Baker Hughes Incorporated ("Baker Hughes"), headquartered in Houston, Texas, was a global provider of comprehensive oil-field services and products which it provided through several subsidiaries and operating divisions. From 1999 to 2003, Roy Fearnley was employed by Baker Hughes as a Business Development Manager in Kazakhstan and later in Russia.
From at least 1998 through 2003, Baker Hughes paid approximately $5.2 million to two agents while knowing that some or all of the money was intended to bribe government officials in Kazakhstan. One agent was allegedly hired in September 2000 on 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 to the company. Baker Hughes retained the agent principally at the urging of Fearnley. Baker Hughes engaged the agent and was awarded an oil services contract in the Karachaganak oil field in Kazakhstan that generated more than $219 million in gross revenues from 2001 through 2006. Baker Hughes allegedly paid the agent $4.1 million to its bank account in London but received no identifiable services from the agent. In 1998, Baker Hughes allegedly 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, Baker Hughes allegedly paid over $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.
Between 1998 and 2005, Baker Hughes also allegedly made payments in Kazakstan and other countries either to agents or to other individuals, including public officials, 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.
On April 26, 2007, the SEC filed a complaint against Baker Hughes and Roy Fearnley, charging Baker Hughes with violating the anti-bribery, books and records, and internal controls provisions of the FCPA, and charging Roy Fearnley with violating and aiding and abetting violations of the FCPA. The complaint also charged Baker Huges with violating a 2001 Commission cease-and-desist Order prohibiting violations of the books and records and internal controls provisions of the FCPA (In the Matter of Baker Hughes Incorporated, Admin. Proc. No. 3-10572 (September 12, 2001)).
At the same time, Baker Hughes agreed, without admitting or denying the SEC's allegations, to pay $19,944,778 in disgorgement and $3,133,237 in prejudgment interest for the alleged violations, as well as an additional $10 million penalty for violating the 2001 cease and desist order. The settlement also permanently enjoined Baker Hughes and Roy Fearnley from further violations of the FCPA or the 2001 cease-and-desist order.
On January 26, 2010, a default judgment was entered against Roy Fearnley, who failed to appear or defend the complaint. Fearnley was enjoined from future violations of the FCPA and ordered to pay $5,000 in disgorgement and $7,635.51 in prejudgment interest.
