Entries in Congo (13)
The U.S. Department of Commerce has finally published its long awaited list of all known facilities that process tin, tantalum, tungsten, or gold -- the so-called “conflict minerals.” Despite taking an additional year and seven months past its original deadline set in the 2010 Dodd-Frank Act, and despite using the combined resources and efforts of the Commerce Department, the OECD, and the U.S. Geological Survey, the list is inconclusive.
By now, most people in the compliance profession know that the Dodd-Frank Act created regulations on conflict minerals. However, fewer know the role young people played in agitating on this issue.
Is there a link between air safety and corruption? We take a look.
The NGO Global Witness has published a new report that says governments in Africa are awarding concessions and productions contracts to shell companies that may have ties to government officials.
Does it make any sense to burden issuers and the SEC with Congress' foreign policy concerns du jour? Somehow we doubt it.
The former country manager in Venezuela for Pride International, Inc. last week settled civil FCPA charges with the SEC.
Joe Summers, a U.S. citizen who lives in John Day, Oregon, agreed to pay a civil penalty of $25,000.
From 2003 to 2005, Summers arranged payments of about $384,000 to third-party companies, "believing that all or a portion of the funds would be given to an official of Venezuela's state-owned oil company in order to secure extensions of three drilling contracts." Summers also approved a $30,000 payment through an intermediary to an employee of Venezuela's state-owned oil company to obtain the payment of receivables.
Summers' former employer, Pride International, said in February this year it has set aside $56.2 million for an expected settlement with the DOJ and SEC of FCPA offenses. The Houston-based oil-rig operator first disclosed potential compliance problems in 2006.
In December last year, the SEC accused a former Pride vice president, Bobby Benton, of violating the FCPA. The civil complaint against Benton alleged among other things that he deleted references in Pride's audits to about $384,000 in payments made by “the manager of the Venezuelan branch of a French subsidiary of Pride” to third-party companies. Pride self-disclosed the payments and cover-up after it learned about them through its internal investigation. The SEC's complaint against Summers included details about the Venezuelan bribes.
Pride has also disclosed that it found evidence of illegal payments from 2001 through 2006 directly or indirectly to government officials in Saudi Arabia, Kazakhstan, Brazil, India, Nigeria, Libya, Angola, and the Republic of the Congo. The payments related to clearing rigs and equipment through customs, resolving customs disputes, immigration, tax, licensing, and merchant marine issues.
The SEC's complaint against Summers charged him with violating Sections 13(b)(5) and 30A of the Securities Exchange Act of 1934 [15 U.S.C. §§ 78m(b)(5) and 78dd-1] and Rule 13b2-1 [17 C.F.R. § 240.13b2-1], and aiding and abetting Pride's violations of Sections 13(b)(2)(A), 13(b)(2)(B), and 30A of the Securities Exchange Act of 1934 [15 U.S.C. §§ 78m(b)(2)(B), and 78dd-1].
Pride International, Inc. trades on the NYSE under the symbol PDE.
View the SEC's Litigation Release No. 21617 and Accounting and Auditing Enforcement Release No. 3169 (both dated August 5, 2010) in SEC v. Joe Summers, Civil Action No. 4:10-cv-02786 (S.D. Texas, August 5, 2010) here.
Download the SEC's civil complaint against Summers here.
Pride International, Inc. said this week it has set aside $56.2 million for an expected settlement with the Justice Department and the Securities and Exchange Commission of Foreign Corrupt Practices Act offenses. The Houston-based oil-rig operator first disclosed potential FCPA compliance issues in 2006.
In December last year, the SEC accused a former Pride vice president, Bobby Benton, of violating the FCPA. He allegedly bribed Mexican officials in 2004 and altered the company's accounts to hide the payments. The SEC's December 10 civil complaint, filed in federal court in Houston, seeks a civil penalty and disgorgement from Benton, as well as an injunction against future violations.
