Show
HMT’s Venezuela transactions show how foreign-bribery evidence can sit inside the pricing and payment records of an ordinary sale. The Justice Department’s letter describes a sales agent who paid officials to persuade PDVSA, Venezuela’s state-owned energy company, to buy HMT products from approximately 2002 until approximately 2011. The agent’s price to PDVSA was frequently substantially higher than the price HMT had quoted to the agent.
PDVSA paid that inflated price directly to HMT. HMT kept its quoted amount and sent the remainder to the agent, describing the payments as commissions and subcontracting fees. The money left HMT’s Texas bank account for accounts the agent designated in Panama, Curacao and other locations. The agent then used part of those payments to pay PDVSA employees and other Venezuelan government officials.
That route put HMT inside the flow of money used for the bribes. A person familiar with the sale could connect the amount the customer paid, the amount HMT retained and the explanation attached to the transfer out. The commission and subcontracting labels mattered because they were how HMT described payments that helped fund the agent’s bribery. We look at what the commercial description meant to the people approving it and what they knew about the money’s destination.
When the Agent Became the Reseller
On some PDVSA sales, the same intermediary operated as a reseller or distributor. The letter says the intermediary paid HMT for its products, resold them to PDVSA at a higher price and used the difference to pay bribes. The customer payment therefore followed a different path from the sales in which HMT received the inflated amount and sent the excess back out.
For an insider, that distinction changes which transaction explains the money available to the intermediary. In the commission arrangement, the connection runs through HMT’s receipt and outgoing payment. In the resale arrangement, it runs through the distributor’s purchase from HMT and higher-priced sale to PDVSA. Knowing which role the intermediary played can connect a familiar sales record to the payment that influenced the customer’s purchasing decision.
What the Regional Managers Knew
The letter identifies two Houston-based regional managers responsible for HMT’s Latin America sales who approved the commissions and subcontracting payments. In 2008, the agent explicitly told one of those managers that the agent was paying bribes. The other subsequently received information from the agent sufficient to put that manager on notice of the bribery.
The approvals and the communications belonged to the same commercial relationship. For someone who knows why a payment was approved, that connection can explain more than the accounting label alone. We connect the reader’s knowledge of the transaction to the decision inside the business, including what reached the people who authorized the payment.
China Sales and the Emails Behind Them
The China distributor was engaged by an HMT subsidiary to promote and sell HMT products. According to the letter, it paid Chinese government officials for purchases by Chinese state-owned enterprises from approximately 1999 through approximately 2011. The Justice Department described bribery on almost all of the distributor’s transactions in China.
An HMT regional manager responsible for China sales received emails about several transactions that provided sufficient notice of the bribes. That manager oversaw those sales from February 2008 until at least approximately July 2010 and was an HMT employee paid by HMT. Here, the connection to the company’s management ran through transaction emails. An insider who understands those messages can explain how a distributor’s payments became visible inside the supplier’s business.
Why HMT Received a Declination
The Justice Department’s Fraud Section and the United States Attorney’s Office for the Southern District of Texas closed their investigation under the FCPA Pilot Program. Their letter credited HMT’s timely voluntary disclosure, comprehensive global investigation and full cooperation. That cooperation included supplying all known relevant facts about the people involved and agreeing to continue cooperating in ongoing investigations of individuals.
The letter also credited improvements to HMT’s compliance program and internal accounting controls. HMT terminated employees involved in the conduct and disciplined others through suspensions, pay freezes, bonus suspensions and reduced responsibilities. It ended its relationships with the Venezuela agent and China distributor and severed relationships with other intermediaries based on its investigation. Those changes addressed the people and sales relationships through which the payments had moved.
HMT agreed to surrender the profits from the illegally obtained Venezuela and China sales to the United States Treasury. The letter required payment within ten business days of execution and barred HMT from seeking a tax deduction or reimbursement from another source. Those were conditions of the corporate resolution, alongside the disclosure, cooperation and remediation the government credited. The company outcome therefore depended on both explaining the conduct and changing the business practices that allowed it.
You Know the Transaction Behind the Entry
If you know how a customer price, commission or approval concealed a payment to a foreign official, speak with our whistleblower experts about the transaction. We work with you to connect the commercial decisions to the money and bring in FCPA whistleblower lawyers who understand intermediary payments. We stay beside you as that inside knowledge becomes a case.
