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ANDRÉ BIROTTE JR. United States AttorneyDENNISE D. WILLETTAssistant United States AttorneyChief, Santa Ana Branch OfficeDOUGLAS F. McCORMICK (180415)Assistant United States Attorney
411 West Fourth Street, Suite 8000 Santa Ana, California 92701 Telephone: (714) 338-3541
Facsimile: (714) 338-3564E-mail: [email protected]
KATHLEEN McGOVERN, Acting ChiefCHARLES G. LA BELLA, Deputy ChiefNATHANIEL B. EDMONDS, Assistant ChiefANDREW GENTIN, Trial Attorney Fraud Section Criminal Division, U.S. Department of Justice
1400 New York Avenue, N.W.Washington, DC 20005Telephone: (202) 353-3551Facsimile: (202) 514-0152E-mail: [email protected]
Attorneys for PlaintiffUnited States of America
UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF CALIFORNIA
SOUTHERN DIVISION
UNITED STATES OF AMERICA,
Plaintiff,
v.
STUART CARSON et al.,
Defendants.
)))))))))))
NO. SA CR 09-00077-JVS
DECLARATION OF SPECIAL AGENT BRIANSMITH IN SUPPORT OF GOVERNMENT’SOPPOSITION TO TO DEFENDANTS’AMENDED MOTION TO DISMISS COUNTSONE THROUGH TEN OF THE INDICTMENT
Plaintiff United States of America, by and through its
attorneys of record, the United States Department of Justice,
Criminal Division, Fraud Section, and the United States Attorney
for the Central District of California (collectively, “the
government”), hereby files the declaration of FBI Special Agent
Case 8:09-cr-00077-JVS Document 334 Filed 04/18/11 Page 1 of 32 Page ID #:3900
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Brian Smith in support of the government’s Opposition to
Defendants’ Amended Motion to Dismiss Counts One through Ten of
the Indictment.
DATED: April 18, 2011 Respectfully submitted,
ANDRÉ BIROTTE JR. United States Attorney
DENNISE D. WILLETTAssistant United States AttorneyChief, Santa Ana Branch Office
DOUGLAS F. McCORMICKAssistant United States AttorneyDeputy Chief, Santa Ana Office
KATHLEEN McGOVERN, Acting ChiefCHARLES G. LA BELLA, Deputy ChiefNATHANIEL B. EDMONDS, Assistant ChiefANDREW GENTIN, Trial Attorney Fraud Section, Criminal DivisionUnited States Department of Justice
/s/ DOUGLAS F. McCORMICKAssistant United States Attorney
Attorneys for PlaintiffUnited States of America
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DECLARATION OF FBI SPECIAL AGENT BRIAN SMITH
I, Brian Smi th, declare as follows:
l. I am a Special Agent with the Federal Bureau of
Investigation ("FBI"). I am currently assigned to the Washington
Field Office and focus on investigations of violations of United
States law, particularly those involving foreign bribery. I am
the lead Agent in the case of United States v. Stuart Carson, et
al. Presented below are some facts related to certain of the
entities involved in the above-listed case and information
pertaining to state-owned enterprises in China. Also presented
below are certain portions of legislative history related to the
Foreign Corrupt Practices Act ("FCPA").
2. In preparing this Declaration, I worked with other
government officials to gather facts from various sources related
to the relevant entities and review portions of the legislative
history of the FCPA. As part of the fact gathering process,
information was obtained from employees and foreign service
officers of the U. S. Department of State and employees of the
U. S. Commercial Service ("USCS"). uscs is the trade promotion
arm of the U. S. Department of Commerce's International Trade
Administration. See www.trade.gov/cs (attached as Exhibit l).
USCS operates in nearly 80 countries and offers services to U. s.
companies related to market intelligence, trade counseling,
business matchmaking, and trade advocacy. Id.
Case 8:09-cr-00077-JVS Document 334 Filed 04/18/11 Page 3 of 32 Page ID #:3902
Overview of State-Owned Entities in China
3. State-owned entities! enterprises ("SOEs") playa key
role in China's economy. Kenneth A. Cutshaw et al., Corporate
Counsel's Guide to Doing Business in China at 377 (3d Ed. 2009)
("Guide to Doing Business in China") (attached as Exhibit 2) .
The major corporate entities in most industries in China are
controlled by the government, despite being listed on capital
markets exchanges. Id. SOEs listed on Chinese stock exchanges
haVe a market capitalization equal to 40% of China's Gross
Domestic Product. Corporate Governance of State Owned Enterprise:
A Survey of OECD Countries, Organization for Economic Co-
Operation and Development at 38 (2005) (attached as Exhibit 3) .
Specifically, from 2000 to 2005, 95.5% of the combined revenues
in the petroleum and natural gas industry in China were under
state ownership and 99.3% of revenues in the electricity, gas and
water industry were under ownership of the Chinese government.
Mikael Mattlin, The Chinese Government's New Approach to
Ownership and Financial Control of Strategic State-Owned
Enterprises, The Bank of Finland BOFIT Institute for Economies in
Transition, Oct. 2007 at 37 (attached as Exhibit 4) .
