Sargeant Marine Inc: The Guilty Plea and the Insider’s View

The Sargeant Marine Inc FCPA case concerned bribes paid to win asphalt business in Brazil, Venezuela and Ecuador. In its September 22, 2020 announcement of the corporate guilty plea, the Justice Department said the company admitted paying officials to obtain contracts to buy or sell asphalt between 2010 and 2018. Fake consulting agreements and invoices concealed payments that intermediaries passed to officials.

Across foreign-bribery cases, those connections explain what an accounting entry conceals. Someone who knows the transaction brings something the invoice leaves out: what the payment was meant to buy.

The Customer’s Decision Can Be the Product

In Brazil, the customer was Petrobras, the state-controlled oil company. Sargeant’s criminal information charged that an intermediary promised bribes to a Petrobras official and a member of the Brazilian Congress in exchange for helping Sargeant win business. The official then directed subordinates in the asphalt department to give Sargeant contracts.

The information described an approval chain inside the supplier’s business. An executive authorized an employee, who authorized an intermediary to arrange payments connected to Petrobras contracts. The corrupt payments appeared in Sargeant’s books as commissions. Fake consulting contracts and invoices gave transfers to offshore shell-company accounts the appearance of ordinary business expenses, while intermediaries passed part of the money to officials in cash or through other shell accounts.

The information also connected the promised influence to actual cargoes. After an executive reported that ships belonging to Asphalt Trading, the information’s label for a company related to Sargeant, had completed two asphalt shipments to Petrobras, another executive replied:

The company’s own exchange put the trip, the shipments and the next contract in the same conversation. We see the value of an insider’s knowledge here: a commission entry conceals the purpose that the people discussing the sale understood. In a separate September 2018 order, the Securities and Exchange Commission found that corrupt Petrobras executives gave a contractor cartel inside information, manipulated bidding and approved contracts outside procurement rules.

The information also described how participants concealed discussions about the Brazilian payments. They shared an email account and left messages in its drafts folder, telling each other to log in and read them without sending the messages outside the account. That gave the people arranging the payments a channel separate from the invoices that described them as consulting work.

For someone in purchasing or sales, the revealing event may be a decision: an invitation, an approval or a change in contract terms. We connect that knowledge to the payment and the people who authorized it. A ledger shows where the money was booked. The insider explains what the disguised payment bought.

A Real Cargo Can Sit Behind a Fake Invoice

The Venezuelan business ran in the other direction: Sargeant wanted to buy asphalt from PDVSA, Venezuela’s state-controlled oil company. The criminal information charged that PDVSA had refused to sell to Sargeant or companies associated with it. Sargeant arranged for a Swiss asphalt company to buy at Sargeant’s request and direction, then resell the asphalt to Sargeant at a small premium.

According to the information, Sargeant employees and agents agreed to bribe PDVSA officials so the Swiss company would obtain those contracts. A Sargeant affiliate entered fake consulting contracts with an intermediary, whose commission was typically calculated per barrel of asphalt purchased for Sargeant. The intermediary paid an official a bribe also typically calculated per barrel, and that official shared a portion with a supervisor. The cargo supplied a formula for both the intermediary’s fee and the official’s payment.

Gunvor admitted in its own plea agreement that intermediaries used portions of oil volume fees to bribe Ecuadorian officials, a comparison to Sargeant’s per-barrel asphalt arrangement. In both accounts, sham consulting contracts sat alongside real commodity transactions. That is why following the payment means connecting the fee to its beneficiary and purpose. Someone who knows what the consultant actually delivered explains a discrepancy that a matched invoice and payment would leave hidden.

The Sargeant information described another benefit purchased from PDVSA officials: confidential information used to gain a competitive advantage. It charged that a fake consulting agreement provided a $2,000 monthly retainer from which an intermediary paid bribes. Participants used code names for officials and called the confidential information “Chocolates.” Separately, they paid PDVSA employees to authorize payment of demurrage fees owed to the Swiss company, which passed those fees to Sargeant. For an insider, the account connects corrupt payments to purchasing access, information and the release of money already owed.

What the Ecuador Commission Bought

In Ecuador, Sargeant admitted bribing a Petroecuador official to secure a 2014 contract to supply asphalt, according to the Justice Department’s plea announcement. The corporate information described the approach: an intermediary told a Sargeant employee that Petroecuador needed asphalt, then met with employees and a Petroecuador official to discuss the project’s requirements and an upcoming tender.

At a later meeting in Florida, the intermediary was promised a $2 per barrel commission if Sargeant won the tender, the information charged. A Sargeant employee understood there was a high probability that some of that money would go to the Petroecuador official as a bribe. A Swiss Sargeant affiliate entered a fake consulting agreement with an offshore shell company associated with the intermediary and a close relative. The intermediary submitted approximately $471,881 in invoices under that agreement and, after receiving payment, wired part of the money to an account controlled by the official.

A 2022 Journal of Forensic and Investigative Accounting study of Fresenius Medical Care describes managers continuing payments after an audit flagged an Angola storage relationship, a comparison to Sargeant’s approvals of payments whose corrupt purpose employees understood. For a finance, audit or compliance employee, the approval and the knowledge behind it belong together. We want to understand who authorized the fee, what the intermediary promised and what the people approving payment knew about the official’s role.

The Part of the Transaction You Know

Different jobs reveal different parts of the evidence behind a foreign-bribery concern. Sales may know what the intermediary promised to obtain, finance may know who approved the invoice, and the payment team may know which company received the money. Audit and compliance may know which questions went unanswered. Our work connects that account to the contract, service, payment and government decision.

A whistleblower case under the separate False Claims Act can pay 15% to 30% of what the government recovers. Foreign-bribery reporting involves different whistleblower award programs, and we work through the relevant program with you.

You Know Why the Payment Was Approved

If you know what a consultant’s invoice concealed or why a payment survived an unanswered question, speak with our whistleblower experts about why that payment was approved. We build your strongest foreign-bribery whistleblower case around that knowledge and bring in foreign-bribery whistleblower lawyers who understand intermediary payments. We stay beside you through the whole process.