ENI and ex-CEO indicted for Saipem FCPA

Saipem, a 30%-owned subsidiary of ENI, is under investigation in the US, in Italy and in Algeria for alleged bribes of $275mn supposedly paid out to various Algerian public figures and other intermediaries to secure some $10Bn of pipeline construction contracts in that country. The main corruption trial starts in Italy on February 6th and another parallel trial is set to start in Algeria shortly ("l'affaire Sonatrach 2").

As stated on Tuesday, ENI itself is under investigation by Nigerian, Italian and US authorities for a major Nigerian bribery case.  The Algerian investigation was started formally in 2011, whilst ENI and Snamprogetti (a subsidiary of Saipem) were still covered by a two year deferred prosecution agreement after paying $365 million in fines for an earlier bribery case in Nigeria. Back in 2011 ENI owned 43% of, and "exercised control over" Saipem: it still does, despite having reduced its stake to 30.5%. The initial indications and internal alerts are said to go back to 2009.

In 2012 the Italian inquiry picked up steam and heads started to roll. In December that year Saipem's CEO resigned and two senior executives were suspended. That same week the CFO of its parent company, ENI, stepped down (he had previously been the CFO of Saipem). Initially the investigation focused on pipeline contracts valued at $580mn with notional bribes of between $180-200mn which sounded somewhat excessive: in time the information has grown to suggest contracts to the tune of $10bn and payments of $275mn.

The role of Farid Bedjaoui

In August 2013 an Algerian blog started to set out details of who paid what amounts and via what corporate structure (another example of why one should monitor the periphery). The name of Farid Bedjaoui had first surfaced in February of that year, but the Algerie-focus article on the Sonatrach-Saipem 'scandal' if true, suggested that his role was far more that a mere intermediary between Saipem and Sonatrach.  It is alleged that Mr Bedjaoui was contracted by Saipem to help the company gain contracts from Sonatrach in return for a commission of 3%.  It is also alleged that of this 3% certain amounts found their way back to senior officers of Saipem.  Mr Bedjaoui is thought to currently reside in Dubai, keeping away from the law: he has an Interpol red notice on him.

The article suggested that Bedjaoui, nephew of a past Algerian Minister of Justice and Ambassador to France and to the UN for Algeria (Mohamed Bedjaoui) in fact had been helping one Chakib Khelil whilst the latter was still CEO of Sonatrach and prior to his elevation to Minster of Energy & Mines.  During this earlier period Sonatrach decided to liquidate key holdings that the State oil company had in Duke Energy and Anadarko and to invest the proceeds with Russell Investments.  The latter had an agreement with a Dubai-based "asset manager" which acted as its agent throughout the Middle-East called Rayan Asset Management.  The co-founder of Rayan Asset Management was a certain Farid Bedjaoui, who can be seen clearly in the attached photograph - bottom right.

Saipem COO turns State's witness

In February 2014 matters took a serious turn for both Saipem and ENI with Saipem's ex-COO, Pietro Varone telling prosecutors that Paolo Scaroni, CEO of ENI not only knew of the scheme but that "he knew everything".  Mr Scaroni states that he had no involvement in any 'agreements' between Saipem and the Algerian Minister or his middleman: yet one email date July 10th 2008 seized by the Italian prosecutors refers specifically to "meeting between Scaroni and F".  Pietro Varone claims he set up the meeting and that "F" was Farid Bedjaoui.

Subsequently the Italian authorities not only increased their focus on the role of ENI's then-CEO Paolo Scaroni, but also investigated the transactions of his family trust. Mr Scaroni subsequently resigned from ENI. In October 2015 both Mr Scaroni and ENI were cleared of any wrongdoing in the Saipem bribery case, whist six Saipem managers and ex-managers were sent for trial.

However in February 2016 a higher court overturned the acquittal and in July of last year Mr Scaroni was once again indicted, this time on the back of a large batch of embarrassing documentation.

Panama Papers happens...

On July 25th 2016 the ICIJ published a major article about the use of hidden offshore companies to pay bribes and "commissions" to key players in major resource contracts across Africa: the cause celebre that the ICIJ used for the cover story was that of Saipem and Sonatrach.  In his work as the apparent middleman, Mr Bedjaoui had used Mossack Fonseca to create twelve of the seventeen offshore companies being investigated by the Italian authorities regarding the Saipem investigation.

"Italian investigators described one of those companies, Minkle Consultants S.A., as a “crossroads of illicit financial flows” that channelled millions of dollars from subcontractors to an array of recipients whose identities are still being untangled."

The Saipem trial is set to begin on February 6th. It will doubtless be closely watched by both the DoJ and the SEC. If Saipem is found to have knowingly broken the law at a time when one of its own subsidiaries was being tried and then sentenced in the US for FCPA offenses, and were the court to find that Mr Scaroni had direct or indirect knowledge of the affair(as per the statement by Saipem's ex-COO), both Saipem and its parent ENI may find that US leniency can run dry.

CEO of ENI to be charged with corruption?