4. SOEs in China are managed by the State-owned Assets
Supervision and Administration Commission of the State Council
("SASAC"). See www.sasac.gov.cn/n2963340/n2963393!2965l20.html
(attached as part of Exhibit 5). SASAC's responsibilities
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include appointing and removing top executives at SOEs, managing
the state-owned assets of the enterprises, and supervising the
turn-over of state-owned capital gains to the state. Id. SASAC
is directly under the State Council of the People's Republic of
China. See www.gov.cn/english/2008-03!l6!content 92l873.htm
(attached as part of Exhibit 5). The State Council is "the
highest executive organ of State power, as well as the highest
organ of State Administration." See ww.gov.cn!english/2005-
08/05/content 20763.htm (attached as part of Exhibit 5). "The
State Council is responsible for carrying out the principles and
policies of the Communist Party of China ... and dealing with
such affairs as China's internal politics, diplomacy, national
defense, finance, economy, culture and education." Id. SASAC
recrui ts executives to:
implement the 'Decisions of the CPC (Communist Party ofChinaJ Central Committee Regarding Issues on Improvingthe System of the Socialist Market Economy,' the'Decision of the CPC Central Committee and the StateCouncil on Further Strengthening Personnel Selection,'the spirit of the national personnel selectionconference, and the 'Opinions of the State-owned AssetsSupervision and Administration Commission of the StateCouncil on Strengthening and Improving PersonnelSelection in the Enterprises under the CPC CentralCommittee,' and to propel the leadership selection andappointment system reform within State-ownedenterprises. . . .
See www.sasac.gov.cn/n2963340 !n29647l2!3050l94. html (attached as
Exhibit 6) .
5. There is a very strong link between the Communist Party
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of China ("CPC") and SOEs. Jonathan G. S. Koppell, Political
Control for China's State-Owned Enterprises: Lessons from
America's Experience with Hybrid Organizations, Governance: An
International Journal of Policy, Administration, and
Institutions, Vol. 20, No.2, April 2007, at 266 (attached as
Exhibit 7). Chinese SOEs have been described as "a vital
instrument for provision of social services and an instrument of
state policy." Id. at 258. The CPC maintains an official
position in most SOEs and has a significant amount of influence
in the decision-making process within SOEs. Id. at 266. The
government and communist party institutions of China appoint and
supervise the senior executives and management at SOEs. Guide to
Doing Business in China at 378 (attached as Exhibit 2) .
6. Article 93 of Section 3 of the Chinese Criminal Code
states as follows:
'State functionaries' as mentioned in this Law refersto persons who perform public service in State organs.Persons who perform public service in State-ownedcompanies or enterprises, institutions or people'sorganizations, persons who are assigned by Stateorgans, State-owned companies, enterprises orinsti tutions to companies, enterprises or institutionsthat are not owned by the State or people'sorganizations to perform public service and the otherpersons who perform public service according to lawshall all be regarded as State functionaries.
See Article 93 of Section 3 of the Chinese Criminal Code
(attached as Exhibit 8) .
7. Article l63 of Section 3 of the Chinese Criminal Code
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states as follows:
Where an employee of a company or enterprise who,taking advantage of his position, demands money orproperty from another person or illegally acceptsanother person's money or property in return for thebenefits he seeks for such person, if the amountinvolved is relatively large, he shall be sentenced tofixed-term imprisonment of not more than five years orcriminal detention; if the amount is huge, he shall besentenced to fixed-term imprisonment of not less thanfive years and may also be sentenced to confiscation ofproperty.Any employee of a company or enterprise who, violatingState regulations in economic activities, acceptsrebates or service charges of various descriptions andtakes them into his own possession shall be punished inaccordance with the provisions in the precedingparagraph.Any employee of a State-owned company or enterprisewho, being engaged in public service or who is assignedby a State-owned company or enterprises to engage inpublic service in a company or enterprise that is notowned by the State, commits any of the acts mentionedin the preceding two paragraphs shall be convicted andpunished according to the provisions in Articles 385and 386 of this Law.
See Article l63 of Section 3 of the Chinese Criminal Code
(attached as Exhibit 9).8. Article 385 of Section 3 of the Chinese Criminal Code
states as follows:
Any State functionary who, by taking advantage of hisposition, extorts money or property from anotherperson, or illegally accepts another person's money orproperty in return for securing benefits for the personshall be guilty of acceptance of bribes.Any State functionary who, in economic acti vi ties,violates State regulations by accepting rebates orservice charges of various descriptions and taking theminto his own possession shall be regarded as guilty ofacceptance of bribes and punished for it.
See Article 385 of Section 3 of the Chinese Criminal Code
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(attached as Exhibit iO) .
9. Article 386 of Section 3 of the Chinese Criminal Code
states as follows:
Whoever has committed the crime of acceptance of bribesshall, on the basis of the amount of money or propertyaccepted and the seriousness of the circumstances, bepunished in accordance with the provisions of Article383 of this Law. Whoever extorts bribes from anotherperson shall be given a heavier punishment.
See Article 386 of Section 3 of the Chinese Criminal Code
(attached as Exhibit ll) .LO. Article 388 of Section 3 of the Chinese Criminal Code
states as follows:
Any State functionary who, by taking advantage of hisown functions and powers or position, securesillegitimate benefits for an entrusting person throughanother State functionary's performance of his dutiesand extorts from the entrusting person or accepts theentrusting person's money or property shall be regardedas guilty of acceptance of bribes and punished for it.
