French company Technip said on Friday in its fourth quarter earnings release that it has reserved €245 million for an exceptional charge related to a potential settlement of Foreign Corrupt Practices Act offenses with the Justice Department and Securities and Exchange Commission for its role in the TSKJ Nigeria joint venture.
The company said:
As previously disclosed in its public filings, Technip has been cooperating with the United States Securities and Exchange Commission ("SEC") and the United States Department of Justice ("DOJ") in the ongoing investigations involving the joint venture company TSKJ, of which Technip has a 25% share, in relation to events which occurred between 1994 and 2004. Technip and the SEC and DOJ have discussed a resolution of all potential claims against the company arising from the investigation. While these discussions have not concluded, Technip will record an exceptional charge of €245 million in the fourth quarter 2009 reflecting the estimated costs of resolution based on the current status of the ongoing discussions.
Technip's chairman and CEO Thierry Pilenko said discussions with the SEC and DOJ "have intensified over the last weeks. There is now a roadmap to a satisfactory global resolution of all potential claims in the U.S. arising from the investigation. This is why we are now able to estimate the monetary cost of a resolution in our fourth quarter 2009 accounts."
A year ago, Houston-based global engineering firm Kellogg Brown & Root LLC (KBR) pleaded guilty to a five-count criminal information, with one conspiracy count and four substantive counts of violating the Foreign Corrupt Practices Act, for its role in the TSKJ joint venture. And with its former parent, Halliburton, it settled civil charges with the SEC. KBR's criminal fine was $402 million and with Halliburton it agreed to pay the SEC $177 million in disgorgement.
KBR admitted paying Nigerian officials at least $182 million in bribes for engineering, procurement and construction contracts awarded between 1995 and 2004 to build liquefied natural gas facilities on Bonny Island, Nigeria. The contracts to TSKJ were worth more than $6 billion. KBR's former CEO, Albert "Jack" Stanley, pleaded guilty in September 2008 to conspiring to violate the FCPA. He was sentenced to seven years in prison, subject to court review based on his cooperation.
The TSKJ joint venture was equally owned by KBR, Technip, Snamprogetti Netherlands B.V., a subsidiary of Saipem SpA of Italy, and JGC of Japan. It operated through three Portuguese special purpose corporations based in Madeira, Portugal. See our prior posts about KBR and TSKJ here.
In its release today, Technip said it doesn't expect " a criminal conviction for Technip’s role in the TSKJ joint venture." It said the fine will be "substantial" but won't impede the company from continuing its global business "in a normal manner."
The company added that the deal with the DOJ and SEC isn't completed.
Technip is a market leader in oil, gas, and petrochemical engineering, construction and services. It is headquartered in Paris and has about 23,000 employees. In 2009, revenue was €6.4 billion and operating income was €677 million.
Technip S.A.'s ADRs trade on the over-the-counter market under the symbol TKPPY.
View a copy of the company's February 12, 2010 release here.
Special thanks to Cody Worthington for his help with this post.