The CEO of Italian oil giant ENI and his predecessor are likely to be prosecuted under Italy's anti-corruption laws for alleged wrongdoings in the purchase of a Nigerian offshore oil block OPL 245. ENI and Royal Dutch Shell are named in the court documents as having committed "administrative offenses" with regard to the relevant Italian anti-corruption laws . The Nigerian authorities are also moving ahead to prosecute a number of people in the same case for money-laundering offenses.

Just before Christmas Italian prosecutors closed the investigative phase of their inquiry into the dealing of ENI and Shell regarding their joint purchase of the Nigerian offshore block. The issue now moves into the formal prosecution stage, with  eleven individuals set to be charged with "international corruption".  The list includes the past and current CEO's of the Italian oil giant.

The news hit the Italian press on December 23rd and no significant mention of that affair appeared in the international press.  However, a structured search with relevant key words and enforced-term operators reveals  the prosecutors' notice, which can be read in its entirety here.

ENI has stated that it notes the closure of the investigation and "reaffirms the propriety of the transaction" saying that at no time did it make any payments to members of the Nigerian Government. The direction of the prosecutors' investigation appears to suggest that both Messrs Scaroni (as the then CEO) and Descalzi (as head of Exploration) not only knew the terms of the complex transaction but were likely have understood that the Nigerian Government would not benefit from the deal despite the payments for the purchase of the block going into its coffers. The Nigerian authorities have laid charges of money-laundering against nine of the individuals in the Italian case and are expected to include both ENI and Royal Dutch Shell as defendants in time. The diagram below shows the main movements of money in the deal.

Malabu - the story of block OPL 245

As with many OSINT investigations, to get verifiable information you have to start by looking elsewhere. In this case the words ENI and Malabu would deliver a lot of noise, where as a "filetype" search on Malabu Oil & Gas, plus one of ENI's other corporate names (Nigerian AGIP Exploration), delivers us a New York Supreme Court affidavit from 2011, made by a US intermediary in the deal called International Legal Consulting Ltd, in turn owned by Mr Ednan Agaev. Mr Agaev is named as one of the defendants in the Italian prosecutors' findings.  In his affidavit Agaev lays the entire Malabu deal bear for all to see, essentially because he is seriously annoyed at not having been paid his take from the deal.

These court documents from the US Supreme Court, dated June 28th 2011, set out the terms of an operation whereby Shell and ENI bought a key offshore oil block in Nigeria from the Nigerian Government.  What this affidavit claims (see page 20 of the pdf file onwards) is that ENI (and possibly Shell) knowingly structured a back-to-back deal between an ex-Minister of the Nigerian Government (convicted of money-laundering by a French Court) and the Nigerian State whereby the latter sold on the licence to the international oil companies.  This is the document that effectively triggered the current Italian investigation into ENI and several of its past senior executives: this probe has resulted in ENI having to self-report the issue to the US SEC and Department of Justice.

ENI  self-reported (necessarily) to the DoJ and SEC in 2014

ENI has stated that it is under investigation for “alleged international corruption” regarding its acquisition of OPL 245.  Importantly the company goes on to state that it has “reported the matter to the US Department of Justice and the US SEC” – i.e. it has self-reported (see Legal Proceedings note 2.i – page 103).  This is important for two reasons: in the first place ENI has already fallen foul of the US authorities back in 2010, when Snamprogetti was fined along with Technip for FCPA issues in another Nigerian contract.  As part of that settlement ENI ‘consented to the entry of a court order permanently enjoining it from violating the recordkeeping and internal controls provisions’, which is to say that it is obliged to report any possible corruption issues.  Secondly, the US authorities are obliged to investigate the situation regardless of what the Italian authorities might finally decide, given that ENI has a sponsored-ADR traded on the US markets.

A story of multiple amber flags

The history of OPL 245 is tangled, with Royal Dutch Shell and Malabu Oil & Gas having various rights over the block for much of the past eighteen years:

1998 – The Nigerian Petroleum Ministry awards Malabu Oil & Gas the rights over OPL 245 for a price of $2mn.  Malabu is said at that stage to be controlled by Mr Dan Etete, at that time being the Nigerian Minister of Petroleum

1999 – Malabu offers Royal Dutch Shell 40% of the profits on the block in return for carrying all exploration and development costs

2001 – A new Nigerian Government revokes Malabu’s licence to OPL 245 and awards the block to Shell for a signatory fee of US$210mn

2003 – Mr Etete sues Shell in the US courts over ownership of OPL 245

2006 – A different and new government reaffirms Malabu’s rights over OPL 245 and Shell is to be given other assets in compensation

2007 – Mr Etete is convicted and sentenced in absentia by French courts of money-laundering offences (he loses his appeal)

2011 – The Nigerian Government ‘brokers’ a deal whereby Malabu cedes its rights to the Government, which the awards OPL 245 to Shell and ENI for a total price of $1.3bn.  Shell pays a signatory bonus of US$207mn to the Nigerian Government and receives 50% rights to the block, and ENI pays US$1.1bn to the Government, receiving a 50% stake and operatorship.  According to court documents lodged in both New York and London, the ENI payment (US$1.1bn) was transferred by the Nigerian Government to bank accounts controlled by Dan Etete.  

