Yara International, a Norwegian based fertilizer company was found guilty in January 2014 of corruption charges from deals in Libya, India and Russia. Yara is the global leader in fertilizer production, with $14 billion in revenue in 2012. The company was ordered to pay $48 million in fines to the Norwegian government- the largest corporate fine in the country’s history- after admitting to paying out more than $12 million in bribes between 2004 and 2009. Yara acknowledged bribing senior government officials in India and Libya, including the former oil minister under Muammar Gaddafi, Shorki Muhammad Ghanem.
Yara’s presence in Libya expanded in 2009 when the company entered into a joint venture with the National Oil Corporation of Libya (NOC) and the Libyan Investment Authority (LIA) to create the Libyan Norwegian Fertiliser Co (Lifeco). NOC and LIA each held a 25% stake in Lifeco, while Yara took 50% in exchange for their investment in a $325 million fertilizer plant at Marsa El Brega on the Mediterranean coast.
In 2011 Yara reported to the Norwegian Authority for Investigation and Prosecution of Economic and Environmental Crime (OEKOKRIM) that some suspected irregular payments may have been made during the formation of Lifeco by Yara’s Swiss affiliates, Yara Switzerland LTD and Balderton Fertilisers. The payments were moved through executives at Swiss fertilizer trader Nitrochem Distribution AG. During the formation of Lifeco, Yara and Nitrochem management approved several illicit transactions, including the transfer of $1.5 million into a UBS Swiss bank account for which Ghanem, the Libyan Oil Minister, was a beneficiary. Yara was able to hide these bribes by overpaying for fertilizer it bought from Libya, a common tactic to cover-up the portion of “payments” that are actually bribes, as opposed to for legitimate purposes.
Swiss general prosecutors questioned a number of officials from Nitrochem, Balderton and Yara Switzerland about their involvement in negotiations and transactions between the companies. Then on April 29, 2012 Mr. Ghanem’s body was found fully clothed floating the in the Danube River in Vienna, a very long way from Libya. His death came just seven months after the fall of Muammar Gaddafi’s Libyan regime, at which time Ghanem had fled to Vienna. An investigation into his death concluded that Ghanem likely suffered heart failure while standing near the river and fell in, an obviously untimely and unfortunately placed health event. At present, four other men involved in the scheme have been indicted on criminal charges in Norway, including Yara’s former top executive and lawyer. The record fine and aggressive prosecution is indicative of Norwegian officials zero-tolerance for corruption- the country consistently is ranked among the world’s least corrupt nations.
In 2012 when the investigation became public, some FCPA observers wondered if US officials from the DOJ or SEC would seek to go after Yara, because their business in the US might make them fall under the FCPA’s jurisdiction. Given the salacious details involving Gaddafi, the record Norwegian fine, and the company admitting its guilt, Yara was seen as potentially low-hanging fruit for FCPA investigators. The potential US jurisdiction relies on Yara’s status as a participants in the US American Depositary Receipt (ADR) program. An ADR program effectively allows foreign companies to be traded in the US without the need for converting currency. A financial institution purchases share of the company overseas and then issues Deposit Receipts to US buyers that function similar to shares of stock. There are multiple levels of the ADR program which become increasingly complex and allow the foreign company to do things like list the DRs on an American stock exchange or raise capital by issuing DRs. Depending on the ADR level, a company may be liable under the FCPA because at higher levels they must register with the SEC and are considered a US issuer.
Yara is registered as a Level I ADR, which according to the American Bar Association does not make them subject to the FCPA:
“Because Level I ADRs do not trigger Exchange Act registration or reporting, foreign issuers whose securities underlie these ADRs do not expose themselves to FCPA jurisdiction. Conversely, because Level II and Level III ADRs trigger Section 12 registration, they subject the foreign issuer to U.S. enforcement authorities’ FCPA jurisdiction.”
It seems that US government officials may very well agree with the ABA’s stance as so far there has been no public word on any investigation of Yara by the SEC or DOJ, though the Norwegian settlement is only seven months old, so a definitive conclusion is likely premature. The SEC has, in recent years, been casting its net wider and wider for FCPA violators which likely led to the talk of possible action against Yara. International politics can come into play in circumstances like these- such as in the multi-billion dollar BNP Paribas settlement, which purportedly rankled French President François Hollande enough to discuss the matter with President Obama. Or perhaps the record fine and prosecution of the Yara bribery ringleaders makes US regulators feel that justice has been adequately served. After all, Norway’s track record on corruption is far better than that of the US, where even serious criminal FCPA violators rarely face prison time. (Again, consider BNP Paribas which violated US sanctions to bank for the genocidal regime of Sudan.) Whatever the case, even if Yara is in the clear with US officials, foreign companies with an ADR program should be aware of potential FCPA liability and consider, as the ABA opinion recommends, if the risks are worth the rewards.
Whistleblower Justice Network Can Help You
Whistleblower Justice Network partners with whistleblowers worldwide to expose worldwide bribery schemes that violate the Foreign Corrupt Practices Act. Facilitating payments which are merely bribes in disguise are a clear violation of the FCPA. Utilizing the SEC Whistleblower Program, we aid whistleblowers in bringing corporations that expand their business interests through bribery to justice.
If you have meaningful information regarding corporate bribery that you believe is in violation of the FCPA, Whistleblower Justice Network can help. Working alongside world-class legal counsel, we will ensure you are protected to the fullest extent of the law and that you receive credit for the information you bring to the U.S. government. Partnering with whistleblowers is all we do. Visit us at www.whistleblowerjustice.net, or call us at 844-WJN-4ALL, to learn if we can help you.