See Article 388 of Section 3 of the Chinese Criminal Code
(attached as Exhibit l2) .
ll. Article 389 of Section 3 of the Chinese Criminal Code
states as follows:
Whoever, for the purpose of securing illegitimatebenef i ts , gives money or property to a Statefunctionary shall be guilty of offering bribes.Whoever, in economic activities, violates Stateregulations by giving a relatively large amount ofmoney or property to a State functionary or by givinghim rebates or service charges of various descriptionsshall be regarded as guilty of offering bribes andpunished for it.Any person who offers money or property to a Statefunctionary through extortion but gains no illegitimate
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benefits shall not be regarded as offering bribes.
See Article 389 of Section 3 of the Chinese Criminal Code
(attached as Exhibit l3).l2. Several SOE executives have been prosecuted for
official bribery in recent years. In November 20l0, Kang Rixin,
the former general manager of China National Nuclear Corporation,
was sentenced to prison for accepting 6.6 million yuan ($970,000)
in bribes between 2004 and 2009. See Former China Nuclear Head
Jailed for Life Over Bribes, BBC News, Nov. 19, 2010 (attached as
Exhibit l4). Kang was convicted of having abused his position,
enabled profits for others, and accepted large bribe payments.
Id. In relation to this misconduct, the Communist Party Central
Committee also stripped Rixin of his political rights for life.
Id. In 2009, Chen Tonghai, the former chairman of Sinopec (also
known as China Petroleum & Chemical corporation), was sentenced
to death with a two year reprieve after he was convicted of
illegally receiving 196 million yuan ($28.7 million) in bribes
between 1999 and June 2007. See Richard McGregor, Sinopec's
Corrupt Ex-Chief Gets Death Sentence, Financial Times, Jul. l6,
2009 (attached as Exhibit l5). The total bribes added up to "one
of the largest taken by a Chinese official, according to public
records." Id. Additionally, in 2006, the former chairman of
China Construction Bank was sentenced to l5 years in prison for
accepting more than $500,000 in bribes from International
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Business Machines, NCR, and Hitachi. See David Barboza, IBM. NCR
and Hitachi Named in China Bribe Verdict - Business -
International Herald Tribune, N.Y. Times, Oct. 30, 2006 (attached
as Exhibit l6) .
Entities Involved in Counts Two through Ten of the Indictment
A. Korea Hydro and Nuclear Power (Counts 2 and 3)
l3. According to the World Nuclear Association, "(fJ rom
1961 until April 200l, South Korea's sole electric power utility
was Korea Electric Power Company" ("KEPCO"), which was set up as
a government corporation. See www.world-
nuclear.org!info!inf8l.html (attached as Exhibit l7). In 200l,
the power generation part of KEPCO was split into six entities,
and all the nuclear generation capacity became part of Korea
Hydro & Nuclear Power Co. Ltd. ("KHNP"). Id. Since its
formation, KHNP has operated nuclear power plants and
hydroelectric plants in South Korea. Id.l4. According to USCS, KHNP is a wholly owned subsidiary of
KEPCO. Under the 1982 KEPCO Act, the South Korean government is
obliged to own at least 5l% of KEPCO's share capital. Because
KEPCO operates under the provisions of the KEPCO Act, it is a
virtual monopoly in the provision of electricity and assumes a
vital role in the national energy and security policies. No
civil service protection or government pensions are provided to
KHNP employees.
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l5. According to USCS, the primary ministry responsible for
developing electricity policy in South Korea is the Ministry of
Knowledge Economy ("MKE"). MKE, through the direct or indirect
government ownership of energy companies, utilities, and several
energy research institutes, has maintained a high degree of
control in all aspects of energy policy development and
implementation. MKE sets South Korea's electricity prices, which
are currently below KEPCO's production costs, and consumers are
billed according to a formula that differentiates the costs
according to KEPCO's different priorities - charging different
amounts for energy used for education purposes or for industrial
use.
l6. According to USCS, Article 32 of the KHNP Articles of
Incorporation provides:
(TheJ Nominating Committee nominates multiplecandidates for the (KHNPJ corporate presidency. Thesecandidates are reviewed and put to vote at theCommittee for Management of Public Institutions(established under the control of Minister of Strategyand Finance ("MOSF")), and again at the general meetingof shareholders. Upon the recommendation of theMinister of MOSF, the President of ROK (Republic ofKoreaJ makes the final appointment.
B. PetroChina Company Limited (Count 4)
l7. According to the company's website, PetroChina Company
Limited ("PetroChina") was founded in 1999 as a joint stock
company with limited liabilities by China National Petroleum
Corporation ("CNPC"). See
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www.petrochina.com.cn/Ptr/About PetroChina/Company Profile
(portions attached as Exhibit 18). It is the largest oil and gas
producer and distributor in China. Id. At the end of 2007, CNPC
possessed approximately 86% of PetroChina shares. Id. "(CNPCJ
is the sale sponsor and controlling shareholder of PetroChina....
CNPC is a large state-owned enterprise managed by the investment
organs authorized by the state and (SASACJ." Id.
l8. According to PetroChina' s most recent interim report
(attached as Exhibit 19), "CNPC, the immediate parent of the
Company, is a state-controlled enterprise directly controlled by
the PRC (People's Republic of ChinaJ government. The PRC
government is the Company's ultimate controlling party." See
2 aia Interim Report at l02. The other ten largest shareholders
include: National Council for Social Security Fund of the PRC,
Industrial Commercial Bank of China, China Life Insurance
Company, China Construction Bank, and the Bank of China. Id. at
9.
