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U.S. v. Willbros Group, Inc., and Willbros International, Inc.

 
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Willbros - Willbros Group, Inc.
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DOJ Criminal
:
May 14, 2008
:
U.S. v. Willbros Group, Inc., and Willbros International, Inc.
:
U.S. v. Willbros, Inc. and Willbros International, Inc., No. 4:08-cr-0287 (S.D. Tex. 2008)
:
Despite discovery through an internal investigation of certain aspects of the improper activities, employees of the company thereafter schemed to honor preexisting improper "commitments" for the purpose of continuing to make illegal payments to Nigerian officials.

After entering into the deferred prosecution agreement with the Department of Justice and settling a civil action brought by the SEC, Willbros International, Inc. ("WII"), a subsidiary of Willbros Group, Inc. ("WGI"), sued Tillery, a former executive, and Novak, a former consultant, for breach of fiduciary duty based on the facts uncovered in the investigations. Both Tillery and Novak are under federal indictment stemming from the same set of facts.
:
Energy (Non-Utility)-Oil & Gas-Other/Multi
:
Bolivia, Ecuador, Nigeria
:
2003; 2004; 2005
:
1) officials of state-owned Nigerian National Petroleum Corporation (NNPC); 2) officials of NNPC's subsidiary National Petroleum Investment Management Services (NAPIMS); 3) officials of NNPC's majority-owned joint venture operator, Shell Petroleum Development Company of Nigeria (SPDC); 4) a senior official in the executive branch of the Nigerian federal government; 5) officials in the dominant political party in Nigeria; and 6) officials of state-owned PetroEcuador and its subsidiary PetroComercial.
:
According to facts admitted in a deferred prosecution agreement entered into by Willbros Group, Inc. ("WGI"), WGI, an "issuer" pursuant to the FCPA, violated the FCPA when one or more of its officers, employees, or agents used contractual payments, fraudulent loans, and petty cash obtained by fraudulent invoices to funnel money to two "consultants" and an employee for the purposes of bribing foreign officials from Nigeria and Ecuador to procure lucrative contracts related to the oil and gas industry. WGI sold its Nigerian business interests in early 2007.

WGI provides construction, engineering, and other services in the oil and gas industry. Willbros International, Inc. ("WII") is a wholly-owned subsidiary of WGI and conducts WGI's international operations. WII uses a number of its own subsidiaries to conduct business on behalf of it and WGI in Nigeria and Ecuador. In late 2003, a WII subsidiary and a German construction company's subsidiary, GCCB, formed a consortium to pursue contracts associated with the Eastern Gas Gathering Systems (EGGS), a project building a natural gas pipeline system in the Niger Delta designed to relieve existing pipeline capacity constraints. Other WII subsidiaries hoped to receive contracts to repair offshore oil platforms along the Nigerian coast and to refurbish a pipeline in Ecuador.

The Nigerian National Petroleum Corporation ("NNPC"), a government-owned company, and its subsidiaries developed and regulated Nigeria's oil and gas resources. NNPC's subsidiary, the National Petroleum Investment Management Services ("NAPIMS'), oversaw Nigeria's investments in these development projects. The Shell Petroleum Development Company of Nigeria ("SPDC") operated joint ventures majority-owned by NNPC, including EGGS and the repair of offshore oil platform projects.

EGGS CONTRACTS

SPDC divided EGGS into two phases: Phase 1 concerned the engineering, procurement, and construction of the pipeline and included an optional second contract for applying a polyethylene-concrete coating to the pipeline; Phase 2 concerned the construction of a second pipeline.

WGI and WII, through their Nigerian subsidiaries, pursued contracts relating to both EGGS phases in late 2003. WII contracted with two consulting firms ostensibly to provide consulting services relating to obtaining those contracts. The contracts between WII and the consulting firms required WII to pay the firms 3% of all contract revenue from Nigerian construction projects. In all, $6 million in payments were promised to Nigerian officials. Two consultants affiliated with both firms made corrupt payments to NNPC, NAPIMS, and SPDC officials in furtherance of obtaining the EGGS contracts for WII. The consultants also bribed a senior official in the Nigerian government and made payments to a prominent Nigerian political party.

