In September 2007, the DOJ entered into an non-prosecution agreement with Paradigm B.V. (Paradigm) related to improper payments to government officials in Kazakhstan, China, Mexico, Nigeria, and Indonesia. The improper payments were voluntarily disclosed to the DOJ and were discovered by Paradigm during due diligence conducted in anticipation of its listing on a United States exchange as a public company. During the relevant time period, Paradigm, a software provider to the oil and gas industry, was a private company registered in the Netherlands with a principal place of business in Israel. Paradigm gradually moved to Houston, Texas - making the company a "domestic concern" and thus subject to the FCPA.
In Kazakhstan, the DOJ found that Paradigm retained a company recommended by an official of KazMunaiGas, Kazakhstan's national oil company, to assist in preparing tender documentation. Paradigm retained the company without conducting any due diligence and without entering into any written agreement with the company detailing services to be provided. Paradigm won the tender, entered into a contract with KazMunaiGas, and then paid a $20,000 invoice from the company despite no evidence that the company performed any services for Paradigm.
In China, Paradigm's representative office (Paradigm China) entered into an agent agreement with a company to assist in obtaining business with Zhonghai Petroleum (China) Co., Ltd. (Zhonghai), a company owned by China's national oil company. The agreement contemplated that portions of the agent's commission would be passed on and indeed were passed on, to representatives of Zhonghai. Further, the DOJ found that Paradigm China retained and paid employees of Chinese national oil companies or state-owned entities to serve as "internal consultants" to evaluate Paradigm's products with the intent that these individuals would encourage their employers to purchase Paradigm's products. Paradigm China also paid travel and entertainment expenses for the internal consultants and other employees of Chinese state-owned entities including gifts, cash per diems, sightseeing trips and cash payments for shopping.
In Mexico, the DOJ found that Paradigm Mexico provided various things of value to certain employees of Pemex, Mexico's national oil company. The things of value included: (i) a $12,000 trip to Napa Valley, California, to coincide with the employee's birthday, $10,000 in entertainment expenses for the same employee in connection with obtaining or retaining business, and hiring the employee's brother; and (ii) leasing a house from the wife of an employee of a Pemex branch.
In Nigeria, the DOJ found that a Paradigm subsidiary (Paradigm Nigeria) sought a service alliance with a subsidiary company of the Nigerian National Petroleum Corporation, a governmental agency, and that Paradigm Nigeria, through an agent, made between $100,000 - $200,000 in corrupt payments to Nigerian politicians to secure this alliance.
In Indonesia, the DOJ found that an agent of a Paradigm subsidiary (Paradigm Indonesia) made improper payments to employees of Pertamina, Indonesia's national oil company, for the purpose of obtaining or retaining business.
Based on this conduct, and pursuant to an 18-month non-prosecution agreement, Paradigm agreed to pay a $1 million penalty, adopt a set of internal controls including compliance code and standards to prevent future FCPA violations, and retain an outside compliance consultant.