Shell Oil Co., facing allegations of international bribery in Nigeria in 2009, told federal prosecutors that one of its senior petroleum engineers, Robert Writt, approved and facilitated the bribes and then lied about his role in interviews with company lawyers.
The company did what dozens of others have done when facing global corruption charges: conduct an internal investigation, identify problems, assign blame and beg law enforcement for mercy.
In 2010, Shell’s case took a unique turn when Writt sued for defamation, claiming the company’s allegations about him were lies that slandered hisgood reputation.
Legal experts say the defamation case could significantly affect future investigations of potential violations of the Foreign Corrupt Practices Act.
Some of the nation’s most prominent business groups say that many corporations will no longer offer crucial cooperation with the U.S. Department of Justice or the U.S. Securities and Exchange Commission investigations into global corruption if they could later be sued by those named in their reports.
Plaintiffs lawyers say companies have nothing to worry about as long as they don’t make intentionally false and defamatory comments about those identified in the reports given to federal prosecutors.
The potentially precedent-setting case is pending before the Texas Supreme Court, where business leaders want the justices to declare that statements provided by companies to federal authorities as part of FCPA inquiries should receive “absolute privilege” or immunity from civil defamation lawsuits, even if the company makes allegations that are knowingly false and malicious.
Six former U.S. attorneys general, in a legal brief filed with the state’s highest court, said a ruling against Shell could impede future investigations because evidence will be denied to law enforcement at the investigative stage of cases, when it is most valuable.
A decision against Shell by the Texas Supreme Court “could make Texas a magnet for fishing-expedition suits from employees seeking to discover these reports through litigation against the many companies that have a significant presence in Texas,” said Dallas appellate lawyer James Ho, who represents the U.S. Chamber of Commerce, National Association of Manufacturers and American Petroleum Institute.
The origins of the case date to 2007, when the U.S. Department of Justice started investigating Shell and a subcontractor for possible violations of FCPA by participating in a scheme to bribe Nigerian customs officials in connection with a deep water oil and gas pro-ject off the coast of Nigeria.
As part of the investigation, Shell officials told federal prosecutors they would conduct an internal investigation of the matter and provide the authorities with the findings – a maneuver companies undertake in hopes of getting charges or penalties reduced.
Fired by Shell
In a 129-page report provided to authorities, Shell officials said Writt approved and facilitated the bribes, violated the company’s ethics policies and then lied about his role in interviews with Shell lawyers. The company fired Writt.
In 2010, the Justice Department hit Royal Dutch Shell, Shell Oil’s parent company, with a $30 million penalty for violating the FCPA – about half the amount that could have been levied. Shell ended up paying the $30 million plus $14 million in disgorged profits and$4 million in prejudgment interests, but the oil company did not admit guilt.
Writt, who lives in Houston, sued Shell for defamation and wrongful termination. In his lawsuit, Writt claims that he initially raised concerns with Shell senior management about suspect invoices being paid to subcontractors working with Nigerian officials and that he recommended that the company refuse to pay questionable invoices.
Shell officials initially followed his recommendation, declining to make the apparent bribes, court records show.
Says decision reversed
But Writt claims that Shell superiors reversed the decision and instructed him to make the payments after losing millions of dollars a day because the company’s oil and gas project was shut down after those allegedly receiving the bribes would not allow Shell to import production equipment into the country.
Writt was never charged.
A Houston trial judge initially rejected Writt’s case based on Shell’s argument that the report was covered by immunity because it was part of the government’s official investigation and prosecution.
But the court of appeals in Houston reversed it, saying Shell issued the report voluntarily and, as a result, it did not qualify for absolute privilege or immunity.
The merits of Writt’s allegations have not been addressed by any court.
In oral arguments before the Texas Supreme Court three weeks ago, Justice Eva Guzman asked if granting absolute immunity would encourage companies to falsely shift blame to employees.
“I think it fundamentally misunderstands a judicial proceedings privilege, which specifically contemplates that it might on occasion immunize malicious falsehoods,” Macey Reasoner Stokes, a lawyer representing Shell, responded.
“But that (risk) is greatly outweighed by the benefits to the administration of justice in encouraging free and full disclosure from the vast majority of honest participants in the judicial process,” said Stokes, a partner at Baker Botts.
“If left intact, the decision may force employers to make the difficult decision not to disclose all of the details in relation to potential FCPA violations as soon as they are aware of them,” Ho, a partner at Gibson, Dunn & Crutcher, told the justices.
Dual concerns
Robert Dubose, who represents Writt in the case, said Texas is not among the 10 states that have declared all communications with law enforcement are privileged.
“We have to be concerned about protecting people’s reputation as well as encouraging communication,” Dubose said.
The Texas Supreme Court is not expected to announce its decision for several months.