Jump to content Jump to menu
Why Register?

Shearman FCPA Website: Cases Logo Shearman & Sterling LLP FCPA.Shearman.com: The One-Stop Resource on the Foreign Corrupt Practices Act

SEC v. Halliburton Company and KBR, Inc.

 
:
Halliburton and KBR, Inc. - KBR, Inc.
:
SEC Civil
:
February 11, 2009
:
SEC v. Halliburton Company and KBR, Inc.
:
Although KBR, Inc. is issuer now, at the time of the bribery scheme it was merely a subsidiary of another issuer; it did not become an issuer until after the conduct had ceased. Because the SEC's jurisdiction is limited to issuers and its agents, it was forced to charge KBR, Inc. as an agent of acting on behalf of an issuer, Halliburton, to gain jurisdiction.
:
Energy (Non-Utility)-Oil & Gas-Exploration/Production
:
Nigeria
:
1995; 1996; 1997; 1998; 1999; 2000; 2001; 2002; 2003; 2004
:
Nigerian government officials
:
Kellogg Brown & Root LLC, then a subsidiary of Halliburton Company, now a wholly owned subsidiary of KBR, Inc. (Kellogg Brown & Root LLC and KBR, Inc. are jointly referred to as "KBR"), participated in a joint venture to obtain and perform contracts to build and expand the Bonny Island Project for Nigeria LNG Limited, which is owned in part by the Nigerian National Petroleum Corporation. The joint venture received four engineering, procurement, and construction contracts for the Bonny Island Project between 1995 and 2004. According to the SEC’s February 11, 2009 complaint, from at least 1995 until 2004, Kellogg Brown & Root LLC and its partners in the joint venture allegedly authorized, promised, and paid bribes to Nigerian government officials to obtain business related to the Bonny Island Project. To conceal the bribes, the joint venture allegedly entered into sham consulting or services agreements with intermediaries. One U.K. consultant allegedly received over $130 million for use in bribing Nigerian government officials. A Japanese consultant allegedly received over $50 million for use in bribing Nigerian government officials. During this period, Halliburton allegedly maintained inadequate internal controls, which led to the company's failure to detect, deter, or prevent the payments of bribes. KBR allegedly aided and abetted Halliburton's failure to maintain adequate internal controls and company records. Specifically, the KBR attorneys conducting the due diligence investigation on the U.K. consultant allegedly never learned the identity of the beneficial owners of the entities holding shares of the Gibraltar shell company controlled by the U.K. consultant; the attorneys allegedly failed to determine how the consultant would carry out his contractual duties; and the attorneys allegedly did not check all of his references. At the time the Nigerian authorities awarded the additional contracts, KBR officials allegedly prepared an agent approval request form that contained false information. Senior KBR and Halliburton officials allegedly signed the approval form without asking questions or undertaking an independent review. KBR officials, acting through the joint venture, improperly characterized the relationship between the joint venture and the Japanese consultant as a "services" contract. Additionally, KBR's books and records allegedly contained false information, which was incorporated into Halliburton's books and records.

By the terms of the final judgment, Halliburton and KBR, Inc. are jointly and severally liable for the disgorgement of $177 million. Pursuant to the master separation agreement between Halliburton and KBR, Halliburton agreed to indemnify KBR for certain FCPA-related matters, and Halliburton will pay the $177 million disgorgement. KBR, Inc. is also required to retain an independent corporate monitor for three years to evaluate its FCPA-related policies and procedures and adopt any recommendations.
:
Aiding and abetting books and records, Aiding and abetting internal controls, Anti-bribery (Issuer), Books and records (Individual)
:
Civil Settlement, Compliance Monitor, Disgorgement, Injunction/Cease and desist
:
Not stated.
:
0
:
Agent of Issuer, Aider/abettor, Person (B&R/internal controls)
:
U.S.
:
Contract Procurement/Retention
:
6,000,000,000
:
Cash, Wire/check
:
Sales Agent/Consultant
:
Not stated.
:
Monaco, Nigeria, Switzerland, United Kingdom
:
Monaco, Nigeria, Switzerland, United Kingdom, United States
:
"Agent": Although KBR, Inc. is issuer today, at the time of the bribery scheme it was merely a subsidiary of another issuer; it did not become an issuer until after the conduct had ceased. Because the SEC's jurisdiction is limited to issuers and its agents, it was forced to charge KBR, Inc. as an agent acting on behalf of an issuer, Halliburton, to gain jurisdiction.

"Mails or means or instrumentality of interstate commerce": The SEC alleged that certain corrupt payments were routed through banks in New York. Although it was unnecessary to allege correspondent account jurisdiction because KBR, Inc. was charged as an agent of an issuer, the fact that the SEC included correspondent account jurisdictional claim may have been intended to signal that U.S. authorities believe that they have the jurisdictional basis to bring charges against non-U.S. companies even in the absence of evidence of traditional jurisdictional facts.
:
Yes
:
France, Nigeria, Switzerland, United Kingdom