C. China Petroleum Materials and Equipment Corp. (Count 5)
19. According to USCS, China Petroleum Materials and
Equipment Corporation ("CPMEC") is a state-owned enterprise
specializing in the distribution of petrochemical products and
petroleum mechanical equipment. CPMEC is a subsidiary of China
National Petroleum Corporation. See portions of China National
lo
Case 8:09-cr-00077-JVS Document 334 Filed 04/18/11 Page 12 of 32 Page ID #:3911
Petroleum corporation ("CNPC") Annual Report (2003) (attached as
Exhibit 20).
20. According to CNPC's website:
(theJ predecessor of CNPC was the Minister of PetroleumIndustry of the People's Republic of China, which wasfounded in July 1955, supervising the exploration anddevelopment of oil and gas resources in China. (CNPCJwas established on September l7, 1988 on the basis ofthe Minister of Petroleum Industry, mainly in charge ofoil and gas upstream operations. It is a state oilcompany endowed with certain governmentaladministrati ve functions.
See
www.cnpc.com.cn/en/aboutcnpc/companyprofile!history/default.htm
(attached as Exhibit 2l) .
D. China National Offshore Oil Corporation (Count 6)
2l. According to USCS, China National Offshore Oil
Corporation ("CNOOC") is a state-owned enterprise whose governing
body is SASAC. CNOOC was created under the Regulations of the
People's Republic of China on the Exploitation of Offshore
Petroleum Resources in Cooperation with Foreign Enterprises
(l982) (attached as Exhibit 22). The Regulations designate CNOOC
as "a state corporation with the qualification of a juridical
person which has the exclusive right to explore for petroleum
within the areas of cooperation and to develop, produce and
market it." See id. at Article 5.
22. In its latest credit rating for CNOOC Ltd., the core
operating subsidiary of CNOOC, Standard & Poor's ("S&P") noted
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CNOOC Ltd.' s "critical role to the government" and explained that
CNOOC Ltd. "plays a key role in helping the government ensure a
secured supply of energy to meet growing domestic demand." See
S&P: Rates CNOOC Ltd. Proposed Notes AA-, REUTERS. COM, Jan. l2,
20ll (attached as Exhibit 23). S&P also noted the company's
"very strong link to the government" and opined that "the
government is able to exert strong influence on CNOOC Ltd.' s
strategy through the appointment of board members and senior
management." Id. According to USCS, the senior officers of
CNOOC are appointed by the Chinese government.
E. National Petroleum Construction Company (Count 7)
23. According to the company's website, the National
Petroleum Construction Company ("NPCC") is a public j oint stock
company and provides services in the development of oil and gas
fields. See www.npcc.ae/NPCCSite/abo about us. aspx (attached as
Exhibi t 24). According to USCS, NPCC is owned by the General
Holdings Corporation ("GHC"), which holds a 70% interest, and the
Consolidated Contractors Group, which holds the remaining 30%.
GHC is a "public joint stock company" and is "fully owned by the
Higher Corporation for the Specialized Economic Zones in the
Emirate of Abu Dhabi" and is "exempted from the governmental fees
and taxes." See GHC Establishment Law (2004) (attached as
Exhibit 25).
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24. According to GHC's website, GHC is "the UAE's largest
industrial conglomerate and a prime mover in implementing the Abu
Dhabi government's industrial diversification policy." See
www.ghc.ae/cprofile.htm (attached as Exhibit 26)
25. Article 5 of the United Arab Emirates' Penal Code
states that "(tJ he following shall ipso jure be considered a
public official: . Chairmen and members of boards of
directors, managers and all other employees working in
associations and public corporations." See United Arab Emirates
Penal Code (l987) (attached as Exhibit 27). The Bribery
provisions of the Penal Code provide that "A prison term shall be
imposed upon any public official or person assigned to a public
service, who solicits or accepts for himself or for another
person, any gift or privilege of any kind, or any promise
thereof, in return for the performance of an act or its omission
in breach of his duties." See id. at Article 234.
F. Dongfanq Electric Corporation (Count 8)
26. According to USCS, Dongfang Electric Corporation
("Dongfang") is a state-owned enterprise that was established
wi th the approval of SASAC.
27. According to Dongfang's website, the company is "one of
the largest backbone enterprise groups under the direct
administration of Chinese Central Government." See
www.dongfang.com.cn/index.php/aboutdecs (attached as Exhibit 28).
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Dongfang "is appointed by the Central Government as one of the
most important state-owned enterprise groups concerning the
national economy of the country. As the national strategic base
for heavy-duty machinery and equipment, (DongfangJ possesses
comprehensive technical R&D abilities and is honored by the
Central Government as a National Research & Development Center."
Id.
G. Guohua Electric Power Company (Count 9)
28. Beij ing Guohua Electric Power Corporation's ("Guohua
Electric") website provides the following information:
According to national economic development planning,state industrial policies and market demands, GuohuaElectric Power, upon implementation of the scientificdevelopment concept and the group's advantage inintegrated coal, power and transportation operation,has focused on construction of power generationfacilities at coal mines, port, traffic hub and majorpower consumption regions. . .. For the future, GuohuaElectric Power will work hard to create value for thestate by keeping and increasing value of stateassets. . . .
