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SEC v. Willbros Group, Inc., Jason Steph, Gerald Jansen, Lloyd Biggers, Carlos Galvez

 
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Willbros - Willbros Group, Inc.
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SEC Civil
:
May 14, 2008
:
SEC v. Willbros Group, Inc., Jason Steph, Gerald Jansen, Lloyd Biggers, Carlos Galvez
:
SEC v. Willbros Group, Inc., et al., No. 4:08-cv-01494 (S.D. Tex. 2008)
:
The corrupt payments to Nigerian officials continued even after Willbros Group, Inc. commenced an internal investigation in January 2005. The internal investigation was initiated to examine allegations of tax improprieties relating to a Willbros International, Inc. subsidiary, but the investigation quickly expanded to include alleged corrupt payments in Nigeria.
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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; 6) Nigerian tax officials; 7) Nigerian court officials; and 8) officials of state-owned PetroEcuador and its subsidiary PetroComercial.
:
Willbros, in settling the SEC action, neither admitted nor denied the following allegations made by the SEC in its complaint:

Willbros Group, Inc. ("WGI") violated the FCPA when an officer and employees of its subsidiaries used contractual payments, fraudulent loans, and petty cash obtained by fraudulent invoices to funnel money to two "consultants" and employees to bribe foreign officials from Nigeria and Ecuador to procure construction contracts, lower tax liabilities, and influence litigation, and authorized a scheme to defraud the Bolivian government of tax revenue.

WGI, through direct and indirect subsidiaries operating world-wide, provides construction, engineering, and other services in the oil and gas industry. Its wholly-owned subsidiary, Willbros International, Inc. ("WII"), conducts its international operations. WII in turn uses a number of subsidiaries to conduct business on behalf of it and WGI in Nigeria, Ecuador, and Bolivia.

NIGERIAN SCHEMES

In late 2003, a WII subsidiary and a German construction company's subsidiary 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.

The Nigerian National Petroleum Corporation (NNPC), a government-owned entity, 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 many of NNPC's majority-owned joint venture projects, including EGGS and the repair of offshore oil platforms.

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, through its subsidiaries in late 2003, pursued contracts relating to both EGGS phases. To further those efforts, a WII officer contracted with two consulting firms ostensibly to provide 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. WGI representatives authorized approximately $6 million in improper payments to Nigerian officials, and the 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 from the consulting firms to WGI's offices in Houston, TX, with instructions to wire payments to foreign bank accounts as directed by the invoices. 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 its joint venture partner to a WII subsidiary. 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 the $1,850,000 to one of the consultants who paid Nigerian officials.

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 $5,000,000 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, but at lease some were made by October 2004. The Nigerian government granted a WII subsidiary an offshore repair contract in August 2004.

TAX AND COURT OFFICIAL PAYMENTS

From at least the early 1990's through 2005, employees of WGI and its affiliates in Nigeria abused petty cash accounts to, among other things, make repeated bribes to Nigerian tax and court officials to obtain favorable tax treatment and positively influence the outcome of pending court cases.

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 a consultant 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. In June or early July 2004, the WII officer directed the consultant to wire $150,000 to a bank account in Ecuador controlled by an employee of a WII subsidiary to pay the Ecuadorian officials. At some point prior to WGI making the second installment payment, the Ecuadorian officials were replaced on the project with new officials. Both old and new officials then demanded payment for the project. A WII officer authorized his subordinates to meet with the Ecuadorian officials and to strike a deal. WGI paid the old officials another $90,000 and the new officials $165,000. In return, WGI retained the Santo Domingo project it had already been awarded and understood it would be awarded with a second project.

BOOKS AND RECORDS - FCPA VIOLATIONS

WGI violated the FCPA's books and records and internal controls 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 and employees 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.

SECURITIES FRAUD

Based on these same facts regarding the Bolivian tax scheme, the SEC alleged securities fraud under Section 17(a) of the Securities Act and Section 10b of the Exchange Act.

Having settled the SEC claims, the action against Willbros Group, Inc. is now terminated.
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Anti-bribery (Issuer), Books and records (Issuer), Internal controls (Issuer)
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Securities Fraud
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Civil Settlement, Disgorgement, Injunction/Cease and desist, Prejudgment Interest
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In addition to agreeing to a permanent injunction against future violations of the provisions alleged, by consenting to the judgment Willbros Group agreed to disgorge $8,900,000 in profits and pay $1,400,000 in pre-judgment interest. The court ordered Willbros to pay the $10.3 million in installments of $2.575 million within 10 days of the entry of final judgment, and payments of $2.575 million plus statutory post-judgment interest paid annually for three years dating from entry of the final judgment.
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10,300,000
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0
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Issuer
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Foreign
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Contract Procurement/Retention, Legislation, Tax
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490,400,000
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Cash, Wire/check
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Direct, Sales Agent/Consultant
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11,705,000
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Ecuador, Nigeria
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No