Pride earlier disclosed that its internal investigation found evidence of illegal payments from 2001 through 2006 directly or indirectly to government officials in Saudi Arabia, Kazakhstan, Brazil, India, Nigeria, Libya, Angola and the Republic of the Congo. The payments related to clearing rigs and equipment through customs, resolving customs disputes, immigration, tax, licensing and merchant marine issues.
Pride's February 16, 2010 release said:
Pride International, Inc. (NYSE: PDE) today announced that it has accrued $56.2 million in the fourth quarter of 2009 in anticipation of a possible resolution with the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) of potential liability under the U.S. Foreign Corrupt Practices Act. As described in Pride's quarterly and annual reports, the company voluntarily disclosed in 2006 to the DOJ and the SEC information relating to initial allegations of potential improper payments to foreign government officials and has continued to cooperate with the agencies' investigations. The accrual in the fourth quarter 2009 represents the company's best estimate of potential fines, penalties and disgorgement related to settlement of the matter with the DOJ and SEC. The monetary sanctions ultimately paid by the company to resolve these issues, whether imposed on the company or agreed to by settlement, may exceed the amount of the accrual.
We talked about Pride's February 2008 disclosure of its internal investigation here.
The Securities and Exchange Commission accused Bobby Benton, a former vice president of offshore drill rig operator Pride International, of violating the Foreign Corrupt Practices Act. He allegedly bribed Mexican officials in 2004 and altered the company's accounts to hide the payments. The SEC's December 10 civil complaint (below) was filed in federal court in Houston.
The SEC accused Benton of authorizing a third party to pay off Mexican customs officials and concealing bribes to Mexican and Venezuelan officials between 2003 and 2005. Benton allegedly deleted references in the audits to about $384,000 in payments made by “the manager of the Venezuelan branch of a French subsidiary of Pride” to third-party companies. The SEC said the alleged bribes went to a Venezuelan state-owned oil company official to extend three drilling contracts.
Pride disclosed in SEC filings including its latest quarterly report (here) an internal investigation into the company's Latin America operations that began in February 2006. It said possible FCPA violations were found, including payments of less than $1 million to government officials in Venezuela and Mexico.
Benton is accused of authorizing a $10,000 bribe in 2004 to ensure a Mexican customs official would overlook deficiencies in a Pride supply boat. He's also accused of redacting references to another $15,000 bribe paid by an agent of Pride's Mexican subsidiary to keep a Mexican customs official from delaying a drilling rig for customs violations, according to the complaint.
The SEC is seeking a civil penalty and disgorgement from Benton, as well as an injunction against future violations.
Pride's internal investigation also found evidence of illegal payments of less than $2.5 million from 2001 through 2006 directly or indirectly to government officials in Saudi Arabia, Kazakhstan, Brazil, India, Nigeria, Libya, Angola and the Republic of the Congo. The payments related to clearing rigs and equipment through customs, resolving customs disputes, immigration, tax, licensing and merchant marine issues.
The company self-disclosed the results of its investigation. It said it is in talks with the DOJ and SEC "regarding a potential negotiated resolution of these matters, which could be settled during 2009 and which . . . could involve a significant payment by us." It said a settlement is likely to "include both criminal and civil sanctions." The DOJ hasn't yet announced any enforcement actions involving Benton or the company.
View the Securities and Exchange Commission's December 14, 2009 Litigation Release No. 21335 in SEC v. Bobby Benton here.
Download the civil complaint in SEC v. Bobby Benton, Civil Action No. 4:09-CV-03963 (S.D. Texas, December 11, 2009) here.
The lawsuit examining how three African rulers and their families managed to acquire dozens of luxury homes, cars and other assets in France has been stopped. A Paris magistrate had ordered the investigation in May at the request of Transparency International. See our post here. But last month an appellate court agreed with the Justice Ministry that TI lacked standing to bring the case.
