Keppel to pay $422 million in fines to resolve bribery case

Singapore’s rig builder Keppel Offshore & Marine (KOM) will pay fines totaling $422 million to three jurisdictions to resolve charges arising out of a decade-long scheme to pay millions of dollars in bribes to officials in Brazil. 

Keppel informed last week it has reached a global resolution with criminal authorities in the United States, Brazil and Singapore in relation to corrupt payments made by its former agent in Brazil, Zwi Skornicki.

As part of the global resolution, KOM has accepted a conditional warning from the Corrupt Practices Investigation Bureau (CPIB) in Singapore, and entered into a Deferred Prosecution Agreement (DPA) with the U.S. Department of Justice (DOJ), while Keppel FELS Brasil, a subsidiary of KOM, has reached a Leniency Agreement with the Public Prosecutor’s Office in Brazil, the Ministério Público Federal (MPF).

The Leniency Agreement would become effective following approval of the Fifth Chamber for Coordination and Review of the MPF. In addition, Keppel Offshore and Marine USA (KOM USA), also a subsidiary of KOM, has agreed to plead guilty pursuant to a plea agreement with the DOJ.

“Today’s resolution once again underscores the importance of the Department of Justice’s collaboration with foreign authorities to hold corrupt companies and individuals accountable for their crimes, while ensuring the fair and appropriate allocation of fines and penalties,” said Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division.

“This case also represents the first coordinated FCPA resolution with Singapore and the most recent of several coordinated resolutions with Brazil,” he added.

These agreements relate to corrupt payments made by Skornicki in relation to several KOM projects in Brazil, which were made with knowledge or approval of former KOM executives. As reported in October 2016, Keppel undertook a thorough internal investigation, identified certain suspicious transactions involving Skornicki, and cooperated with the authorities to resolve the issues arising from or in connection with those transactions.

As part of the resolution, KOM will pay fines in an aggregate amount of $422 million (or approximately S$570 million), to be allocated between the U.S., Brazil, and Singapore.

The U.S. will credit the amount the company pays to Brazil and Singapore under their respective agreements, with Brazil receiving $211 million, equal to 50 percent of the total criminal penalty, and Singapore receiving up to $105.6 million, equal to 25 percent of the total criminal penalty.

According to admissions and court documents, beginning by at least 2001 and continuing until at least 2014, KOM conspired to violate the FCPA by paying approximately $55 million in bribes to officials at the Brazilian state-owned oil company Petrobras and to the then-governing political party in Brazil, in order to win 13 contracts with Petrobras and another Brazilian entity.

KOM effectuated and concealed the bribe payments by paying outsized commissions to an intermediary, under the guise of legitimate consulting agreements, who then made payments for the benefit of the Brazilian officials and the Brazilian political party.

Remedial measures

Keppel’s remedial measures involved enhancements to compliance and internal controls systems across the Keppel Group and disciplinary action against individuals involved in the misconduct. In light of these efforts, the authorities determined that an independent compliance monitor was not necessary, and KOM received a 25% reduction, the maximum cooperation and remediation credit possible, off the bottom of the applicable fine range under the U.S. Sentencing Guidelines.

Dr Lee Boon Yang, Chairman of Keppel Corporation, said, “We do not and will not tolerate any illegal activity in the conduct of our business. We regret and are deeply disappointed by the actions that we now know to have taken place at the Group’s offshore and marine business in Brazil from around 2001 to 2014.”

Loh Chin Hua, CEO of Keppel Corporation, added, “Today’s settlement means we can draw a line under this difficult issue which has been a key focus of the board and senior management since the bribery allegations first emerged, and look to the future.”

Keppel concluded that the financial penalty is an extraordinary item and its impact is one-off.

Offshore Energy Today Staff