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Extractive Industries/Mining/Oil & Gas
Houston, Texas, United States
Nationality of Foreign Officials: Nigeria
Summary of Allegations:
In February 2009, the DOJ and SEC charged KBR LLC, KBR Inc., and Halliburton with various FCPA violations in connection with a decade-long bribery scheme to obtain engineering, procurement and construction ("EPC") contracts to build liquefied natural gas ("LNG") facilities on Bonny Island, Nigeria. The DOJ charged KBR LLC with conspiracy and violations of the anti-bribery provisions of the FCPA. The SEC charged KBR, Inc., KBR LLC's parent company, and Halliburton, its former parent company, with books and records and internal controls violations in connection with the bribery. Previously, in September 2008, KBR Inc.'s former chief executive officer ("CEO") and chairman, Albert "Jack" Stanley, pled guilty to conspiracy to violate the FCPA in connection with his role in the bribery scheme.
Between 1995 and 2004, KBR LLC and three other joint venture partners (France's Technip SA; Snamprogetti Netherlands B.V., a subsidiary of Saipem SpA of Italy; and Japan's JGC Corporation) (collectively, the "TSKJ" joint venture) were awarded four EPC contracts by Nigeria LNG Ltd. ("NLNG") to build LNG facilities on Bonny Island. The four contracts were valued at USD 6 billion in total. NLNG's largest shareholder, holding a 49 percent stake, was the government-owned Nigerian National Petroleum Corporation ("NNPC"). According to court documents, the joint venture authorized, promised and made a variety of improper payments to Nigerian government officials, including officials of the executive branch.
Tens of millions of dollars in consulting fees were paid to two agents for use in bribing Nigerian officials. KBR LLC admitted that, at certain key junctures before the award of the EPC contracts, former CEO Albert "Jack" Stanley and others met with three successive top-level office holders in Nigeria's executive branch, asking the office holder to designate representatives through whom the joint venture would negotiate the improper payments made to the government officials. Over the course of the ten-year scheme, the first agent, a consulting company incorporated in Gibraltar but based in the United Kingdom ("UK"), received approximately USD 132 million, while the second agent, a global trading company headquartered in Tokyo, Japan, received over USD 50 million. The joint venture's cultural committee (set up to orchestrate the improper payments) decided that the UK agent would make the improper payments to high-ranking government officials while the Japanese agent would make the payments to the lower-ranking officials.
The improper payments were concealed through sham contracts with the two agents. In addition, in an effort to obtain further insulation from FCPA liability, the joint venture partners operated in Nigeria through three Portuguese special purpose corporations, owned equally by the four joint venture companies.
IRAQ and ANGOLA
In July 2012, the Company acknowledged that it had begun an internal investigation into possible FCPA violations by the Company in Angola and Iraq.
Approximate Alleged Payments to Foreign Officials: USD 182 million
Business Advantage Allegedly Obtained: USD 6 billion
Agencies: Nigeria: Economic and Financial Crimes Commission
Results: Civil Penalty, Prosecution of Individuals
Year Resolved: 2010
Compliance Monitor:
Ongoing: No
Details:
The press reported that Nigeria's Economic and Financial Crimes Commission ("EFCC") had arrested ten Halliburton employees in Nigeria during a raid of the offices of Halliburton Energy Services Nigeria Limited in Lagos on 25 November 2010. The EFCC also arrested one employee each from Saipem Contracting Nigeria and Technip Offshore Nigeria. On 7 December 2010, the EFCC reportedly filed corruption charges against Halliburton, former U.S. Vice President Dick Cheney (who was the CEO of Halliburton during the period at issue), Albert Stanley (former CEO of KBR), David Lesar (current CEO of Halliburton) and William Utt (current CEO of KBR). Technip, Snamprogetti and JGC Corp. were reportedly also charged on the same day. The case number is Federal Republic of Nigeria v. Halliburton and others, CV/435/10, High Court of Justice, Abuja Judicial Division (Abuja).
On 21 December 2010, Halliburton reported that it reached a settlement with the Nigerian government, agreeing to pay a USD 32.5 million penalty and USD 2.5 million in legal expenses (the amount is significantly less than the supposed USD 120 million fine reported in the press previously). Halliburton also agreed to assist the Nigerian government in recovering frozen assets in Switzerland. In exchange, Nigeria agreed to withdraw all lawsuits and charges against KBR and Halliburton corporate entities and associated persons. According to press reports, former U.S. President George H. W. Bush and former Secretary of State James Baker assisted with the settlement negotiations. Former Vice President Dick Cheney had been charged by the Nigerian authorities as a former Halliburton executive.