The rulers named in the suit were Teodoro Obiang Nguema Mbasogo of Equatorial Guinea, Denis Sassou Nguesso of the Congo Republic, and Omar Bongo-Ondimba of Gabon. The Congo Republic and Gabon -- recently joined by Equatorial Guinea -- are important oil exporters. According to Reuters, the French oil and gas group Total SA is "the leading producer in Gabon and Congo Republic and many other French firms, public and private, have long-term contracts there."
William Bourdon, one of TI's lawyers, said: "Those in France and Africa who organize and take advantage of the looting of African public money will be celebrating with champagne." TI said it will ask France's Supreme Court (the Cour de cassation) to reinstate the investigation.
Gabon's President Bongo died in June. He had ruled the country since 1967, making him Africa's longest-serving head of state. His family owns 39 properties in France, Reuters said, mostly in exclusive districts of Paris and on the Riviera. The Congo Republic's Sassou-Nguesso and his relatives own 24 French properties, including a Paris mansion worth $28 million.
TI tipped police in 2007 to the African leaders' French assets. A preliminary police review identified "dozens of bank accounts, properties in rich districts of Paris and on the Riviera, and a collection of Bugattis, Ferraris, Maybachs, Maseratis and other luxury cars." The foreign rulers have denied using embezzled public funds to buy assets in France.
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Another time, another surge. President Lyndon Johnson, during a June 8, 1965 phone call to Senate Majority Leader Mike Mansfield, said this about U.S. troops in South Vietnam and the generals' requests for reinforcements:
I don't see exactly the medium for pulling out. . . . Our 75,000 men are going to be in great danger unless they have 75,000 more. My judgment is and I'm no military man at all, but I study it every day and every night and I read the cables, I look back over what's happened in the last two years, the last four really, and if they get 150, they'll have to have another 150. And then they'll have to have another 150. . . .
But, unless you can guard what you're doing, you can't do anything. We can't build an airport, by God . . . it takes more people to guard us in building an airport than it does to build the airport.
From the transcript of LBJ's Path To War, Bill Moyers' Journal, November 20, 2009.
Francophile kleptocrats everywhere must be shaking in their Yves Saint Laurent double monk-strap black boots today, thanks to a Paris magistrate's ruling. He accepted a case brought by Transparency International that requires French authorities to investigate how three African rulers, their family members and friends managed to acquire numerous luxury homes, cars and other assets in France.
It's unusual to hear positive news from France about fighting graft. A few months ago, for example, the government decided French law prevents the prosecution of overseas bribery (Paris Pulls The Plug On Enforcement). So this marks a dramatic turnaround. There's one problem, though -- it might end soon.
The magistrate who made the ruling, Francoise Desset, is an independent investigator. But the justice ministry, through the public prosecutor's office, is already trying to quash his decision. There's concern the case and others that could follow would upset France's foreign policy.
The rulers named in the suit are Denis Sassou Nguesso of the Congo Republic, Omar Bongo-Ondimba of Gabon, and Teodoro Obiang Nguema Mbasogo of Equatorial Guinea. Gabon and the Congo Republic are former French colonies still close to Paris, while Equatorial Guinea is becoming an important oil exporter. The French oil and gas group Total SA, according to Reuters, is "the leading producer in Gabon and Congo Republic and many other French firms, public and private, have long-term contracts there."
Gabon's President Bongo has run the country since 1967 and thinks of France as his second home, according to Reuters. The BBC said "a 2007 French police investigation found the leaders of the three countries and their relatives owned homes in upmarket areas of Paris and on the Riviera along with luxury cars, including Bugattis, Ferraris and Maseratis."
If the investigation is allowed to proceed, Transparency International says the scope will be wide:
This judge will have to determine how the assets owned in France were acquired, and where the funds in the many bank accounts uncovered during a preliminary police investigation came from. The investigation will also throw light on the various intermediaries involved in the transactions under scrutiny, namely the banks identified by the police investigation whose compliance with anti-money laundering regulations is in question.TI said it hopes the case will eventually lead to the right of restitution for the people of the three countries under the United Nations Convention Against Corruption, ratified by France in 2005.
