Enforcement Action

 

Docket or Case Number:    09-cr-071

Court:    S.D. Texas

Initiation Date:    02/06/2009  Information

Prosecuting Agency:    US Department of Justice

Name of Prosecuting Attorneys:   

  • Steven A. Tyrell, Chief, Fraud Section, Criminal Division
  • William J. Stuckwisch, Senior Trial Attorney, Fraud Section, Criminal Division
  • Patrick F. Stokes, Senior Trial Attorney, Fraud Section, Criminal Division

Assisting Agencies:    US Securities and Exchange Commission , Nigerian Government Agency

Type of Action:    DOJ Criminal Proceeding

Origin of the Proceeding:    N/A

Whistleblower:    Unknown

Case Status:    Resolved


Summary

Halliburton Company ("Halliburton") was a Delaware energy services corporation headquartered in Houston, Texas and Dubai, United Arab Emirates. Its common stock was registered under Section 12(b) of the Exchange Act and traded on the New York Stock Exchange.

In September 1998, Halliburton acquired Dresser Industries, Inc. ("Dresser"), including Dresser's subsidiary, The M.W. Kellogg Company ("Kellogg"). After the acquisition, Kellogg was combined with Halliburton's subsidiary, Brown & Root, Inc., to form Kellogg Brown & Root, Inc., which later became Kellogg Brown & Root, LLC, now a wholly-owned subsidiary of KBR, Inc. In 2007, Halliburton separated from KBR, Inc. KBR, Inc., its subsidiaries and predecessor entities, including Kellogg, are referred to collectively as "KBR."

KBR's predecessor companies were part of a four-company joint venture called TSKJ, which was comprised of Technip of France, Snamprogetti Netherlands B.V. of the Netherlands, Kellogg Brown & Root of the United States, and JGC Corporation of Japan. Between 1995 and 2004, members of the joint venture devised and implemented a scheme to bribe Nigerian government officials to obtain contracts worth over $6 billion to build liquefied natural gas (LNG) production facilities on Bonny Island in Nigeria. The joint venture partners formed a "cultural committee" comprised of senior sales executives at each company, to consider how to carry out the bribery scheme. To conceal the illicit payments, the joint venture entered into sham contracts with a shell company controlled by a U.K. solicitor (Jeffrey Tesler, who was given $132 million for the purpose of bribing high-level Nigerian officials) and a Japanese trading company (Marubeni, which was given $51 million for the purpose of bribing low-level Nigerian officials) as conduits for the bribes. Total payments to the two agents exceeded $180 million.

On February 6, 2009, the DOJ filed a criminal information against Kellogg Brown & Root, LLC in the Southern District of Texas, charging the company with one count of conspiracy to violate the anti-bribery provisions of the FCPA, and four counts of violating the anti-bribery provisions of the FCPA. On February 11, 2009, Kellogg Brown & Root, LLC entered into a plea agreement with the DOJ and was sentenced to 3 years probation and ordered to retain an indepedent compliance monitor. Kellogg Brown & Root, LLC was also required to pay a $402,000,000 fine and $2,000 special assessment. Under the terms of the Master Separation Agreement between KBR, Inc. and Halliburton, Halliburton will pay $382 million and KBR will pay $20 million of this fine.

On March 21, 2014 the African Development Bank levied a $6.5 million fine against Kellogg Brown & Root LLC. The African Development Bank also levied a $5.3 million penalty against Technip, and a $5.2 million penalty against JGC.

Country(ies) involved:    Nigeria

Sanction to Bribe Ratio:    $402,002,000 / $182,000,000 = 220.88 %

Sanction to Revenue Ratio:    $402,002,000 / $6,000,000,000 = 6.70 %

Sanction to Profit Ratio:    N/A

Number of Related Enforcement Actions (Including This Enforcement Action):    11

Country(ies) involved:    Nigeria

Total $ Bribery Payments:    $183,000,000

Total $ Revenue Generated from Bribery:    $6,000,000,000

Total $ Profit Earned or Expenses Avoided from Bribery:    N/A

Total $ Monetary Sanctions:    $1,715,938,854

Sanction to Bribe Ratio:    $1,715,938,854 / $183,000,000 = (937.67 %)

Sanction to Revenue Ratio:    $1,715,938,854 / $6,000,000,000 = (28.60 %)

Sanction to Profit Ratio:    N/A

Name:    Kellogg Brown and Root LLC

Place of Incorporation:    United States

HQ Country(ies):    United States

Entity Type:    Subsidiary

FCPA Claims:    Anti-Bribery, Conspiracy (18 U.S.C. 371) ; Anti-Bribery, Primary, Domestic Concern (15 U.S.C. § 78dd-2) ; Anti-Bribery, Aiding and Abetting/Causing (18 U.S.C. § 2, 15 U.S.C. §§ 78dd-1, 78dd-2, and/or 78dd-3)

Related Claims:    N/A

Statutory Basis for FCPA Jurisdiction:    Domestic Concern ; Conspirator ; Aider & Abettor/Cause/Control Person

Period of Bribery:   1994 - 2004

Total Bribery Payments:    $182,000,000

Total Revenue Generated from Bribery:    $6,000,000,000

Total Profit Earned or Expenses Avoided from Bribery:    N/A

Country(ies) involved:    Nigeria

Officials Potentially Influenced (Name; Title; Organization): 

