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Texas Appeals Court Revives Shell FCPA Defamation Suit

Screen Shot 2014-10-30 at 09.22.43By Jeremy Heallen

Law360, Houston (June 25, 2013, 3:21 PM ET) — A Texas appeals court Tuesday revived a defamation suit against Shell Oil Co., ruling that the oil and gas giant could potentially be held liable for allegedly telling federal authorities that a former employee signed off on bribes to foreign officials.

The First District Court of Appeals rejected a trial court’s decision that Shell was immune from the suit under an “absolute privilege” that extended to statements made in the context of judicial proceedings because at the time the company told the U.S. Dept. of Justice that it believed project manager Robert Writt had violated the Foreign Corrupt Practices Act, a criminal case had not yet been initiated.

“To extend the absolute privilege to the circumstances of the instant case, where neither Shell nor Writt was a party to an ongoing or proposed judicial or quasi-judicial proceeding at the time that Shell made the complained-of statements, would have the very dangerous effect of actually discouraging parties from being truthful with law-enforcement agencies and instead encourage them to deflect blame to others without fear of consequence,” the appeals court’s opinion said.

Representatives for Shell did not immediately respond to a request for comment Tuesday.

In reversing the trial court’s order, the appeals court noted that Shell voluntarily met with DOJ officials in 2007 to discuss its business dealings in Nigeria with global freight-forwarding company Panalpina Inc., which was suspected of bribing foreign officials on behalf of its customers to more easily import goods and secure logistics services.

During the meeting Shell agreed to conduct an internal investigation and provide the DOJ with documents and a proposed investigative plan, according to the opinion.

Eighteen months later, Shell handed over to federal authorities the details of its investigation, including a memorandum prepared by Vinson & Elkins LLP that described Writt as a “major participant” in the bribery scheme by approving phony reimbursements to Shell’s vendors, including Panalpina, the opinion said.

The DOJ and U.S. Securities and Exchange Commission eventually filed criminal and civil charges against Shell over the FCPA violations but not until 20 months after Shell had supplied prosecutors with its report, according to the opinion.

As a result, Shell could not evade Writt’s defamation suit by claiming absolute privilege, the court reasoned, because the defense was only available in limited situations involving the administration of government, such as statements made during legislative and judicial proceedings.

“There simply is no evidence that a criminal case had been filed against Writt or Shell or that a criminal prosecution was actually being proposed against either Writt or Shell, at either the time the DOJ first contacted Shell or when Shell submitted its report to the DOJ,” the opinion said.

But the court added that Shell does enjoy a conditional privilege, given that a sufficiently important public interest may have required the company to communicate with the DOJ to enable federal authorities to take appropriate action.

“The conditional privilege is ‘applicable when any recognized interest of the public is in danger, including the interest in the prevention of crime and the apprehension of criminals, the interest in the honest discharge of their duties by public officers and the interest in obtaining legislative relief from socially recognized evils,’” the opinion said.

Because the trial court did not address Shell’s conditional privilege in dismissing Writt’s defamation claim, the appeals court sent the case back to the lower court for additional proceedings.

Writt filed his suit against Shell in 2009, alleging wrongful termination and defamation stemming from the company’s report to the DOJ that implicated him in the bribery scheme. A trial court tossed Writt’s defamation claim, and a jury decided in favor of Shell on his wrongful termination allegations, according to court records.

Shell and Panalpina settled the DOJ and SEC suits in 2010 over the bribery scheme.

Panalpina — which agreed to pay $11.3 million in the SEC case and $70.6 million in the DOJ case — allegedly doled out bribes totaling at least $27 million to officials in countries including Angola, Azerbaijan, Brazil, Kazakhstan, Nigeria and Russia to import goods or secure logistics services more easily.

Shell and its affiliates agreed to pay $18.1 million in the SEC case in addition to a $30 million criminal fine for its hand in FCPA violations that purportedly included funneling $2 million to subcontractors to fund bribes from Panalpina to Nigerian customs officials to import materials and equipment.

Writt is represented by Robert Dubose of Alexander Dubose & Townsend LLP and Kenneth D. Hughes of The Hughes Law Firm.

Shell is represented by Macey Reasoner Stokes of Baker Botts LLP, James Edward Maloney of Andrews Kurth LLP and Tracey Nicole Leroy of Sidley Austin LLP.

The case is Writt v. Shell Oil Co. et. al., case number 01-11-00201-CV, in the First District Court of Appeals for the State of Texas.

–Editing by Melissa Tinklepaugh.

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