See www.ghepc.com/Englishsite/contents/l 75/302. html (attached as
Exhibit 29) .
29. Guohua Electric was established on March ll, 1999, as
the electric power business unit under the Shenhua Group. Id.
According to Shenhua Group's website, Shenhua Group is "one of
the key central SOEs, with integrated operations against various
regions and industries" and "plays an important role in the
national economic development." See
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www.shenhuagroup.com.cn/english/aboutous/prileOofoshenhua/index. s
html (attached as Exhibit 30). Shenhua Group's Chairman makes
the following statement on the company's website:
(UJ nder the leadership of the CPC Central Committee andthe State Council, Shenhua Group, taking theopportunity of the nationwide campaign to study andimplement the scientific outlook on development,actively responded to the global financial crisis withstrengthened confidence and determination.. .. As oneof the SOEs we always keep in mind the political,economic as well as social responsibilities, adhere tothe harmony and win-win concept and do our best tomaximize the value for the related parties.
See
www.shenhuagroup.com.cn/english/aboutOus IgroupOleadership/chairma
n sOstatement/index. shtml (attached as Exhibit 30) .
H. Petronas (Count LO)
30. According to the company's website, Petroliam Nasional
Berhad ("Petronas") was incorporated in 1974 as "the national oil
company of Malaysia, vested with the entire ownership and control
of the petroleum resources in the country." See
www.petronas.com.my/about uS.aspx (attached as Exhibit 31).
According to USCS, the company's name translates to "National
Petroleum Limited," and the company is wholly owned by the
Malaysian government.
3 l. Section 3 of the Malaysian Petroleum Development Act of
1974, through which Petronas was established, provides that
"(PetronasJ shall be subj ect to the control and direction of the
Prime Minister who may from time to time issue such direction as
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he may deem fit." See Petroleum Development Act 1974 (200l
version) (attached as Exhibit 32). Section 4 of the Act provides
that" (iJ n return for the ownership and the rights, powers,
liberties and privileges vested in it by virtue of this Act,
(PetronasJ shall make to the Government of the Federation and the
Government of any relevant State such cash payment as may be
agreed between the parties concerned." Id. Section 6 of the Act
provides that "(nJ otwithstanding the provisions of any other
written law, no business of processing or refining of petroleum
or manufacturing of petro-chemical products from petroleum may be
carried out by any person other than PETRONAS unless there is in
respect of any such business a permission given by the Prime
Minister." Id.32. According to a March 2007 Rice University policy report
on the company,
Petronas is organized under a Chairman and Board ofDirectors who report directly to the Prime Minister.The Chairman is selected by the Prime Minister and hasconsiderable personal power.... The Board is composedof the Director General of the Economic Planning Unit,the General Secretary of the Ministry of Finance, theDirector of the Economic and Coordination Unit, and theindependent advocate and solicitor. There are alsofour members from Petronas: the President and CEO; theSenior Vice President of Finance; the Vice President ofCorporate Planning and Development; and the VicePresident of oil.
Fred von der Mehden and Al Troner, Petronas: A National oil
Company with an International Vision at l6-l7 (2007) (attached as
Exhibit 33) .
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33. Section 3 of Malaysia's bribery law states that a
"public body" includes "(a) the Government of Malaysia; (or)
(k) any company or subsidiary company over which or in which any
public body as is referred to (aboveJ has controlling power or
interest." See Malaysian Anti-Corruption Commission Act (2009),
Section 3, (attached as Exhibit 34)
Overview of Chinese Power and Nuclear Industry
34. According to the World Nuclear Association, Chinese
national utility companies are largely or wholly state-owned.
See World Nuclear Association: Nuclear Power in China, Appendix
l, Government Structure and Ownership at 1 (20ll), available at
www.world-nuclear. org/info/inf63ai chinanuclearstructure. html
(attached as Exhibit 35).
35. According to the World Nuclear Association,
The State-owned Assets Supervision and AdministrationCommission (SASAC) of the State Council was founded in2003 to take over the responsibilities of the formerState Economic and Trade Commission as investor ofstate-owned assets on behalf of the central governmentand in guiding state-owned enterprises' reform andmanagement. It aims to speed up restructuring ofstate-owned economy and push forward reform of state-owned enterprises, as well as harvesting dividends fromthem. At the end of 2007, l52 major enterprises weresubordinate to it, comprising the top two or three ineach sector, which gives SASAC great political andeconomic power. SASAC has a major role in nuclearpower expansion, along with (the National Developmentand Reform Commission), and supervises the ChinaNational Nuclear Corporation ("CNNC" J . . . .
Id.
36. According to the World Nuclear Association,
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(CNNCJ controls most nuclear sector business includingR&D, engineering design, uranium exploration andmining, enrichment, fuel fabrication, reprocessing andwaste disposal. It also claims to be the maj orinvestor in all nuclear plants in China. Establishedby the State Council in 1988 as a self-supportingeconomic entity, it 'combines military production withcivilian production, taking nuclear industry as thebasis while developing nuclear power and promoting adiversified economy.'
Id. at 2-3.
37. According to the World Nuclear Association,
(J the present China National Nuclear Corp (CNNC) wasestablished on 1 July 1999 upon approval of the StateCouncil. It is a conglomerate directly under theleadership of the central government, and also a largestate-owned enterprise directly under the supervisionand control of the State-owned Assets Supervision andAdministration Commission of the State Council. TheCNNC consists of over 100 member units, with a totalstaff of 100,000 and total assets of LLO billion Yuan.