WII subsidiaries received the $216,000,000 construction contract for EGGS Phase 1 and the $30,000,000 coating contract. A WII officer working in Nigeria sent the invoices received from the consulting firms to WGI's offices in Houston, TX, with instructions to wire payments to bank accounts in Lebanon, which WGI employees did.

In an internal audit begun in January 2005, WGI uncovered and stopped some of these payments, and an officer central to the Nigerian consultant payments left WII. The officer's subordinates, Jim Bob Brown and Jason Edward Steph, and the consultants became concerned that the corporate interference at WGI would jeopardize WII's ability to receive the EGGS Phase 2 contract. In February and March 2005 Brown facilitated a $1,000,000 loan from GCCB to a WII subsidiary which was delivered in cash in a suitcase to Brown in Nigeria. At the same time Steph borrowed $500,000 cash from another company and used fraudulent invoices to withdraw $350,000 in petty cash from a WII subsidiary. Brown and Steph gave $1,850,000 to one of the consultants who paid Nigerian officials. The WII subsidiary did not receive the contracts for EGGS Phase 2.

OFFSHORE CONTRACT

WII contracted with two consultants to use a consulting firm to pay Nigerian officials as WII pursued contracts to repair offshore oil platforms. WII promised to pay over $4,000,000 to NNPC and NAPIMS officials, a senior official in the executive branch of the federal government of Nigeria, and a Nigerian political party in furtherance of obtaining these repair contracts. It is not clear how many of these payments WII actually made. The Nigerian government granted a WII subsidiary a repair contract in August 2004.

ECUADOR CONTRACT

From December 2003 through the first half of 2004, WII pursued contracts in Ecuador with PetroComercial, a subsidiary of state-owned PetroEcuador. A WII officer, his subordinates, and the consultants promised to pay officials of both PetroComercial and PetroEcuador $300,000 to help WII obtain the contracts, with $150,000 paid up front and $150,000 paid at the project’s conclusion. A WII officer sitting in Houston, TX directed the consultant via email to Venezuela to wire $150,000 to a bank account in Ecuador controlled by an employee of a WII subsidiary to pay the Ecuadorian officials.


BOOKS AND RECORDS - CORRUPT PAYMENTS

WGI violated the FCPA's books and records requirements by recording all of the above payments as contract costs incurred for legitimate consulting services or vendor goods and services when the payments actually were corrupt payments to intermediaries intended to bribe Nigerian and Ecuadorian government officials.

BOOKS AND RECORDS - TAX FRAUD

In addition, in Bolivia, Willbros Transandina, S.A., an indirect subsidiary of WGI, devised a scheme to buy false invoices through a consultant in order to fraudulently claim VAT tax credits to reduce tax liability, in violation of WGI's obligation to keep accurate books and records. In 2004 alone, WGI made approximately $524,000 in payments to a consultant for this purpose.
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Anti-bribery (Issuer), Books and records (Issuer), Conspiracy - Books & Records
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Compliance Monitor, Deferred-prosecution Agreement, Fine
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Willbros Group, Inc. and Willbros International, Inc. agreed, jointly and severally, to a fine of $22,000,000 payable in four installments: $10,000,000 paid within 10 days of executing the deferred prosecution agreement; two $4,000,000 installments on or before the first and second anniversaries of the initial payment date; and a fourth payment of $4,000,000 after the third anniversary of the initial payment, but before the end of the deferred prosecution agreement, which would run for three years and seven days from May 14, 2008.

In addition, Willbros Group, Inc. and Willbros International, Inc. represented that they had implemented and would continue to implement a compliance and ethics program and a review of existing controls, policies and procedures, would continue to cooperate with the ongoing investigations, and would engage an independent corporate monitor.
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22,000,000
:
0
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Issuer
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Foreign
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Contract Procurement/Retention, Tax
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390,500,000
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Cash, Wire/check
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Direct, Sales Agent/Consultant
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10,824,000
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Bolivia, Ecuador, Nigeria
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Ecuador, Lebanon
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The deferred prosecution agreement makes clear that the element of "mails, means, or instrumentalities of interstate commerce" was satisfied by: (i) wire transfer of funds from Houston, Texas to a bank account in Lebanon in furtherance of corrupt payments to Nigerian government officials; and (ii) email correspondence from Houston, Texas to Venezuela in furtherance of corrupt payments to Ecuadorian government officials.
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No