In December 2015, media reported that the EFCC may reopen investigation into the Halliburton scam in January 2016. According to the media the EFCC may have discovered that Nigeria did not get a fair deal from the investigation of the scam and the commission also felt some of the suspects, who entered into a plea bargain, did not return substantial funds.
On 11 February 2016, the EFCC questioned a Senior Advocate of Nigeria, Damian Dodo, over his role in the Hallliburton deal. Specifically, Dodo is alleged to have received USD 4.5 million through his firm, DD Dodo and Co. from the multinational firms involved in the Hallliburton scandal under the cover of legal fees. Dodo allegedly withdrew USD 2 million in cash for purposes yet clear to the EFCC but in violation of money laundering regulations. Many more are expected to be questioned in the weeks ahead.
Agencies: United Kingdom: Serious Fraud Office
Results: Disgorgement
Year Resolved: 2011
Compliance Monitor:
Ongoing: No
Details:
On 23 October 2009, Halliburton disclosed in an SEC filing that the UK's Serious Fraud Office ("SFO") may bring civil claims or criminal charges against it under various UK laws. According to Halliburton, the SFO is focused on the role of M.W. Kellogg Limited ("MWKL"), a UK subsidiary of KBR, in the TSKJ joint venture. Halliburton also said it understood that the Bonny Island project is under investigation in France, Nigeria, and Switzerland as well, and could also result in third-party claims.
On 16 February 2011, following a High Court Order issued under Part 5 of the UK's Proceeds of Crime Act of 2002, the SFO announced a civil settlement in which MWKL will pay approximately GBP 7 million in recognition of funds MWKL was due to receive. The SFO recognized that MWKL took no part in the criminal activity which generated the funds, but rather was used by its parent company, which participated in the joint venture and bribery scheme to bid for contracts on Bonny Island. The agreement follows MWKL's self-reporting to the SFO in October 2009 and will lead to payment within fourteen (14) days in full and final settlement of the case. The agreement also insures MWKL will pay the costs of the investigation, and MWKL will overhaul its internal audit and control measures to ensure its compliance systems are in accordance with UK law.
Agencies: United States: Department of Justice, United States: Securities and Exchange Commission
Results: Civil Injunction, Compliance Monitor, Criminal Fine, Disgorgement, Plea Agreement, Prosecution of Individuals
Year Resolved: 2009
Compliance Monitor:
Ongoing: No
Details:
On 11 February 2009, KBR LLC pleaded guilty to conspiracy to violate the FCPA and to four counts of violating the FCPA's anti-bribery provisions. Under the plea agreement, KBR LLC agreed to pay a USD 402 million criminal fine and to retain an independent compliance monitor for a three-year period. The Company also agreed to cooperate with the DOJ in its ongoing investigations. It appears that Halliburton, KBR LLC's former parent company, will in fact pay all or most of the USD 402 million fine on behalf of KBR LLC, due to an indemnification agreement signed at the time of KBR LLC's separation from Halliburton in January 2009.
Also on 11 February 2009, without admitting or denying the SEC's allegations, KBR, Inc. and Halliburton consented to the entry of an order that (i) permanently enjoins KBR, Inc. from violating the anti-bribery and books and records provisions of the FCPA, and from aiding and abetting violations of the books and records and internal controls provisions; and (ii) permanently enjoins Halliburton from violating the books and records and internal controls provisions of the FCPA. The two companies were also ordered to disgorge USD 177 million in ill-gotten profits. An independent monitor was imposed on KBR, Inc. for a three-year period and Halliburton was required to retain an independent consultant to review its FCPA policies and procedures.
Halliburton and the KBR entities agreed to pay total penalties of USD 579 million to settle the DOJ and SEC enforcement actions.
Individual Prosecutions
Previously, on 3 September 2008, the DOJ filed criminal charges against KBR, Inc.'s former CEO, Albert "Jack" Stanley, for conspiring to violate the FCPA and conspiring to commit mail and wire fraud. Stanley pleaded guilty to one count of each charge. He faces a possible sentence of seven years in prison and payment of USD 10.8 million in restitution. Stanley's sentencing was deferred until his cooperation with the DOJ in its ongoing investigation was complete. He is currently awaiting sentencing.
Also on 3 September 2008, the SEC charged Stanley with violations of the anti-bribery and books and records and internal controls provisions of the FCPA in connection with his role in the bribery scheme. Without admitted or denying the SEC's allegations, Stanley consented to the entry of a civil injunction and agreed to cooperate in the SEC's ongoing investigation.
