Tag Archives: FCPA

Expro to pay $8m to settle Angola bribery allegations

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Expro Group has settled with the SEC over allegations that Frank’s International paid bribes to Angolan officials between 2008 and 2014. Expro merged with Frank’s in 2021 in a deal that valued Frank’s at $742 million.

Expro has agreed to pay $4.2 million which represents the profits made by Frank’s on the Angolan contracts after Frank’s completed its IPO in 2013. In addition, Expro will pay $0.8 million in interest and $3 million in penalties.



Frank’s primarily supplied tubular services and technology used in deepwater drilling. Starting in 2007, it tried to increase its business with the ultimate end customer, Sonangol, the state-owned Angolan oil producer. Initially, Sonangol directed Frank’s customer to use a competitor to Frank’s that made a bigger investment in Angola.  But a senior Sonangol executive said they could change its mind if Frank’s established a consulting company and paid five percent of the value of the contract to the consulting company for the benefit of high-ranking Sonangol officials.

Instead of creating a consulting company, Frank’s hired an agent in Angola in November 2007 without a contract in place. The first payment was made in January 2008. Towards the end of 2008, the Frank’s CFO and Chief Accounting Officer started asking questions about the commission payments, which, at that point, amounted to $688,000. The regional senior management then approved a back-dated contract.

In 2011, a new agency agreement was created. This provided for a 10% sales commission, although only 2.2% was actually paid in commissions, with the rest being used for bribes.

Between 2008 and 2014, Frank’s paid the Angolan agent approximately $5.5 million from Frank’s Angolan Operations, a portion of which was paid to the senior Sonangol executive. Frank’s received at least $4,176,858 in post-IPO net profits from its contracts with oil companies where Sonangol was the ultimate customer and for which the Sonangol executive possessed decision-making authority.

Frank’s self-reported the issue to the SEC and Department of Justice in 2016 and Expro made a reserve of $8 million, that was recorded as an additional liability on the acquisition of Frank’s.

 

https://www.sec.gov/litigation/admin/2023/34-97381.pdf

 

Foster Wheeler agrees to pay $177 million to resolve Brazil bribery allegations

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Foster Wheeler, now part of the Wood Group, has agreed to pay $177 million to resolve criminal charges stemming from a scheme to pay bribes to officials of Petrobras in exchange for a $190 million contract to design a gas-to-chemicals complex.



The scheme occurred in 2012. At the time, Foster Wheeler was an independent company with its headquarters in Switzerland. In 2014 Amec acquired the company for £1.9 billion. The combined company was later acquired by UK-based John Wood Group plc in 2017 for £2.2 billion. All three companies had large presences in the Houston area.

The Scheme

In 2011 Foster Wheeler hired a Country Manager for Brazil to identify opportunities in the country. The Country Manager reported to the Houston office.

Later that year, an Italian agent learned from a Brazilian agent (an ex-Petrobras employee) that Petrobras were seeking bids on the design of a gas-to-chemical fertilizer plant. Both the Italian agent and the then-Chairman of Foster Wheeler were regular customers of a high-end men’s clothing store in New York. The Store sales manager introduced the two. After the meeting, the chairman forwarded details to the acting CEO, without vouching for the legitimacy of the agent.

In turn, the CEO forwarded the information to the Brazil Country Manager, who responded that the company should not use the Italian agent as ‘we would send a wrong message in the market here’.

The Italian agent was affiliated with a Unaoil, a Monaco company heavily involved in bribery. See my blog post from October 2019 here. When Foster Wheeler did its due diligence on Unaoil, they declined to use it because of its possible violations of US and UK sanctions laws. Despite that, the CEO and COO offered the agent a 2% commission.

Foster Wheeler later agreed a 2% commission with the Brazilian agent. As a result, the company won the front-end engineering and design contract in late 2012. In total, Foster Wheeler ended up paying over $1.1 million in bribes.

In 2014, Petrobras elected not to proceed with the construction phase of the project.

The Settlement

Wood Group issued a press release stating it will pay $177 million over the next three years to resolve all allegations. This covers payments to the UK, US, and Brazil, though the company did not disclose the exact split.

Foster Wheeler is paying the Department of Justice $18.4 million. It is also paying the SEC $22.7 million for FCPA and book-keeping violations (if you are going to bribe someone, you must record it as a bribe). Both will be reduced by penalties paid to Brazil and the UK. The US will receive a net number of $17.8 million.

https://www.woodplc.com/news/latest-press-releases/2021/wood-reaches-resolution-on-legacy-investigations

https://www.justice.gov/opa/pr/amec-foster-wheeler-energy-limited-agrees-pay-over-18-million-resolve-charges-related-bribery

https://www.sec.gov/news/press-release/2021-112

Houston oil trader indicted over Ecuador bribery scheme

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Javier Aguilar, a Mexican citizen living in Houston, has been indicted on charges of conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and conspiracy to commit money laundering. He faces charges in the Eastern District of New York.