See www. world-
nuclear.org/reference/portal/nuclear power utili ties. html
(attached as Exhibit 36).
Certain Entities involved in the Thirty Additional Transactions
I. Jiangsu Nuclear Power Corporation
38. According to CNNC's website, "Jiangsu Nuclear Power
Corporation was established on December l8, 1997, (and isJ mainly
responsible for the construction and operation of Tianwan
(Nuclear Power PlantsJ. The corporation consists of the
following three shareholders: China National Nuclear Corporation
(described above at paragraphs 36-37J (50% share), China Power
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Investment Corporation (30%) and Jiangsu Guoxin Group (20%)."
See www.cnnc.cn/tabid/l69 /Defaul t. aspx (attached as Exhibit 37)
J. Qinshan Nuclear Power Plant
39. The Qinshan Nuclear Power Company, established in 1983,
is a nuclear power company under the umbrella of the CNNC and the
main organization to implement the Qinshan Nuclear Power Plant
Proj ect in Zhej iang Province. See
www.fas.org/nuke/guide/china/contractor/cnnc.htm (attached as
Exhibit 38) .
K. China Guodian Corporation
40. According to the corporate profile on China Guodian
Corporation's website, it is one of the largest state-owned power
generation groups in China. See
www.cgdc.com.cn/en no use/en index.html (attached as Exhibit 39).
It engages in the development, investment, construction,
operation and management of power generation, and the production
and sales of electricity and heat. Id. China Guodian
Corporation is administered by SASAC. See
www.sasac.gov.cn/n296334 0 /n297ll2 /n4 956567 /index. html (attached
as Exhibit 40).
41. According to the company's President and the Party
Secretary, "China Guodian Corporation, as a key state-owned
enterprise with the vital importance on the national economy and
state energy safety, is responsible not only for keeping and
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increasing in state owned assets value by creating its material
wealth, but also for creating spiritual and intellectual wealth
to maximize economic and social benefits." See China Guodian
Company Brochure (attached as Exhibit 4l). The company was
established in 2002 and "keeps and adds value of state assets and
better fulfills the responsibility as a state-owned enterprise."
Id. The Guodian Shizuishan Power Plant is classified as a
Business Unit of Internal Accounting under China Guodian
Corporation. See www.cgdc.com.cn/en no use/en cm.html (attached
as Exhibit 42) .
L. Liqanq Power Plant
42. Ligang Power Plant is a coal fired power station
located in Jiangsu Province. See
www.citicpacific.com/eng/biz /infra/power /ligang. html (Attached as
Exhibit 43). CITIC Pacific owns 65.05% of Ligang Power Phases I
and II and 7 i . 35% of Phases III and IV. Id. CITIC Pacif ic is
incorporated in Hong Kong and publicly traded on the Hong Kong
Stock Exchange. See portions of
www.citicpacific.com/eng/about/about index. html (attached as
Exhibit 44). CITIC Pacific's ultimate holding company is CITIC
Group, a state-owned enterprise established under the Laws of the
People's Republic of China. Id. CITIC Group owns 58% of CITIC
Pac if ic . Id.
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M. China National Machinery and Equipment Corporation
43. According to the company's website, China Machinery
Engineering Corporation was restructured and renamed from China
National Machinery and Equipment Import and Export Corporation
("CMEC") on January l8, 2 Ol1. See
www.cmec.com/en/contents/l2l/383.aspx (attached as Exhibit 45)
"Established in 1978, as the first large national corporation
integrating foreign trade with industry, CMEC is a large global
conglomerate with engineering contracting as its core business."
Id. The company's Chairman of the Board is the Secretary of
Committee of the Chinese Communist Party. Id. Two additional
members of the company's executive team are Deputy Secretaries of
Committee of the Chinese Communist Part. Id.
N. Taiwan Power Company
44. According to the company's website, Taiwan Power
Company ("Taipower") was organized on May 1, 1946. See
www.taipower.com. tx/eng/about us/Introduction (attached as
Exhibit 46). "(The companyJ is a public utility and the sole
integrated power industry in Taiwan. In compliance with the
government's economic development and the policy of ensuring the
people's well-being, the company will do its utmost on every
level to provide quality and stable electricity to the public."
Id. "Taipower is a state-owned enterprise under the Ministry of
Economic Affairs ('MOEA').... Organizational adjustments are
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undertaken according to the regulations stipulated by the MOEA or
necessary business changes." Id.
45. According to Article 8 of the Administrative Law of
State-Run Enterprise, the competent authorities overseeing state-
owned enterprises have authority to establish, consolidate, and
dis sol ve the state-owned enterprise, approve operating
guidelines, appoint and remove important persons, inspect and
evaluate operations, and make financial plans. See
Administrative Law of State-Run Enterprise (2002) (attached as
Exhibit 47). Article l3 provides that" (sJ tate-run enterprisesshall turn over (their) profits to the National Treasury after
the year-end audit." Id. Article 37 provides: "With the
exception of the employment of special technical specialists, all
personnel appointments by state-run enterprises shall comply with
Article l2 of the Civil Service Appointment Law in order to
prevent favoritism." Id.o. Nigerian Gas Company Limited
46. According to the website of the Nigerian National
Petroleum Corporation ("NNPC"), the Nigerian Gas Company Limited
("NGCL") was "established in 1988 as one of the LL subsidiaries
of (NNPCJ. It is charged with the development of an efficient
gas industry to fully serve Nigeria's energy and industrial
feedstock needs through an integrated gas pipeline network and
also to export natural gas and its derivatives to the West
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African Sub-region." See www.nnpc-nigeria.com/ngcl.htm (attached
as Exhibit 48). The Nigerian National Oil Corporation was
founded in 1971 and subsequently merged with the Ministry of
Petroleum Resources under Decree 33 of 1977, and changed its name
to NNPC. See www.nnpc-nigeria.com/nnpc.htm (attached as Exhibit
49) .