On 17 February 2009, two UK nationals, Jeffrey Tesler and Wojciech Chodan, were indicted by a federal grand jury in Houston, Texas in connection with their participation in the bribery scheme. Tesler, a London lawyer, was allegedly one of the agents hired by the four-company joint venture to funnel bribes to high-ranking Nigerian government officials. Chodan was a former executive and consultant of a KBR, Inc.'s UK subsidiary. The indictment was unsealed on 5 March 2009 in connection with the U.S. government's extradition request and charged Tesler and Chodan with one count of conspiracy to violate the FCPA and ten substantive counts.
On 25 March 2010, District Judge Caroline Tubbs decided at Westminster Magistrates' Court that Tesler be extradited to the United States to stand trial. He had argued that the extradition request should be denied because he would no longer be able to receive a fair trial in the United States. Tesler appealed the decision, but on 20 January 2011, the UK High Court ruled that it could go forward. Tesler was formally extradited on 10 March 2011. On 11 March 2011, Tesler pleaded guilty in U.S. District Court in Houston to one count of conspiracy and one count of violating the FCPA. As part of his plea agreement, Tesler agreed to forfeit USD 148,964,568. At his sentencing, he faces faces a maximum penalty of five years in prison on the conspiracy charge, and five years in prison on the FCPA violation charge.
On 20 April 2010, Judge Tubbs ruled that Chodan be extradited to the U.S. On 6 December 2010, following his extradition to the United States, Wojciech Chodan pleaded guilty to one count of conspiracy to violate the FCPA. At his sentencing, Chodan faces a maximum penalty of 60 months in prison. As part of his plea agreement, he agreed to forfeit USD 726,885.
On 22 February 2012, Wojciech Chodan was sentenced to one year of unsupervised probation by the U.S. District Court for the Southern District of Texas. Chodan was also fined USD 20,000. He had pleaded guilty to conspiracy charges under the FCPA in December 2010, and could have received up to five years in prison. Chodan's probation allows him to return to his residence in the UK.
The following day, on 23 February 2012, the judge in the case sentenced Jeffrey Tesler, a lawyer and consultant based in the UK who also pleaded guilty last year to violating the FCPA, to twenty-one months in prison, and two additional years of supervised probation. Mr. Tesler had already agreed to forfeit approximately USD 150 million held in Swiss and Israeli bank accounts, at the time of the original plea agreement in March 2011 (this was the largest individual forfeiture to-date under the FCPA). In November 2012, a French court investigating Mr. Tesler's activity agreed to postpone a hearing in the case for one year, until 11 December 2013, after Tesler's scheduled release from jail in October 2013.
Albert "Jack" Stanley, who pleaded guilty in 2008, was sentenced by Judge Keith B. Ellison to thirty months in prison, followed by three years of supervised probation, on 23 February 2012. When he pleaded guilty in 2008, Stanley was ordered to pay USD 10.8 million in restitution for the kickbacks he admitted to having taken. The judge in the case, Keith B. Ellison, agreed to allow Stanley to pay the USD 1.55 million remaining in USD 1,000 monthly installments following his release from prison. Stanley is 69 years old in 2012.
In its SEC Form 8-K filed on 19 July 2012, Halliburton announced that earlier in the month, on 9 July, the 165th Judicial District Court of Harris County, Texas had issued an order preliminarily approving the proposed settlement of a derivative suit filed against Halliburton by some of its shareholders. The derivative action had been filed in 2009 against current and former Halliburton directors and officers for violations of the FCPA while KBR, Inc. was working as a government contractor in Iraq, illegal kickbacks, fraud in government contracts, and prohibited activity in Iran.
The proposed settlement was signed by the parties in June. In it, the Company expressly denies wrongdoing by it or the individual officers and directors named, and requires that the settlement not be construed as an admission by any of the defendants. The settlement provides for mandatory FCPA and UK Bribery Act training, revisions to the Company's code of business conduct, clawbacks against the officers and directors, limitations on discretionary payments to officers and the payment of legal expenses, and ongoing review and modifications of the compliance program and code of business conduct.
In its 10-K Form submitted to the SEC on 20 February 2013, KBR, Inc. reported that its independent compliance monitor has "certified that KBR's current anti-corruption compliance program is appropriately designed and implemented to ensure compliance with the FCPA and other applicable anti-corruption laws."
On 20 May 2014, lawyer Jeffrey Tesler was disbarred by the UK Solicitors Regulation Authority.