Our thanks to Pete from DC for sending us a link to this story.
Read Transparency International's May 6, 2009 release here.
We admire Pride International, Inc.'s approach to its Foreign Corrupt Practices Act disclosures. The company talks about the serious problems it had for years with sensitive payments, and how it's been dealing with them. The countries involved included Venezuela and Mexico, India and Malaysia, Saudi Arabia, Kazakhstan, Brazil, Nigeria, Libya, Angola and the Republic of the Congo, among others. Bribes apparently were paid directly or by intermediaries to clear rigs and equipment through customs, and to help solve problems with immigration, tax, and licensing authorities. Some of the payments in question involved global logistics firm Panalpina and other third parties.
Sadly, people near the top of the company probably knew what was going on. The ex-chief operating officer resigned his position in mid-2006 but has stayed as an employee during the FCPA investigation. If the audit committee or the board of directors think there's "cause" under his employment agreement to terminate his services, he could lose retirement benefits and maybe a lot more. Other senior people have already been fired or placed on administrative leave, and some resigned because of the FCPA investigation. The company says it has "taken and will continue to take disciplinary actions where appropriate and various other corrective action to reinforce our commitment to conducting our business ethically and legally and to instill in our employees our expectation that they uphold the highest levels of honesty, integrity, ethical standards and compliance with the law."
Who is Pride? It's a can-do Houston-based drilling contractor for the oil and gas industry. It has over 7,000 employees working around the world. "We have positioned our fleet," its website says, "in some of the world's largest and most active exploration and production areas, with a market presence in West Africa (Angola), Latin America (Brazil), the Gulf of Mexico, the Mediterranean and Middle East. Today, we operate a total of 45 rigs."
As we did a year ago here, we're reprinting below Pride International's FCPA disclosure from its annual report (Form 10-K), this one for the period ending December 31, 2008. Pride filed it with the Securities and Exchange Commission this week. It's a long read (for a blog post, anyway). But it's filled with details and admissions not usually found in similar disclosures. We think it also gives fair warning to shareholders and other stakeholders that an eventual resolution with the Justice Department and SEC could be expensive and disruptive.
Pride International, Inc. trades on the New York Stock Exchange under the symbol PDE.
Download Pride's February 25, 2009 Form 10K (annual report) here.
During the course of an internal audit and investigation relating to certain of our Latin American operations, our management and internal audit department received allegations of improper payments to foreign government officials. In February 2006, the Audit Committee of our Board of Directors assumed direct responsibility over the investigation and retained independent outside counsel to investigate the allegations, as well as corresponding accounting entries and internal control issues, and to advise the Audit Committee.
The investigation, which is continuing, has found evidence suggesting that payments, which may violate the U.S. Foreign Corrupt Practices Act, were made to government officials in Venezuela and Mexico aggregating less than $1 million. The evidence to date regarding these payments suggests that payments were made beginning in early 2003 through 2005 (a) to vendors with the intent that they would be transferred to government officials for the purpose of extending drilling contracts for two jackup rigs and one semisubmersible rig operating offshore Venezuela; and (b) to one or more government officials, or to vendors with the intent that they would be transferred to government officials, for the purpose of collecting payment for work completed in connection with offshore drilling contracts in Venezuela. In addition, the evidence suggests that other payments were made beginning in 2002 through early 2006 (a) to one or more government officials in Mexico in connection with the clearing of a jackup rig and equipment through customs, the movement of personnel through immigration or the acceptance of a jackup rig under a drilling contract; and (b) with respect to the potentially improper entertainment of government officials in Mexico.
The Audit Committee, through independent outside counsel, has undertaken a review of our compliance with the FCPA in certain of our other international operations. In addition, the U.S. Department of Justice has asked us to provide information with respect to (a) our relationships with a freight and customs agent and (b) our importation of rigs into Nigeria. The Audit Committee is reviewing the issues raised by the request, and we are cooperating with the DOJ in connection with its request.