Mr Aguilar was an Oil Trader for Vitol, which has its head office in Geneva. According to the press release released by the Justice Dept, between mid-2015 and 2020, Aguilar paid two intermediaries $1.4 million for their efforts to bribe government officials in Ecuador. In turn, the intermediaries paid out $870,000 to the officials.



In exchange for bribes, Vitol secured contracts to purchase approximately $300 million in fuel oil.

Press Release and Indictment details don’t match

What’s interesting is that the details quoted in the press release don’t match the details in the indictment.  The indictment has two counts. Count One is the conspiracy to violate the FCPA. This count has all the detail. Count Two is the conspiracy to commit money laundering and the indictment has no specific details on this.

The Scheme

Regarding count One, the indictment states that Aguilar sent an email in September 2016 to one of the intermediaries directing that individual to send a letter from a state-owned entity in Oman to Ecuadorian official #1.

One of the intermediaries created 39 sham invoices and sent them to a shell company in Curaçao. Vitol wired approximately $750,000 from a UK bank account to the shell company. It’s not clear in the indictment which invoices this payment covered. However, as payment for 13 of the 39 invoices, the shell company wired approximately $250,000. The money was sent to bank accounts in the Cayman Islands and Curaçao controlled by the intermediaries. In turn, they sent $225,000 (via a correspondence bank in New York) to an account in Portugal controlled by the Ecuadorian official.

The press release refers to Ecuadorian officials, however, the indictment only refers to one in count One.

If convicted, Aguilar faces a maximum sentence of 20 years in prison

https://www.justice.gov/opa/pr/oil-trader-indicted-international-bribery-and-money-laundering-conspiracy-involving-corrupt

Monaco-based brothers plead guilty to bribery scheme

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Cyrus Ahsani and Saman Ahsani, CEO and COO of Monaco-based Unaoil, have pleaded guilty in a scheme to make millions of dollars in bribe payments to officials in multiple countries. The countries included Algeria, Angola, Azerbaijan, the Democratic Republic of Congo, Iran, Iraq, Kazakhstan, Libya and Syria.



Guilty plea in March

The pair pleaded guilty in the Southern District of Texas back in March, but the Department of Justice only announced the news today. It’s not clear why there has been a delay. However it does answer the question of why the United Kingdom’s Serious Fraud Office suddenly dropped its fraud investigation into Unaoil back in June.

Cyrus and Saman Ahsani are set for sentencing April 20, 2020.

Companies involved

Unaoil is an intermediary company that provided services for multinational companies operating in the energy sector. The information sheet lists two companies specifically;

  • Rolls Royce plc (paid £170 million in fines to the UK authorities in 2017, specifically related to Unaoil)
  • SBM Offshore NV (paid $475 million in fines worldwide in 2017 – some related to Brazil which don’t involve Unaoil)

A further 25 companies are unnamed, of which 5 have their head office in Houston.

Many of these companies have been named through previous press reports. They include;

  • TechnipFMC (paid SEC $5m to settle bribery allegations in Iraq)
  • KBR (allegedly paid Unaoil over $10 million to help it win contracts in Kazahkstan. DOJ and SEC investigations still ongoing)
  • Baker Hughes (investigation ongoing)
  • Weatherford
  • Cameron
  • Core Labs (investigation closed – no action taken)

Other companies involved include Honeywell, ABB, Samsung and Hyundai.

Downfall

Unaoil’s downfall started as a result of a 2013 court case involving an Australia company, Leighton Holdings. It had entered into an agreement with Unaoil with the aim of securing a $500 million Iraq pipeline contract but later referred the deal to the police for possible bribery.

Nick McKenzie, an Australian journalist started following the case and was soon contacted by a whistleblower who gave him a hard drive containing 10 years’ worth of internal Unaoil emails.

You can read the investigative report by The Age newspaper here

Ahsani charges filed by DOJ

https://www.justice.gov/opa/pr/oil-executives-plead-guilty-roles-bribery-scheme-involving-foreign-officials

TechnipFMC pays SEC $5 million to settle Iraq bribery violations

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TechnipFMC, has agreed to pay the Securities and Exchange Commission (SEC) $5 million to settle bribery allegations in Iraq.

Between 2008 and 2013, FMC Technologies (based in Houston) made over $794,000 in payments to a third-party consultant, who used some of these funds to pay bribes to Iraqi government officials to procure metering technology contracts with Iraq state-owned oil companies.



