In April, 2007, Baker Hughes entities settled related DOJ and SEC FCPA enforcement actions principally related to conduct in Kazakhstan. (See here, here, and here).
As noted in the DOJ release (here), Baker Hughes Services International Inc. ("BHSI") - a wholly owned subsidiary of Baker Hughes Incorporated - pleaded guilty to violations of the anti-bribery provisions of the FCPA, conspiracy to violate the FCPA, and aiding and abetting the falsification of books and records of its parent company Baker Hughes. The conduct at issue involved "approximately $4.1 million in bribes over approximately a two-year period to an intermediary whom the company understood and believed would transfer all or part of the corrupt payments to an official of Kazakoil, the state-owned oil company." BHSI agreed to pay a $11 million criminal fine. Baker Hughes entered into a deferred prosecution agreement regarding the same underlying conduct and accepted responsibility for conduct of its employees. As noted in the SEC release (here), Baker Hughes also agreed to pay more than $23 million in disgorgement and prejudgment interest and to pay a civil penalty of $10 million for violating a 2001 Commission cease-and-desist Order prohibiting violations of the books and records and internal controls provisions of the FCPA.
The combined $44 million in fines and penalties was (at the time) the largest monetary sanction ever imposed in an FCPA case.
An April 11, 2007 diplomatic dispatch released by WikiLeaks and published by the U.K. Guardian (here) provides some interesting behind the scenes action that took place prior to the public announcement of the enforcement action.
The cable states, other other things, as follows.
"A Foreign Corrupt Practices Act case involving malfeasance by U.S. oil technology and services firm Baker Hughes in Kazakhstan will soon be settled, revealing details of bribes paid by the firm's local representatives. Baker Hughes representatives are in Astana to brief Prime Minister Masimov on the case before it becomes public, in hopes of limiting the negative impact on the firm's ability to work in Kazakhstan. In order to minimize the damage from the case to U.S. investors and the bilateral relationship, post believes it would be helpful to inform the Kazakhstani government that the U.S. government authorized Baker Hughes' representatives to brief them in advance of the settlement, and to share the text of the decision once it is issued."
"The Ambassador met with Alan R. Crain, Senior Vice President and General Counsel of Baker Hughes Incorporated, and Amb. Beth Jones, Executive Vice President of APCO Worldwide, on April 10 in Astana to discuss a Foreign Corrupt Practices Act (FCPA) case involving Baker Hughes' work in Kazakhstan. Crain and Jones informed the Ambassador that they would meet with Prime Minister Masimov later that day to brief him on the upcoming U.S. court decision in the case. They had met with Masimov on January 9 to inform him that legal proceedings were underway in the U.S., and now planned to share the details. They stated that the Department of Justice and the SEC had authorized both meetings."
"Jones and Crain said that their goal in briefing PM Masimov was to demonstrate the respect that Baker Hughes as an investor has for Kazakhstan and its laws, and thereby ensure that the firm will still be able to operate here and that its employees will not face harassment. They will also emphasize the fact that the investigation centered on commercial malfeasance and did not reveal the involvement of any high-ranking Kazakhstani government officials. After the Masimov meeting took place, Jones contacted the Ambassador to relay Masimov's request that the Embassy convey the court decision as soon as it is released."
The cable also states as follows.
"Crain told the Ambassador that a former employee of Baker Hughes filed a report with the SEC in August 2003 detailing alleged malfeasance in several overseas subsidiaries, including Kazakhstan." "Four separate incidents were discovered during the internal investigation, the second of which is the basis of the legal proceedings currently underway in the U.S."
The DOJ enforcement action relates only to Kazakhstan. The SEC's enforcement action also relates to conduct in Indonesia, Nigeria, and Angola as well.
As to the agent at the center of the Kazakhstan payments, see this related story from the U.K. Guardian.
As noted in the DOJ release (here), Baker Hughes Services International Inc. ("BHSI") - a wholly owned subsidiary of Baker Hughes Incorporated - pleaded guilty to violations of the anti-bribery provisions of the FCPA, conspiracy to violate the FCPA, and aiding and abetting the falsification of books and records of its parent company Baker Hughes. The conduct at issue involved "approximately $4.1 million in bribes over approximately a two-year period to an intermediary whom the company understood and believed would transfer all or part of the corrupt payments to an official of Kazakoil, the state-owned oil company." BHSI agreed to pay a $11 million criminal fine. Baker Hughes entered into a deferred prosecution agreement regarding the same underlying conduct and accepted responsibility for conduct of its employees. As noted in the SEC release (here), Baker Hughes also agreed to pay more than $23 million in disgorgement and prejudgment interest and to pay a civil penalty of $10 million for violating a 2001 Commission cease-and-desist Order prohibiting violations of the books and records and internal controls provisions of the FCPA.
The combined $44 million in fines and penalties was (at the time) the largest monetary sanction ever imposed in an FCPA case.
An April 11, 2007 diplomatic dispatch released by WikiLeaks and published by the U.K. Guardian (here) provides some interesting behind the scenes action that took place prior to the public announcement of the enforcement action.
The cable states, other other things, as follows.
"A Foreign Corrupt Practices Act case involving malfeasance by U.S. oil technology and services firm Baker Hughes in Kazakhstan will soon be settled, revealing details of bribes paid by the firm's local representatives. Baker Hughes representatives are in Astana to brief Prime Minister Masimov on the case before it becomes public, in hopes of limiting the negative impact on the firm's ability to work in Kazakhstan. In order to minimize the damage from the case to U.S. investors and the bilateral relationship, post believes it would be helpful to inform the Kazakhstani government that the U.S. government authorized Baker Hughes' representatives to brief them in advance of the settlement, and to share the text of the decision once it is issued."
"The Ambassador met with Alan R. Crain, Senior Vice President and General Counsel of Baker Hughes Incorporated, and Amb. Beth Jones, Executive Vice President of APCO Worldwide, on April 10 in Astana to discuss a Foreign Corrupt Practices Act (FCPA) case involving Baker Hughes' work in Kazakhstan. Crain and Jones informed the Ambassador that they would meet with Prime Minister Masimov later that day to brief him on the upcoming U.S. court decision in the case. They had met with Masimov on January 9 to inform him that legal proceedings were underway in the U.S., and now planned to share the details. They stated that the Department of Justice and the SEC had authorized both meetings."
"Jones and Crain said that their goal in briefing PM Masimov was to demonstrate the respect that Baker Hughes as an investor has for Kazakhstan and its laws, and thereby ensure that the firm will still be able to operate here and that its employees will not face harassment. They will also emphasize the fact that the investigation centered on commercial malfeasance and did not reveal the involvement of any high-ranking Kazakhstani government officials. After the Masimov meeting took place, Jones contacted the Ambassador to relay Masimov's request that the Embassy convey the court decision as soon as it is released."
The cable also states as follows.
"Crain told the Ambassador that a former employee of Baker Hughes filed a report with the SEC in August 2003 detailing alleged malfeasance in several overseas subsidiaries, including Kazakhstan." "Four separate incidents were discovered during the internal investigation, the second of which is the basis of the legal proceedings currently underway in the U.S."
The DOJ enforcement action relates only to Kazakhstan. The SEC's enforcement action also relates to conduct in Indonesia, Nigeria, and Angola as well.
As to the agent at the center of the Kazakhstan payments, see this related story from the U.K. Guardian.
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