This review has found evidence suggesting that during the period from 2001 through 2006 payments were made directly or indirectly to government officials in Saudi Arabia, Kazakhstan, Brazil, Nigeria, Libya, Angola, and the Republic of the Congo in connection with clearing rigs or equipment through customs or resolving outstanding issues with customs, immigration, tax, licensing or merchant marine authorities in those countries. In addition, this review has found evidence suggesting that in 2003 payments were made to one or more third parties with the intent that they would be transferred to a government official in India for the purpose of resolving a customs dispute related to the importation of one of our jackup rigs. The evidence suggests that the aggregate amount of payments referred to in this paragraph is less than $2.5 million. We are also reviewing certain agent payments related to Malaysia.
The investigation of the matters described in the prior paragraph and the Audit Committee’s compliance review are ongoing. Accordingly, there can be no assurances that evidence of additional potential FCPA violations may not be uncovered in those or other countries.
Our management and the Audit Committee of our Board of Directors believe it likely that then members of our senior operations management either were aware, or should have been aware, that improper payments to foreign government officials were made or proposed to be made. Our former Chief Operating Officer resigned as Chief Operating Officer effective on May 31, 2006 and has elected to retire from the company, although he will remain an employee, but not an officer, during the pendency of the investigation to assist us with the investigation and to be available for consultation and to answer questions relating to our business. His retirement benefits will be subject to the determination by our Audit Committee or our Board of Directors that it does not have cause (as defined in his retirement agreement with us) to terminate his employment. Other personnel, including officers, have been terminated or placed on administrative leave or have resigned in connection with the investigation. We have taken and will continue to take disciplinary actions where appropriate and various other corrective action to reinforce our commitment to conducting our business ethically and legally and to instill in our employees our expectation that they uphold the highest levels of honesty, integrity, ethical standards and compliance with the law.
We voluntarily disclosed information relating to the initial allegations and other information found in the investigation and compliance review to the DOJ and the Securities and Exchange Commission and are cooperating with these authorities as the investigation and compliance reviews continue and as they review the matter. If violations of the FCPA occurred, we could be subject to fines, civil and criminal penalties, equitable remedies, including profit disgorgement, and injunctive relief. Civil penalties under the antibribery provisions of the FCPA could range up to $10,000 per violation, with a criminal fine up to the greater of $2 million per violation or twice the gross pecuniary gain to us or twice the gross pecuniary loss to others, if larger. Civil penalties under the accounting provisions of the FCPA can range up to $500,000 and a company that knowingly commits a violation can be fined up to $25 million. In addition, both the SEC and the DOJ could assert that conduct extending over a period of time may constitute multiple violations for purposes of assessing the penalty amounts. Often, dispositions for these types of matters result in modifications to business practices and compliance programs and possibly a monitor being appointed to review future business and practices with the goal of ensuring compliance with the FCPA.
We could also face fines, sanctions and other penalties from authorities in the relevant foreign jurisdictions, including prohibition of our participating in or curtailment of business operations in those jurisdictions and the seizure of rigs or other assets. Our customers in those jurisdictions could seek to impose penalties or take other actions adverse to our interests. We could also face other third-party claims by directors, officers, employees, affiliates, advisors, attorneys, agents, stockholders, debt holders, or other interest holders or constituents of our company. In addition, disclosure of the subject matter of the investigation could adversely affect our reputation and our ability to obtain new business or retain existing business from our current clients and potential clients, to attract and retain employees and to access the capital markets. No amounts have been accrued related to any potential fines, sanctions, claims or other penalties, which could be material individually or in the aggregate.
We cannot currently predict what, if any, actions may be taken by the DOJ, the SEC, any other applicable government or other authorities or our customers or other third parties or the effect the actions may have on our results of operations, financial condition or cash flows, on our consolidated financial statements or on our business in the countries at issue and other jurisdictions.