KBR Inc. and its former parent, Halliburton Co., agreed to pay $579 million to resolve U.S. criminal and regulatory charges that the engineering company bribed Nigerian officials to win more than $6 billion in contracts to build a liquefied natural-gas project.
Andrew Farley, KBR’s general counsel, today entered a guilty plea on behalf of the Houston-based company to conspiracy and to violating the U.S. Foreign Corrupt Practices Act and agreed to a $402 million fine.
Separately, the U.S. Securities and Exchange Commission announced that Halliburton and KBR would pay $177 million in forfeited profits to settle civil bribery allegations without admitting wrongdoing. KBR also pledged at a federal court hearing to hire an independent monitor to review its internal controls and record keeping for three years.
“Beginning in 1994 and continuing through 2004, KBR agreed with other joint venture partners to pay bribes to a wide range of government officials in order to obtain contracts” to build the Bonny Island liquefied natural gas facility, William Pendergast, a U.S. Justice Department senior trial attorney, said at today’s hearing.
Prosecutors said KBR paid more than $180 million in bribes to unnamed Nigerian officials to win engineering, procurement and construction contracts. The Bonny Island project pipes natural gas from wellheads to processing plants, converts it into purified LNG, and loads it onto tankers for export.
Record Fine
Today’s fines mark the largest ever imposed on a U.S. company in the history of the 1977 anti-bribery law, according to data compiled by Bloomberg.
Prosecutors said the criminal fine, which is $25 million higher than the minimum amount under federal sentencing guidelines, “reflects the egregiousness and long duration of the criminal conduct, KBR’s leadership role in that conduct, and the fact that KBR’s use of international sales agents to make corrupt payments to foreign officials does not appear to have been limited to a single project,” according to the plea agreement.
Jack Stanley, KBR’s former chairman, pleaded guilty in September to participating in the bribery scheme and faces as long as seven years in prison at his sentencing on May 6. Stanley also agreed to pay $10.8 million in restitution, equal to the amount of kickbacks he admitted accepting from a consultant in the scheme.
“Today’s settlements announced by the Department of Justice and the Securities Exchange Commission close both a regrettable and unfortunate chapter in KBR’s rich and storied history,” said William P. Utt, KBR’s chairman and chief executive officer. “KBR has fully cooperated with the U.S. government throughout the extensive investigations over the last five years.”
Indemnification
When Halliburton separated from KBR, Halliburton agreed to indemnify KBR from “fines or other monetary penalties” that might be assessed by the U.S. government and “certain other countries” related to any wrongdoing connected with the Foreign Corrupt Practices Act that might have occurred before the spinoff in November 2006, according to a statement released by Cathy Mann, Halliburton’s spokeswoman. Halliburton agreed to pay $382 million of KBR’s $402 million fine, with KBR agreeing to pay the remaining $20 million, Mann said.
Neither prosecutors nor KBR’s lawyers would comment following today’s hearing.
‘Serious Criminal Misconduct’
“The successful prosecution of KBR, and its agreement to pay a more than $400 million fine, demonstrates that no one is above the law, and that the Department is determined to seek penalties that are commensurate with, and will deter, this kind of serious criminal misconduct,” said Acting Assistant Attorney General Rita M. Glavin of the DOJ’s Criminal Division.
According to today’s plea and Halliburton’s statement, the companies will pay the $402 million fine in $50 million installments, beginning with a $52 million payment five days after sentencing. The remaining seven installments will be paid on the first day of each quarter, beginning in April and ending in October 2010.
As a further condition of KBR’s probation, U.S. Justice District Judge Keith Ellison instructed the company not to violate any federal or state laws, “including corporate integrity laws or tax filing requirements.” The company was also ordered to retain all documents related to any actual or threatened legal actions. He said failure to do so would result in further prosecution.
Plea Agreement
Under the plea agreement, the government reserved the right to prosecute KBR for any future violations of the Foreign Corrupt Practices Act, including “corrupt payments, false accounting or bid coordination.” Company officers, employees and agents who might have been involved in corrupt payments weren’t exempted from further investigation or prosecution. KBR’s Utt said that all of the wrongdoing was carried out by former employees prior to the company’s spinoff from Halliburton.
Prosecutors attached a 10-page document spelling out the role of the independent monitor in reviewing KBR’s accounting practices and compliance with anti-corruption laws. The monitor will provide prosecutors with three annual written reports on the status of KBR’s compliance, and KBR has agreed to adopt all recommendations the monitor makes, or to suggest alternative means of compliance to the Justice Department.
Halliburton rose 5 cents to $18.38 and KBR fell 27 cents, or 2 percent, to $14.60 in New York Stock Exchange composite trading.
The case is U.S. v. Kellogg Brown & Root LLC, H-09-071, in the U.S. District Court, Southern District of Texas (Houston).