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Panalpina Hit With FCPA-Related Shareholder Suit

An investment fund that owns about 5% of Panalpina World Transport (Holding) Ltd filed suit on July 23, 2009 in the Southern District of Texas against the company, some current and former officers and directors, and its owner before its 2005 IPO in Switzerland. The D & O Diary has an excellent account of the suit here.

The complaint is based on damages caused by the logistics company's withdrawal from Nigeria after it disclosed a pattern of illegal payments there. Since the disclosure (and during the global financial crisis), the price of its common stock has dropped 78%. There's no private right of action under the Foreign Corrupt Practices Act, however, so private litigants seeking relief have to resort to other claims. In this case, the plaintiffs allege violations of Sections 10(b) and 20 of the Securities Act, common law fraud, aiding and abetting common law fraud, and negligent misrepresentation.

The D & O Diary points out that "the complaint does not appear to be brought as a class action lawsuit. Rather, the action appears to have been brought solely on behalf of four apparently related investment partnerships, based in Connecticut and in the Cayman Islands." The post continues:

Not only is the company foreign [Swiss] domiciled, and not only are its shares traded elsewhere, but the supposed bribery took place outside the U.S. And, without plumbing the depths of the factual allegations, it would seem that many of the alleged misrepresentations took place outside the U.S., notwithstanding the fact that the company may have substantial U.S. operations. The case seems to present circumstances quite analogous to the facts involved in the securities suit against National Australia Bank case (refer here), in which the Second Circuit ultimately concluded that the U.S. courts lacked subject jurisdiction over the matter.

Panalpina has been making FCPA news for more than two years. In February 2007, the Justice Department said in connection with the resolution of a case involving Vetco that bribes in Nigeria "were paid through a major international freight forwarding and customs clearance company to employees of the Nigerian Customs Service . . .?

Since then about a dozen leading oil and gas-related companies have said they received letters from the DOJ and SEC asking them to "detail their relationship with Panalpina . . ." Included are Schlumberger, Shell, Tidewater, Nabors Industries, Transocean, GlobalSantaFe Corp., ENSCO, Cameron, Noble Corp., Pride International, Global Industries and Parker Drilling.

Panalpina said in its 2008 half-yearly report that for compliance reasons it was divesting its domestic operations in Nigeria to a local investment group and retaining no ownership or operating interest. It completed the transaction in November 2008. It also said it was cooperating with an investigation by the DOJ and SEC and that its U.S. subsidiary in Houston had been instructed to produce documents and other information about services to certain customers in Nigeria, Kazakhstan and Saudi Arabia (see our post here).

Panalpina World Transport (Holding) Ltd. trades on the SIX Swiss Exchange under the symbol PWTN.

Download the complaint in Deccan Value Advisors Fund L.P. et al v. Panalpina World Transport (Holding) Ltd. et al here.
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Full post as published by The FCPA Blog on August 03, 2009 (boomark / email).