Back in June, the Department of Justice announced that TechnipFMC had agreed to pay $296 million to settle bribery allegations in Brazil and Iraq. $214 million of that was to be paid to the Brazilian authorities, with $82 million going to the DOJ.  In June, Technip issued a press release announcing a $301 million settlement. I noted, at the time, the $5 million discrepancy. I presume the $301 million includes the $5 million just announced.

The FMC sales manager who played an active role in the bribery scheme was based outside the US. However personnel in the US sent numerous documents and approved payments to Unaoil, the consultancy firm based in Monaco. The company disguised the payments as site installation expenses.

TechnipFMC did not self-report to the SEC until after being contacted by the DOJ. It has agreed to pay $4.3 million (representing profits on the contracts won) plus interest of $0.7 million.

Technip and FMC merged in January 2017. Last month, the company announced plans to split into two having spent $231 million on integration costs since 2016.

https://www.sec.gov/enforce/34-87055-s

 

 

Petrobras sues Samsung in Harris County over bribery scheme

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[UPDATE 04-24-19 Samsung successfully petitioned to move the case to federal court – Southern District of Texas]

Petrobras Americas has filed a lawsuit in Harris County against Samsung Heavy Industries over a $20 million bribery scheme involving Pride International. Pride had its head office in Houston before being acquired by Ensco in 2011. Petrobras is alleging the bribe was used to obtain a drilling contract unusually favorable to Pride.

Plea deal – Independent Consultant 

The lawsuit arises from a plea deal in 2015 involving Hamylton Padilha. He was an independent consultant that Pride hired to assist in winning the Drilling Services Contract with Petrobras. Back in November I wrote about Padilha’s role in a different bribery case involving another Houston driller, Vantage Drilling International.

As part of his plea deal, Mr Padilha stated that he negotiated bribes to Petrobras officials with the help of Hyun-Ju (“Harry”) Park, the Vice President and chief representative for Samsung’s office in west Houston. In 2007 Pride and Samsung signed a contract to build a drillship with an option to build a second one for $580 million.



The $20 million bribe

Shortly before Pride exercised that option a few months later, Samsung increased the price by approximately $30 million. This included $20 million for “unexpected labor and material costs”. Padilha would later use the $20 million to bribe Petrobras officials into signing the drilling contract with Pride. The bribes were paid by Samsung through two shell companies between February 2008 and November 2011.

Lucrative Drilling Contract

Petrobras is alleging that some of the contractual terms were unusually favorable to Pride. Over the life of the contract, Petrobras believed it paid excessive expenses due to corruption or when the drillship was non-operational in the amount of $160 million. Petrobras also states that it paid excessive expenses when the rig was placed on permanent standby, in the amount of $98 million.

Ensco – no action from SEC or DOJ

The drillship contract was canceled by Petrobras in January 2016 after they learned of the bribes. Ensco initiated arbitration proceedings against Petrobras over the cancellation in April 2016. However the two companies settled without any money changing hands in August 2018.

In its recent annual report, Ensco disclosed that, in August 2018, the SEC and US Dept of Justice closed their inquiries into the matter without taking any action. Ensco is still under investigation by the Brazilian authorities.

The lawsuit has just been filed and Samsung has not yet formally responded. It’s got a long way to go before resolution and I would imagine there will be arguments about whether Harris County is the proper jurisdiction.

Petrobras – Samsung lawsuit

TechnipFMC takes $280m charge in bribery probe

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TechnipFMC (market cap $10.8 billion) announced its 2018 results and included a charge for $280 million as a probable estimate to settle bribery allegations. The company had previously disclosed that it was co-operating with authorities in the US, Brazil and France. The allegations relate to contracts in Brazil, Equatorial Guinea, and Ghana.

The charge also covers contracts with Unaoil, which is a Monaco-based consultancy run by British nationals of Iranian descent. A number of well known companies including KBR are under investigation for using Unaoil executives as middle men in deals around the world. Rolls-Royce has already paid $800m in fines and SBM Offshore paid $238 million.

Officially the company has its head office in London but it also has corporate offices in Houston and Paris. It was formed from the merger of Technip and FMC Technologies in January 2017.

The bribery allegations relate to contracts awarded prior to the merger. Both Technip and FMC were being investigated by the Department of Justice regarding the Unaoil contracts. The projects in Brazil, Equatorial Guinea and Ghana were performed by Technip.

It should be noted that no formal settlement has yet been made and the final amount could be more than the $280 million included in the 2018 results.

Back in 2010, Technip paid $338 million to settle bribery allegations in Nigeria related to the Bonny Island LNG project. KBR was part of that consortium too, and paid a $402 million fine related to the project.

TechnipFMC’s 2018 results also included a $1.7 billion asset impairment charge for goodwill and other fixed assets.

https://www.businesswire.com/news/home/20190220005889/en/TechnipFMC-Announces-Fourth-Quarter-2018-Results