The guilty pleas by officials at SBM Offshore, a Dutch energy company with its U.S. headquarters in Houston, are the latest examples of Texas corporate leaders accused of paying bribes, arranging kickbacks and generally greasing the skids to win business in parts of the world where corruption is a common lubricant.
Houston businesses last year accounted for seven, or about one-fourth of the 26 cases brought by the Justice Department under the Foreign Corrupt Practices Act.
Over the past decade, Houston federal court has become one of the busiest in the nation for cases involving foreign bribery cases in large part because of the concentration of energy companies that do business around the world.
Of the 243 group cases brought by the government under the foreign corrupt practices law over the past 40 years, nearly one in five involved energy companies, which, in the search for oil and gas, often do business in areas susceptible to corruption, according to the Foreign Corrupt Practices Act Clearinghouse at Stanford University Law School.
Houston “is a target-rich environment,” said Philip Hilder, a white-collar defense lawyer and former prosecutor.
The federal anti-corruption law was enacted in 1977 in response to revelations during the Watergate hearings that several multinational companies concealed millions of dollars in payments to foreign politicians to win business. The law not only prohibited companies and individuals from paying bribes and kickbacks, but also required companies to properly document the money they spend overseas.
The Foreign Corrupt Practices Act has ensnared some of the biggest energy companies, including Halliburton, the Houston oil field services company, which earlier this year paid a $29 million penalty to settle civil charges brought by the SEC that one of its executives rigged the bidding process in Angola to help the company win contracts with Sonangol, Angola’s state-owned oil company. Halliburton said it reported the improper activities to the Justice Department after its accountants and auditors discovered them and cooperated with the investigation.
Last year, another Houston company, Key Energy Services, paid $5 million in penalties to settle civil charges brought by the Securities and Exchange Commission that it failed to set up financial controls to prevent unauthorized payments to officials of Mexico’s national oil company, Pemex.
During the first three decades of the foreign anti-corruption law, years went by without the government filing a charge, according to data collected by Stanford’s Foreign Corrupt Practices Act Clearinghouse. But that changed 10 years ago when London-based Vetco International and three subsidiaries, including one in Houston, pleaded guilty in Houston federal court to funneling $2 million in bribes through a freight forwarding company to Nigerian custom officials to gain preferential treatment.
Vetco, which was providing engineering and subsea construction equipment for Nigeria’s first deep-water oil drilling project, settled the case for what was then a record-setting criminal penalty of $26 million. Further investigation of the freight company, which acted as conduit for bribes from other companies, snared Shell Nigeria Exploration and Production Co., a subsidiary of Royal Dutch Shell, Transocean, a Swiss offshore drilling services company with a strong presence in Houston, and Tidewater Marine International, a Cayman Islands subsidiary of the New Orleans company.
The companies paid a combined $50.8 million in criminal penalties after admitting they approved or condoned bribes and falsely recorded them as legitimate business expenses, according to court records.
During the past decade, the pace of government enforcement actions has accelerated. In 2006, 14 enforcement actions were filed, eight by the SEC and six by the Justice Department. Last year, 55 were filed, 29 by the SEC and 26 by the Justice Department.
The surge dovetails with a global crack down on corruption, led by the United Nations. Nearly every country – save for the African nations Equatorial Guinea, Chad and Somalia – have signed an 2005 international agreement to outlaw bribery and other business-related corruption and cooperate in the investigation and prosecution of these cases. That cooperation played a role in the SBM Offshore case.
For a longer version of this article, please visit the Houston Chronicle at www.chron.com/business/article/Houston-a-center-of-foreign-bribery-enforcement-12396590.php. The Houston Chronicle and The Texas Lawbook have an editorial partnership.