US company setting up shore base here known for bribing politicians, Customs Officers

Nov 25, 2020 News

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By Kiana Wilburg

Kaieteur News – The Stabroek Block offshore Guyana currently holds over nine billion barrels in oil equivalent resources. To develop such a massive oil and gas reserve, there will be an urgent need for facilities close to the shoreline to support setting up of equipment before it is transferred offshore along with maintenance work for vessels.
These shore base facilities make billions of dollars for providing such services.
Baker Hughes, an American company that boasts of being one of the world’s largest oil field services companies is chomping at the bit to get in on this action. In fact, the Texas-based firm is awaiting approval from the Environmental Protection Agency (EPA) to construct a US$8M shore base facility at Land of Canaan.
Of note, however, is the fact that this very company which is so eager to spread its tentacles into Guyana’s oil industry, has a well-documented history of bribing politicians to win oil contracts.
According to filings in April 2007 by the Securities and Exchange Commission (SEC), Baker Hughes was charged with several violations of the USA’s Foreign Corrupt Practices Act (FCPA).
Following its guilty plea to the said charges in the U.S. federal court, the company agreed to pay US$44.1 million in fines and penalties.
The case that was brought against Hughes alleged that the company paid approximately US$5.2 million to two agents or middlemen while knowing that some or all of the money was intended to bribe government officials, specifically officials of state-owned companies in Kazakhstan. The complaint alleged that one agent was hired in September 2000 with the understanding that Kazakhoil, Kazakhstan’s national oil company at that time, had demanded that the agent be hired to influence senior level employees of Kazakhoil to approve the award of business or contracts to the company.
Baker Hughes retained the agent principally at the urging of Roy Fearnley, a former business development manager for Baker Hughes. Fearnley, had informed his bosses that the “agent for Kazakhoil” told him that unless the agent was retained, Baker Hughes could “say goodbye to this and future business.”
Baker Hughes then engaged the agent and was awarded an oil services contract in the Karachaganak oil field in Kazakhstan, which generated more than US$219 million in gross revenues from 2001 through 2006. Baker Hughes, the complaint alleged, paid the agent US$4.1 million to a secret bank account in London but received no identifiable services from the agent.
The SEC complaint also alleged that in 1998, Baker Hughes retained a second agent in connection with the award of a large chemical contract with KazTransOil, the national oil transportation operator of Kazakhstan. Between 1998 and 1999, the SEC said that Baker Hughes paid over US$1 million to the agent’s Swiss bank account, despite a company employee knowing by December 1998 that the agent’s representative was a high-ranking executive of KazTransOil.
But Kazakhstan was just a small fraction of the gross violations committed by Baker Hughes. Further research by Kaieteur News found that the SEC had also taken Baker Hughes to court over violations of the books and records and internal controls provisions of the FCPA. These acts were committed in Nigeria, Angola, Indonesia, Russia, and Uzbekistan.
With respect to these five countries, the SEC said that between 1998 and 2005, Baker Hughes made payments in Nigeria, Angola, Indonesia, Russia, Uzbekistan and Kazakhstan in circumstances that reflected a failure to implement sufficient internal controls to determine whether the payments were for legitimate services, whether the payments would be shared with government officials, or whether these payments would be accurately recorded in Baker Hughes’ books and records.
For example, the complaint alleged that from 1998 to 2004, Baker Hughes authorized commission payments of nearly US$5.3 million to an agent (who worked in Kazakhstan, Russia and Uzbekistan) under circumstances in which the company failed to determine whether such payments were, in part, to be funneled to government officials in violation of the FCPA.
In Indonesia, between 2000 and 2003, Baker Hughes paid certain freight forwarders to import equipment into Indonesia using a “door-to-door” process under circumstances in which the company failed to adequately assure itself that such payments were not being passed on, in part, to Indonesian Customs officials.
In Nigeria, between at least 2001 and 2005, the SEC noted that Baker Hughes authorized payments to certain Customs brokers to facilitate the resolution of alleged customs deficiencies under circumstances in which the company failed to adequately assure itself that such payments were not being passed on, in part, to Nigerian customs officials.
In Angola, from 1998 to 2003, Baker Hughes, the SEC said, paid an agent more than US$10.3 million in commissions under circumstances in which the company failed to adequately assure itself that such payments were not being passed on to employees of Sonangol, Angola’s state-owned oil company, to obtain or retain business in Angola.
Without admitting or denying the SEC’s allegations, Baker Hughes consented to the entry of a final judgment permanently prohibiting it from future violations of the FCPA and ordering it to pay a civil penalty and disgorgement with prejudgment interest; and to retain an independent consultant to review the company’s FCPA policies and procedures.
In a related criminal proceeding, the United States Department of Justice also filed criminal FCPA charges against Baker Hughes and its wholly owned subsidiary, Baker Hughes Services International, Inc., with an office in Atyrau, Kazakhstan. Baker Hughes Services International, Inc. entered a guilty plea before the Honorable Gray H. Miller, United States District Judge for the Southern District of Texas.
It agreed to plead guilty to one count of violating the anti-bribery provisions of the FCPA, one count of aiding and abetting the falsification of the books and records of Baker Hughes, and one count of conspiracy to violate the FCPA, and to pay a criminal fine of US$11 million.

 

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