As reported in the March 2007 FCPA Advisor, on February 6, 2007, three “Vetco Gray” subsidiaries of Vetco International Limited (“Vetco”), a privately-held oil and gas field services provider, pleaded guilty to conspiracy to violate, and to substantive violations of, the FCPA in connection with over $2.1 million in improper payments to officials of the Nigerian Customs Service. According to the Department’s pleadings in the Vetco case, the payments were made in violation of the FCPA to avoid payment of customs duties and obtain the release of goods and equipment that were being held up by customs officials in return for improper payments.
In April 2007, Baker Hughes Incorporated, a Texasbased provider of oil field products and services, and its wholly owned subsidiary Baker Hughes Services International Inc. paid the largest combined criminal and civil fines and disgorgement to resolve a criminal investigation by the Department and an enforcement action by the SEC involving among things, improper payments to Nigerian customs officials to resolve claims that customs duties had been underpaid.26
On July 24, 2007, Panalpina, a publicly traded Swiss company, announced that its US subsidiary had been requested by the Department to provide documents related to services it provided in Nigeria for a “specific customer” in connection with “the plea agreement of such customer with the US authorities for allegedly making improper payments to Nigerian officials to secure preferential treatment.”27 Panalpina also announced that US authorities had extended the scope of their investigation to all of the services Panalpina provided in Nigeria, Kazakhstan and Saudi Arabia. More recently, on September 20, 2007, Panalpina announced that, in light of the Department’s ongoing investigation, it has suspended part of the services it offered in Nigeria, including those involving temporary importation of goods for oil and gas customers.28
Also, shortly after the disposition of the Vetco and Baker Hughes matters, several publicly-traded companies operating in Nigeria announced that they had initiated internal investigations into their customs clearing practices in Nigeria and that they had made voluntary disclosures to, and were fully cooperating with, the Department and the SEC.
- On April 26, 2007, Tidewater, Inc. (“Tidewater”) announced that its Audit Committee had engaged outside counsel to conduct an internal investigation of its Nigerian operations focusing on the legality of its Nigerian affiliate’s reimbursement of certain expenses incurred by a customs agent in connection with the temporary importation of vessels into Nigeria. According to Tidewater, its management and the Audit Committee were concerned that the Nigerian affiliate had used the same third-party agent for its temporary importations in Nigeria that was thought to be significantly implicated in the 2007 Vetco Gray proceedings.29
- On June 4, 2007, Noble Corporation (“Noble”) announced that its Audit Committee, after reviewing a news release issued by Tidewater, had engaged outside counsel to lead an internal investigation of its Nigerian operations focusing on the legality of its Nigerian affiliate’s reimbursement of certain expenses incurred by a customs agent in connection with obtaining and renewing permits for the temporary importation of drilling units and related equipment into Nigeria.30
- On June 25, 2007, GlobalSantaFe Corporation (“GlobalSantaFe”) announced that, following the announcements of Tidewater and Noble “as well as another company’s recently announced settlement implicating an agent handling customs matters in Nigeria,” it had retained outside counsel to conduct an investigation of its Nigerian operations, focusing on agents who handled customs matters for its Nigerian affiliate and whether those agents had fully complied with the FCPA.31
- On June 28, 2007, Global Industries, Ltd. (“Global”) disclosed that it was conducting an investigation into possible illegal payments in its Nigerian and other West African operations, including reimbursement of certain expenses incurred by a customs agent in connection with shipments of materials and the temporary importation of vessels into West African waters. Global’s Audit Committee said that the investigation was prompted by the Vetco case and the announcements by Tidewater, Noble and GlobalSantaFe.32
Other companies operating in Nigeria that did not make voluntary disclosures are squarely in the Department and SEC’s sights. On July 2, 2007, the Department sent letters to eleven entities, asking them to detail their relationships with Panalpina World Transport Holding, to provide a list of the countries in which they used Panalpina’s services, and the amounts they paid to Panalpina.33 According to news reports, the letters purportedly cited concerns regarding payments that might violate FCPA.34
These recent enforcement activities highlight the challenges and risks of doing business in countries known for corruption. They further make clear that payments made to gain improper advantages, such as customs clearance, can be just as problematic as payments made to obtain or retain business.