Panalpina will pay $81.9 million in fines and penalties to settle charges in the United States that it violated bribery laws, capping a case that led to management changes at one of the world's largest freight forwarders.
The Switzerland-based company announced the settlement, which is subject to court approval, on Friday. The case grew out of an investigation by the U.S. Department of Justice and U.S. Securities and Exchange Commission for violations of the U.S. Foreign Corrupt Practices Act.
As part of the settlement, Panalpina will plead guilty plea to violating accounting provisions of the FCPA and pay a fine of $70.6 million in four installments. Panalpina will also consent to a final judgment in a civil action brought by the SEC alleging violations of the FCPA's anti-bribery and accounting requirements and will pay $11.3 million from profits.
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Panalpina was among six international forwarders who agreed to a total of $50.3 million in criminal fines after pleading guilty to air cargo price fixing in September.
Panalpina may be the first forwarder to pay a penalty under recently increased enforcement of the FCPA as applied to non-U.S. companies and non-U.S. persons. There have been record corporate fines for non-forwarders, individual criminal charges and jail sentences under the FCPA in the last year.
In July 2007, the Justice Department's criminal fraud unit made known its concerns about alleged payments to Nigerian customs agents made by Panalpina. The SEC also launched a related civil investigation.
The company lost millions in profits and spent another $15 million-plus on legal and consulting fees. The company has replaced some members of its executive management since the investigation began and says it has implemented new procedures in its financial units to ensure accountability.
"Nigeria has long been known for its corrupt practices," attorneys Joseph P. Covington and Jessica Tillipman with the Washington law firm Jenner & Block said in a report on the Panalpina situation at the time. "Even those businesses that maintain strict internal controls and work hard to comply with U.S. anti-bribery laws have difficulty with FCPA-compliance in this region.
"Corruption is so prevalent in Nigeria that it is nearly impossible to conduct business in the country without being asked to pay a bribe," the report said.
Panalpina World Transport announced Thursday it has entered into a Deferred Prosecution Agreement with the DOJ. Under the DPA, the DOJ has agreed to defer any criminal prosecution of the forwarder's parent company for three years. PWT has accepted certain obligations under the DPA, such as continuing to improve its compliance policies and procedures and providing regular reports to the DOJ on the company's progress. If PWT satisfies its obligations under the DPA, the DOJ has agreed to release the company from criminal liability at the end of the three-year term.
"The settlement of these claims marks the closing of an extremely burdensome chapter in Panalpina's history and the end of a very demanding three-year effort to address and eliminate serious concerns. Now it is time for us to look to the future and to build on the strong and sustainable compliance culture we have put in place," said Panalpina's CEO, Monika Ribar.
The DOJ noted PWT's "exemplary" cooperation, which resulted in significant benefits for PWT in the resolution of the case, including a reduction in fines.
PWT appointed an outside compliance consultant to ensure that it meets its compliance and reporting obligations. PWT's legal and compliance committee will oversee the program.
As a result of its internal investigation, PWT has terminated relationships with third parties which did not meet the company's compliance standards. PWT also closed operations in three countries, including Nigeria, where compliance risks were too pervasive.
With the support of the Basel Institute on Governance, Panalpina has established a compliance structure and programs aimed at ensuring rigorous adherence to the FCPA and other anti-bribery laws.
-- Contact Thomas L. Gallagher at email@example.com.