  • Name N/A, Officials; Nigerian National Petroleum Corporation ("NNPC")
  • Name N/A, Officials; Nigeria LNG Limited ("NLNG")

Defendant-Related Entities Involved in the Misconduct:    N/A

Third-Party Intermediary:   

  • Marubeni Corporation , Agent/Consultant/Broker
  • Tri-Star Investments Ltd. , Agent/Consultant/Broker

Type of Bribe:   Money

Cash, Wire or Check:    N/A

Purpose of Bribe:    Obtain/retain business

TRANSACTION OVERVIEW
Payments made by the Joint Venture to Tesler for engineering contracts in Nigeria

Period of Bribery:   1994 – 2004

Total Bribery Payments:    $132,000,000

Total Revenue Generated from Bribery:    N/A

Total Profit Earned or Expenses Avoided from Bribery:    N/A

Country(ies) involved:    Nigeria

Officials Potentially Influenced (Name; Title; Organization):  

  • Name N/A, Officials; Nigerian National Petroleum Corporation ("NNPC");
  • Name N/A, Officials; Nigeria LNG Limited ("NLNG");

Defendant-Related Entities Involved in the Misconduct:    N/A

Third Party Intermediary:    Tri-Star Investments Ltd. - Agent/Consultant/Broker

Type of Bribe:   Money

Cash, Wire or Check:    N/A

Purpose of Bribe:    Obtain/retain business

TRANSACTION OVERVIEW
Payments made by the Joint Venture to Marubeni for engineering contracts in Nigeria

Period of Bribery:   1994 – 2004

Total Bribery Payments:    $50,000,000

Total Revenue Generated from Bribery:    N/A

Total Profit Earned or Expenses Avoided from Bribery:    N/A

Country(ies) involved:    Nigeria

Officials Potentially Influenced (Name; Title; Organization):  

  • Name N/A, Officials; Nigerian National Petroleum Corporation ("NNPC");
  • Name N/A, Officials; Nigeria LNG Limited ("NLNG");

Defendant-Related Entities Involved in the Misconduct:    N/A

Third Party Intermediary:    Marubeni Corporation - Agent/Consultant/Broker

Type of Bribe:   Money

Cash, Wire or Check:    N/A

Purpose of Bribe:    Obtain/retain business

Misconduct by Subsidiary?  Yes


Parent(s):   Halliburton

Subsidiary:  Kellogg Brown and Root LLC

  • Percentage of Ownership:    100.00 %
  • Direct or Indirect Ownership:    Unknown
  • Parent Had Knowledge of Sub’s Bribery?:    No
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    No

M&A Negotiated or Completed During Misconduct, Investigation, or Resolution?     Yes

Type of Transaction:    Acquisition


Successor(s):   Halliburton; Kellogg Brown and Root LLC; KBR, Inc.

Predecessor:  The M.W. Kellogg Company

  • Nature of Misconduct   
    • Misconduct Occurred Solely Pre-acquisition:    No
    • Misconduct Occurred Pre- and Post-acquisition, with NO Knowledge and/or Involvement of Successor:    Yes
    • Misconduct Occurred Pre and Post-acquisition, with Knowledge and/or Involvement of Successor:    No
  • Quality of Due Diligence:   
    • Poor Due Diligence Cited:    Yes
    • Good Due Diligence Cited /(e.g. as mitigating factor/):    No
  • Voluntary Disclosure by Successor in Connection with the Transaction:    No
  • DOJ Opinion Sought in Connection with Transaction:    No
  • Successor Liable for Predecessor Misconduct? :    Yes

  

Predecessor:  Kellogg Brown and Root LLC

  • Nature of Misconduct   
    • Misconduct Occurred Solely Pre-acquisition:    Yes
    • Misconduct Occurred Pre- and Post-acquisition, with NO Knowledge and/or Involvement of Successor:    No
    • Misconduct Occurred Pre and Post-acquisition, with Knowledge and/or Involvement of Successor:    No
  • Quality of Due Diligence:    N/A
  • Voluntary Disclosure by Successor in Connection with the Transaction:    No
  • DOJ Opinion Sought in Connection with Transaction:    No
  • Successor Liable for Predecessor Misconduct? :    Yes

  

About the Predecessor Listed

    At least one of the 'predecessors' listed above may have been involved in a corporate reorganization rather than a merger or acquisition transaction. Please review the documents for this case for more information.

Re: Kellogg Brown and Root LLC

  • Inadequate due diligence in connection with M&A

Mitigating Factors Referenced by the Government (Company Defendants):

Defendant Self-Report Cooperation Voluntary Remedial Measures Misconduct Limited to Low Level Individuals Other factors
Kellogg Brown and Root LLC          

Aggravating Factors Referenced by the Government (Company Defendants):

Defendant Insufficient Cooperation Insufficient Remedial Measures
Kellogg Brown and Root LLC    

Total Monetary Sanctions for the Action:    $402,002,000

Case Status:    Resolved


Disposition:    Plea Agreement

Date of Disposition:    02/11/2009

Kellogg Brown and Root LLC

—  Total Monetary Sanctions for Defendant:    $402,002,000

—  Organizational Probation:    36 months

—  Compliance Obligation:    Yes

—  Reporting Obligation:    Independent monitor

—  Admission of Guilt/Acceptance of Responsibility:    Yes

No Document Title Date Category