47. Section 2 of Nigeria's Corrupt Practices and other
Related Offences Act 2000 provides that "' Public Officer' means a
person employed or engaged in any capacity in the public service
of the Federation, State or Local Government, public corporations
or private company wholly on (sicJ jointly floated by any
government or its agency including the subsidiary of any such
company. . . ." See Corrupt Practices and other Related Offences
Act 2000 (attached as Exhibit 50).
P. Bharat Heavy Electricals Limited
48. Bharat Heavy Electricals Limited ("BHEL") was
established by the government of India in 1956 and is 68% state-
owned. See wVM.forbes.com/lists/20l0(37(fab-50-10 Bharat-Heavy-
Electricals KUVM.html (attached as Exhibit 5l). BHEL specializes
in thermal, gas, nuclear, and hydro power plants. Id.
49. The Prevention of Corruption Act of 1988 states that
"public servant" means, in part, "any person in the service or
pay of a corporation established by or under a Central,
Provincial or State Act, or an authority or a body owned or
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controlled or aided by the Government or a Government company as
defined in section 617 of the Companies Act, 1956." See The
Prevention of Corruption Act of 1988 (attached as Exhibit 52).
Q. European Agency for Reconstruction
50. According to the European Union's website, the European
Agency for Reconstruction ("the Agency for Reconstruction") ,
whose mandate expired in 2008, was established in February 2000
by declaration of the Council of the European Union as the
European Union's main reconstruction arm in Kosovo and was later
expanded to Serbia, Montenegro, and Macedonia. See
www.ec.europa.eu/enlargement/archives/ear/agency/main/ag-main.htm
(attached as Exhibit 53). As an independent agency of the
European Union, the Agency for Reconstruction was accountable to
the European Union Council and the European Parliament and was
overseen by a Governing Board composed of representatives from
the European Union Member States and the European Commission.
Id.; see also Council Regulation No. 2667/2000 of 5 December 2000
on the European Agency for Reconstruction ("Council Regulation
No. 2667/2000") (attached as Exhibit 54).
5l. Article 2 of Council Regulation No. 2667/2000 states
that, among other tasks, the Agency for Reconstruction had
responsibility for preparing and evaluating invitations to
tender, signing contracts, concluding financing agreements, and
awarding contracts. Id. Article 10 of Council Regulation
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2667/2000 states that the "Agency's staff shall be subject to the
rules and regulations applicable to officials and other servants
of the European Communities." Id. The Agency for
Reconstruction's emphasis evolved from "post-conflict
reconstruction to helping countries with reform in areas such as
justice and home affairs, public administration and public
finance, and economic development." See
www.ec.europa.eu/enlargement/archives/ear/agency/main/ag-main.htm
(attached as Exhibit 53) .
R. Abu Dhabi Marine Operating Company
52. According to USCS, the Abu Dhabi Marine Operating Areas
Limited ("ADMA Limited") was created in 1955 by British Petroleum
and Total, S.A. to develop the United Arab Emirates' ("UAE")
offshore oil and gas resources. In the early 1970s, the
Government of Abu Dhabi, through 100% state-owned Abu Dhabi
National Oil Company ("ADNOC"), became the owner of 60% of ADMA
Limited. In 1977, the Government of Abu Dhabi and the ADMA
Limited shareholders established a new company, called Abu Dhabi
Marine Operating Company ("ADMA-OPCO"), to succeed ADMA Limited
as operator of the concession. Currently, ADNOC owns 60i of
ADMA-OPCO, and British Petroleum, Total, S.A., and JODCO own the
remaining 40%.
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S. Saudi Aramco
53. According to Saudi Aramco's website, in 1933 Saudi
Arabia granted an oil concession to an affiliate of Standard Oil
of California. See timeline at www.saudiaramco.com website
(attached as Exhibit 55) . In 1973, Saudi Arabia's Government
acquired a 25% participation interest in the company, which had
been renamed Aramco in 1944. Id. In 1980, the Saudi Government
acquired a LOO% participation interest in Aramco and purchased
almost all of the company's assets. Id. In 1988, the company
was renamed the Saudi Arabian oil Company ("Saudi Aramco"). Id.
54 . According to Saudi Aramco' s website,
Saudi Aramco reports to its owner, the Saudi ArabianGovernment, through the Supreme Council of Petroleumand Mineral Affairs, chaired by the Custodian of theTwo HOlY Mosques King 'Abd Allah ibn 'Abd al- 'Aziz AlSa' ud. The Supreme Council of Petroleum and MineralsAffairs sets the company's broadest policy andobjectives. Its members are drawn from the governmentand the private sector.Saudi Aramco' s Board of Directors, chaired by theminister of Petroleum and Mineral Resources, isresponsible for high- level planning, budgeting andproject decisions.
