SBM Offshore earmarks $238M for DOJ bribery probe settlement

Dutch FPSO provider SBM Offshore has set aside $238 million to settle an investigation by the U.S. Justice Department for alleged improper payments made between 2007 and 2012.

The company on Monday said it had made a provision of $238 million based on advanced discussions with the U.S. Department of Justice (“DoJ”) in relation to the DoJ’s reopened investigation into “legacy issues and Unaoil.”

To remind, in 2014, the Department of Justice closed an investigation into SBM Offshore’s illicit payments made to government officials in Angola, Brazil, and Equatorial Guinea, and decided not to prosecute, based upon a lack of US jurisdiction, but reserved the right to reopen the investigation if new facts came to light.

However, it then in 2016 reopened the investigation following a case in Brazil, when the Brazilian Public Prosecutor’s Office made bribery allegations regarding several people in Brazil and abroad, including some (then) current and former employees of SBM Offshore, of whom one is a U.S. citizen.

Furthermore, the DoJ also initiated an investigation into the company’s relationship with Unaoil, following a release of results of a six-month investigation by The Huffington Post and its Australian partner, Fairfax Media.

The results of the investigation of Monaco-based family-owned company Unaoil released in March 2016, implicated big multinational oil and gas services companies and politicians in a global web of bribery in the Middle East and Africa from 2002 until 2012.

Citing hundreds of thousands of emails obtained from the Unaoil leaders, the Huffington Post named a number of oil industry companies as implicated in the bribery scandal including Halliburton, Kvaerner, National Oilwell Varco, Keppel, SBM Offshore, and others.

According to available information on the Dutch company’s website, SBM Offshore had engaged with Unaoil as an agent prior to 2012 in relation to delivery of barges, offshore terminals and maintenance.

Advanced discussions in the U.S.

In a statement on Monday, SBM Offshore said it was is in advanced discussions with the DoJ concerning a potential resolution of the DoJ’s investigations.

“Based on these investigations and the applicable U.S. statutory rules, the DoJ has now concluded that the evidence not only supports jurisdiction in the United States but also requires a further penalty in the United States. Confronted with the DoJ’s conclusions and in anticipation of a final resolution, the Company is making a provision of US$238 million,” SBM Offshore said.

The company said that the proposed terms under discussion reflected confidence in the quality of the company’s compliance program and efforts by current management.

“Final resolution with the DoJ remains subject to, amongst other matters, agreement on the terms and conditions of the resolution, including subsequent approval thereof by the Company’s Supervisory Board,” SBM Offshore said.

To remind, the company in November 2014 reached a $240 million out-of-court settlement with the Dutch Public Prosecutor’s Office (Openbaar Ministerie) over the inquiry into alleged improper payments.

Brazil closure uncertain

In Brazil, SBM Offshore had in July 2016 signed a settlement agreement with the Brazilian authorities, and Petrobras, closing corruption probe over improper payments to Petrobras’ executives. SBM Offshore has been accused of bribing its way to obtaining FPSO contracts with Petrobras.

However, despite settling the case with Petrobras and certain Brazilian authorities, not all the relevant Brazilian authorities have given authorization to the settlement.

The settlement or the leniency agreement stipulated the Dutch company would pay compensation of $328.2 million to Petrobras and $13.6 million to the Brazilian government. The agreement was the outcome of a negotiation process that began in March 2015.

Commenting on the Brazil situation on Monday, SBM Offshore said it was offered two separate leniency agreements.

“The Company has been exploring the potential terms and conditions of these leniency agreements with the Brazilian authorities and Petrobras. The most important elements for the Company in the 2016 leniency agreement were that it provided for finality regarding the company’s legacy issues in Brazil and allowed the company to contract new projects with Petrobras.”

SBM Offshore further said: “The leniency agreements under discussion with the Brazilian authorities and Petrobras would allow the Company to secure future business with Petrobras. However, the proposed agreements do not provide the same level of finality, both regarding the amount of compensation payable for damages and regarding the responsibility for the acts of the Company’s agents in Brazil.”

The proposed leniency agreements, SBM Offshore said on Monday, reference and require payment of a civil fine and compensation for damages.

“The aggregate amount does not differ materially from the amounts agreed in the 2016 leniency agreement,” the company said.

Not bidding for Petrobras projects

SBM Offshore, the world’s largest supplier of FPSO units, said it was committed to closing out its legacy issues in Brazil and willing, in principle, to pay the agreed substantial amounts.

However, SBM Offshore said, to enter into the leniency agreements, the company would need to be in a position to reach satisfactorily closure with all Brazilian authorities and Petrobras on all outstanding leniency issues at the same time.

“In view of the current situation, the company cannot guarantee that a satisfactory resolution will be reached. The Company will await resolution before participating in Petrobras-operated tenders,” SBM said.

SBM Offshore had been banned from taking part in Petrobras’ tenders, pending the investigation, however, it was then in late 2015 allowed to bid for FPSO projects in Brazil, with the new contract awards remaining conditional upon the conclusion of a settlement agreement between SBM Offshore and the Brazilian authorities in the bribery investigation.

Chief Governance and Compliance Officer and member of the SBM Offshore Management Board Erik Lagendijk said on Monday: “The Company self-reported the issues in 2012 and has completely changed its business model and ways of working since, as recognized by the Company’s stakeholders.

“Although it appears that the company can likely reach a resolution with the DoJ and thus make an important step towards closure of the past, it is unfortunate that despite all efforts made, no global solution to bring finality is currently available. We will continue to actively seek to bring the legacy issue in Brazil to an acceptable closure,” Lagendijk said.