Halliburton and its former subsidiary, Kellogg Brown & Root (KBR), pleaded guilty Wednesday to five-counts of violating federal bribery laws and will pay the federal government $579 million to settle a half decade-long criminal investigation into claims the company paid off intermediaries of the notoriously corrupt Nigerian dictator Sani Abacha and some of his subordinates to win a lucrative construction contract for a natural gas liquefaction plant while former Vice President Dick Cheney headed the corporation, the Justice Department announced.
KBR entered guilty pleas to a five-count criminal information in federal court in Houston before U.S. District Judge Keith P. Ellison. KBR pleaded guilty to conspiring with its joint-venture partners and others to violate the Foreign Corrupt Practices Act (FCPA) by authorizing, promising and paying bribes to a range of Nigerian government officials, including officials of the executive branch of the Nigerian government officials and others in exchange for securing construction contracts.
KBR also pleaded guilty to four counts of violating the FCPA related to the joint venture’s payment of tens of millions of dollars in “consulting fees” to two agents for use in bribing Nigerian government officials.
Under the terms of the plea agreement, KBR agreed to retain an independent compliance monitor for a three-year period to review the design and implementation of KBR’s compliance program and to make reports to KBR and the Department of Justice. KBR also agreed to cooperate with the agency in its ongoing criminal investigation investigations. The fines, the second largest ever recorded under the FCPA, will be paid in installments, according to federal court documents.
“Today’s guilty plea by KBR ends one chapter in the Department’s long-running investigation of corruption in the award of $6 billion in construction contracts in Nigeria. This bribery scheme involved both senior foreign government officials and KBR corporate executives who took actions to insulate themselves from the reach of U.S. law enforcement,” said Acting Assistant Attorney General Rita M. Glavin of the Criminal Division. “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.”
Additionally, KBR’s parent company, KBR Inc., and its former parent company, Halliburton Company, also reached a settlement of a related civil complaint filed by the U.S. Securities and Exchange Commission. The SEC’s complaint charged KBR Inc. with violating the FCPA’s anti-bribery provisions, and charged KBR and Halliburton with engaging in books and records and internal controls violations related to the bribery. KBR Inc. and Halliburton jointly agreed to pay $177 million in disgorgement of profits relating to those violations.
“This case, which represents the second largest fine ever in an FCPA prosecution, demonstrates the FBI’s continued commitment to aggressively investigate violations of this law,” said Andrew R. Bland III, Special Agent in Charge of the FBI’s Houston Field Office. “We will continue to investigate these matters by working in partnership with other law enforcement agencies, both foreign and domestic, to ensure that corporate executives who have been found guilty of bribing foreign officials in return for lucrative business contracts, are punished to the full extent of the law.”
“FCPA violations have been and will continue to be dealt with severely by the SEC and other law enforcement agencies,” said SEC Chairman Mary Schapiro. “Any company that seeks to put greed ahead of the law by making illegal payments to win business should beware that we are working vigorously across borders to detect and punish such illicit conduct.”
Neither Halliburton nor KBR, which was spun off into a separate company two years ago and is now known simply as KBR, spokespeople would comment. Spokespeople for both firms issued a prepared statement that said, “Halliburton has agreed to pay in eight installments over the next two years $382 million of $402 million in criminal fines payable by KBR as part of KBR’s resolution of the DOJ investigation, with KBR consenting to pay the remaining $20 million.”
“With respect to the SEC, without admitting or denying the allegations in the complaint, Halliburton consented to the entry of a final judgment that permanently enjoins Halliburton from violating the record-keeping and internal control provisions of the FCPA,” according to Halliburton’s statement. “As part of Halliburton’s settlement, Halliburton agreed to be jointly and severally liable with KBR for and, as a result of the indemnity, to pay to the SEC, $177 million in disgorgement. KBR has agreed that Halliburton’s indemnification obligations with respect to the DOJ and SEC investigations have been fully satisfied.”