See portions of WWW. saudiaramco. com website (attached as Exhibit
55) .
55. Saudi Arabia's 1992 Combating Bribery Law defines a
public official to include, in part, (l) "a person employed by
the government or any public administrative authority," or (2) "a
person employed by a company that manages or operates a public
facili ty or performs a public service, or (is) employed by a
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joint-stock company or company in which the government has a
holding...." See Robert Thomas and Sultan Al-Hejailan, Anti-
Corruption Regulation 2010 at l87 (Homer E. Moyer, Jr. Ed., 20l0)
(attached as Exhibit 56) .
Foreign Corrupt Practices Act Legislative History
56. Dr. Gordon Adams, Director of Military Research,
Counsel on Economic Priori ties, testified as follows at the
Hearings Before the Subcommittee on Consumer Protection and
Finance, House of Representatives, 95th Congress, First Session
(April 20 and 2l, 1977):
American Standard's report reflects the same problem:'In another subsidiary in a foreign country, paymentsin the form of excessive commissions were made tosalesmen of the subsidiary which the Registrantbelieves were probably paid by the salesman topurchasing agents or customers' employees, in part fororders received from government-owned businesses andagencies. f
See Exhibit 42 to Prof. Koehler Decl. at page l574 (emphasis
added) .
57. Senator Frank Church, Chairman of the Subcommittee on
Multinational Corporations of the Committee on Foreign Relations,
summarized testimony at the Hearings Before the Subcommittee,
94th Congress, First Session (July l7, 1975):
We further learn through Mr. Lehmann's testimony thatthe allocation was based upon the amount of oil thecompanies sold to the Italian electric utility company.The Italian electric utility, ENEL, is Governmentowned. It is a Government utility that is decidingwhether to build oil plants for generating electricityor nuclear plants and deciding what kind of fuel to
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use. This government owned utility can either favoroil or adopt some other policy less to the favor ofoil. When it comes to repayment of the association'sborrowing for making poli tical payments to the partiesof Italy, and the interest that accrued on that loan,we find that money was channeled through ENEL and thatthe amount each company pays is based upon how mucheach company sold to ENEL.
Political Contributions to Foreign Governments, Hearings before
the Subcommittee on Multinational Corporations of the Committee
on Foreign Relations, 94th Congress, First Session (July 17,
1975) at page 330 (emphasis added) (attached as Exhibit 57) .
58. Congressman Timothy Wirth, Chairman of the Subcommittee
on Telecommunications, Consumer Protection and Finance Committee
on Energy and Commerce, requested information concerning the
Department of Justice's enforcement activities under the FCPA.
The response, included in The Foreign Trade Practices Act:
Hearings on H.R. 2157 Before the Subcommittee on International
Economic Policy and Trade of the House Committee on Foreign
Affairs, 98th Congress, First Session (April 18 & 25, July l2,
Oct. 6, 1983) contains several references to foreign officials in
the context of state-owned entities. One reference to an ongoing
investigation lists a "National Bank Officer" as a foreign
official having received payments. See Exhibit 66 to Prof.
Koehler Decl. at 3049. The description of "Investigation No. 27"
states: "A telephone call to the Department from an attorney
representing a group of American oil brokers, gave rise to the
possibility that the group might be considering the payment of a
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large commission to a member of royalty in a Middle Eastern
country for assistance in purchasing oil from the government
owned oil company." Id. at 3054 (emphasis added) The
description of "Investigation No. 5l" states:
An American company in an energy related field informedthe SEC that it was approached by officials of a stateenterprise of a fLJ at in American country and told thatin order to obtain certain contracts, blank letters ofcredit would have to be deposited in a bank in theforeign country. The persons who could draw down onthese letters would be determined by officials of thestate enterprise. The American company subsequentlyadvised that they had determined not to go forward inseeking to obtain contracts with the country becausethey could not be sure that an official would not getthe bene fit of the funds.
Id. at 3057 (emphasis added).
59. Mr. Ian MacGregor, the chairman of the AMX Corporation
and chairman of the United States Council of the International
Chamber of Commerce, testified as follows at the Hearings Before
the Committee on Banking, Housing and Urban Affairs, United
States Senate, 94th Congress, Second Session (April 5, 7 and 8,
1976): "The biggest area of problem is the interface between our
business organizations and these Government and quasi-Government
industrial establishments." See Exhibit l3 to Prof. Koehler
Decl. at page 643.
60. Research Reports from the International Division of the
Chamber of Commerce of the United States included in the Hearings
Before the Committee on Banking, Housing, and Urban Affairs,
Senate, 99th Congress, Second Session on S. 430 (June la, 1986)
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listed business foregone due to the FCPA: "A major U.S.
corporation refused sales valued at several hundred thousand
dollars to a Middle East quasi-government organization because it
would have been required to pay commissions to a private company
6l. I declare under penalty of perjury that the foregoing
in order to collect its account. The U. S. corporation could not
be certain that part of that payment would not be passed to some
government officials." See Exhibit 68 to Prof. Koehler Decl. at
page 3197 (emphasis added) .
is true and correct to the best of my knowledge and belief.
DATED: April 18, 2011 7:k~ /~~J--~~- /"/ ¿BR): SMITH//
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