The plea deal and settlement between the government and KBR as outlined in Friday’s court documents was arranged at the same time KBR awarded a new $35 million defense contract to build a power plant and electrical distribution center in Iraq even though the company is under criminal investigation over the electrocution of two U.S. Soldiers who allegedly were killed as a result of KBR’s shoddy electrical work. KBR announced last week that the Army Corps of Engineers awarded the company the contract.
KBR also has handled lucrative U.S. government support contracts for U.S. troops in other countries. In 2002, Halliburton, now based in Dubai, was on the brink of bankruptcy related to a massive financial settlement it paid out to settle asbestos litigation. But in November of that year, Halliburton’s financial troubles disappeared.
At the urging of unnamed officials in the Office of the[n] Vice President [Dick Cheney], according to Defense Department documents, the DoD recommended the Army Corps of Engineers award a contract to KBR to extinguish Iraqi oil well fires in addition to “assessing the condition of oil-related infrastructure; cleaning up oil spills or other environmental damage at oil facilities; engineering design and repair or reconstruction of damaged infrastructure; assisting in making facilities operational; distribution of petroleum products; and assisting the Iraqis in resuming Iraqi oil company operations.”
That was a deal hatched five months before the start of the Iraq war, when the Bush administration said publicly that it had not been working on war plans.
“The fact that the Department was planning for the possibility that it would need to repair and provide for continuity of operations of the Iraqi oil infrastructure was classified until March 2003,” the Army Corps of Engineers said on its web site. “This prevented earlier acknowledgement or announcement of potential requirements to the business community.”
A March 6, 2003 internal Pentagon e-mail sent by an Army Corps of Engineers official says “action” on the multibillion-dollar Halliburton contract was “coordinated” within Cheney’s office.
The e-mail says Douglas Feith, the former Undersecretary of Defense for Policy, received authorization from then Deputy Secretary of Defense Paul Wolfowitz to “execute” the Restore Iraqi Oil contract to Halliburton in 2002.
Feith was one of the architects of the Iraq war who operated the Pentagon’s Office of Special Plans that exaggerated the Iraqi threat and provided the White House with bogus information about links between Iraq and al Qaeda.
The email said Feith approved elements in the contract “contingent on informing WH [White House] tomorrow. We anticipate no issues since action has been coordinated w VP’s [Vice President’s] office.”
Two days after the email was sent, the Army Corps of Engineers formally awarded Halliburton’s KBR unit the contract, without reviewing bids from other companies.
Bunnatine Greenhouse, the Army Corps’ top civilian contracting expert, said the Halliburton/KBR Iraq deal represented “the most blatant and improper contract abuse I have witnessed during the course of my professional career.” Greenhouse, who testified before Congress in June 2005, was demoted for speaking out about contract fraud.
In the case of the bribes paid to Nigerian officials, a formal investigation was launched in 2003 when Georges Krammer, a former executive French company Technip, a member of the consortium for the Bonny Island project, informed French magistrate Renaud Van Ruymbeke that the contracts his group obtained came as a result of payments Tesler made to Nigerian officials from a slush fund the lawyer allegedly managed.
In a quarterly filing last October, Halliburton said it was subpoenaed by the Justice Department and SEC over the use – by a KBR-led consortium known as TSKJ – “of an immigration services provider, apparently managed by a Nigerian immigration official, to which approximately $1.8 million in payments in excess of costs of visas were allegedly made between approximately 1997 and the termination of the provider in December 2004 and our 2007 reporting of this matter to the government.”
Last September, Albert “Jack” Stanley, KBR’s former chief executive, pleaded guilty to conspiracy to commit wire and mail fraud and conspiring to violate the Foreign Corrupt Practices Act. The Justice Department said he paid more than $180 million in bribes to Nigerian government officials so KBR could win the Bonny Island liquefied natural gas plant contract.
Stanley is a close associate of Cheney who was promoted by the former vice president in 1998 to head Kellogg, Brown & Root, Halliburton’s engineering and construction subsidiary. Stanley faces seven years in prison and nearly $11 million in restitution payments. His sentencing is scheduled for May 6.
According to last year’s plea deal, Stanley started paying bribes began in 1995, the year Cheney was named chief executive of the corporation, and ended when Stanley was fired in 2004.
As part of the plea deal, Stanley cooperated with the federal government’s investigation into the matter, which may result in criminal charges against other KBR executives in the months ahead.
The Justice Department said Wednesday that at crucial junctures before the award of the consortium contracts, KBR admitted that Stanley, and others met with three successive former holders of a top-level office in the executive branch of the Nigerian government to ask the office holder to designate a representative with whom the joint venture should negotiate bribes to Nigerian government officials.
Stanley and others negotiated bribe amounts with the office holders’ representatives and agreed to hire the two agents to pay the bribes. According to court documents, the joint venture paid approximately $132 million to the first agent, a consulting company incorporated in Gibraltar, and more than $50 million to the second agent, a global trading company headquartered in Tokyo, Japan, during the course of the bribery scheme. KBR admitted that it had intended for these agents’ fees to be used, in part, for bribes to Nigerian government officials.
Documentary evidence showing Cheney was aware that the bribes took place during his five years he spent as Halliburton’s CEO has not surfaced. But his role in the scheme was scrutinized by one foreign judge.
According to previous published accounts of the bribery scandal, the bribes Stanley paid was laundered through UK lawyer Jeffrey Tesler, who served as a consultant to KBR after it was formed in a 1998 merger that Cheney engineered between Halliburton and Dresser Industries.
For more than a year, a French magistrate poured over evidence to determine whether Cheney may have been responsible under French law for at least one of four bribery payments to the Nigerian officials.
Under French law, “the head of a company can be charged with ‘misuse of corporate assets’ for bribes paid by any employee – even if the executive didn’t know about the improper payments.” Authorities in the UK and Switzerland also have been investigating the matter.
However, during Cheney’s tenure, Halliburton did expand operations in Nigeria despite human rights abuses by Gen. Abacha’s regime and environmental damage to the Niger Delta caused by international oil companies, Shell and Chevron, both of which signed contracts with Halliburton subsidiaries.
In April 2000, Brown & Root Energy Services, a business unit of Halliburton, was selected by Shell Petroleum Development Co. of Nigeria to work on the development of an offshore oil and gas facility, the first of its kind for Shell.
The deal, valued at $300 million, has been questioned by activists who have tried to hold Shell accountable for the pollution and the human rights abuses that have harmed Nigerian indigenous groups in a part of the Niger Delta known as Ogoniland.
In its four-plus decades of oil exploration in Nigeria, Shell has been responsible for repeated environmental calamities, involving oil spills, noxious gas flares, cleared forests, despoiled farmland and pipeline blowouts.
Gen. Abacha’s appreciation for the money that Shell’s operations put into his coffers made him an eager ally when the oil industry faced popular protests, which were crushed by the dictator’s army and security forces.
In 1995, the year Cheney joined Halliburton, renowned writer and environmental advocate Ken Saro-Wiwa and eight of his colleagues were hanged by the Abacha government for their efforts to prevent Shell from continuing to poison the environment of the Niger Delta.
It is estimated that more than 2,000 people have been murdered for their involvement in protests against Shell’s activities in the Delta. Most of those murdered were Ogoni who had rallied behind Saro-Wiwa in the early 1990s.
In 1998, Gen. Abacha died of an apparent heart attack.
Last year, oil field services company Baker Hughes Inc. paid $44.1 million and agreed to hire an outside monitor to oversee its compliance activities to settle claims related to a federal bribery probe of its operations in Nigeria, Angola and Kazakhstan.
The governments of Switzerland and the United Kingdom launched their own investigation into Halliburton and KBR over bribes paid to Nigerian government officials. Those probes are still ongoing.
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