Global Witness had put it very succinctly in 2013:

"In 2011, a deal was signed behind closed doors that involved a former Nigerian oil minister and two of the world’s largest oil companies – Royal Dutch Shell and Eni. It relied on a climate of secrecy in the oil and gas sector, and the clever use of anonymous shell companies that allowed the beneficiaries of the deal to hide their identities and divert huge sums of cash."

Conclusion (for the time being):

ENI has two major FCPA investigations open against it in the US: one relating to this self-reported allegation and the other for allegations of bribery by its subsidiary Saipem, in Algeria. The company's subsidiary Snamprogetti was fined by the DoJ in 2010 (along with Technip) for FCPA offenses also in Nigeria.

By stating that the Italian investigation "reaffirms the propriety of the transaction", ENI is essentially claiming that by making the purchase payment to the Nigerian Government, as stipulated in the terms of the deal, it is essentially off-the-hook when it comes to what the Nigerian Government chose to do with the monies. Under the spirit of the new EU 4th Directive that attitude might be construed as "wilful blindness", which the DoJ finds difficult to accept as a defence.

Whilst both the Italian case and the Nigerian case will take time to rumble through their respective judicial systems, the US authorities might take a more aggressive approach towards a multi-national now in the throws of its third international bribery investigation.

Alstom's global penalties for bribery could exceed $2Bn

At the end of 2014 Alstom agreed to pay a $772mn penalty for criminal charges to the US authorities; Brazilian prosecutors are thought to be seeking $1.3bn in restitution and fines (see below); and the newly confident SFO will doubtless be running its slide rule over Alstom as it weighs up potential fines should it win the three cases that start going through the High Court over the next three months. I note that as of end March 2016 the company has made provisions for €103mn in total to cover current litigation risks (see Note 24, page 87, here).

Brazilian prosecutors in Sao Paolo claim to have evidence that Alstom paid bribes to win metro contracts in the city (Siemens, Alstom’s erstwhile cartel partner, "self-reported", but only after a Brazilian whistle-blower finally got his message to the right people); other prosecutors in Brazil are indicting the company for bribes paid to federal and state employees for power-plant contracts in the states of Sao Paolo, Rio de Janeiro and of Santa Catarina (and more evidence is coming through from other states); and finally federal prosecutors are chasing Alstom regarding corruption allegations at the state oil company Petrobras.

Brazil's new anti-bribery law is far more aggressive than its US counterpart, the FCPA.  The biggest difference is that for a company to be liable there is no need to prove that the senior management had either "intent" or "knowledge": the fact that a company has benefitted by the actions of an employee or a third-party (consultant) makes the company liable.  Hence for Alstom, the implications are potentially devastating given that a core partner in the transport contracts (Siemens) has turned state's evidence and has confirmed the details of corruption in return for a plea bargain. 

Sao Paolo I: Penalties can be of up to 20% of annual revenue (see paragraph two), which in this case would be calculated on the period over which the corruption had taken place on the first five lines investigated (1998-2008).  The Brazilian prosecutors says that the level of overpricing involved was US$834mn on US$2.7bn of contracts.  Initially the prosecutors were pushing for fines of  BRL1.7Bn (US$765mn) on the back of an estimated US$850mn of over-charging. Prosecutors have now added three more metro-line contracts to the investigation list, and thus it is probably that the scale of potential penalties will also rise.

Sao Paolo II:  The second major on-going action against Alstom is the scandal around commissions paid to state politicians for power-generation contracts.  For just one of these contracts (and at this stage there are four contracts being investigated in various states) the prosecutors are seeking penalties BRL 1.129bn (US$500mn) or four times the estimated overcharging.  In this case most of the prosecutor's evidence comes from the Swiss authorities, who have frozen various accounts in Swiss banks on the back of evidence collected in the investigation cited above (Amber Flag #2).  But as a 2008 article in the WSJ highlights, Alstom had been awarded 139 different power contracts in the state of Sao Paolo alone, worth some US$4.6bn. 

In the sale of the power business to GE the terms underlined that Alstom will remain liable for legacy FCPA issues.

At this stage the Brazilian press is also highlighting state level investigations regarding power contracts in the states of Rio de Janeiro and Santa Catarina.  Alstom is also being mention as involved in the various bribery investigations (internal and external) that are ongoing at Petrobras, the national oil company.  Under the terms of Brazil’s new anti-bribery law, cases are heard at a state level and fines are levied at the state level: hence what happens in one state essentially creates precedent for the other states to follow.

Open Source Intel = Think outside the box

The Office of the Director of National Intelligence in Washington defines Open Source Intelligence as being “publicly available information that appears in print or electronic format, including radio, television, newspapers, magazines, Internet, commercial databases, and video, graphics and drawings.” The important term here is “publically available”, given that banks operate in a highly regulated environment.

The amount of digitalised content that can be captured on the surface web and the deep-web is growing exponentially.  Just as importantly, the amount of information on past events is also exploding. This is to say that if one imagines an investigation on a client that was carried out in 2011 and the amount of relevant information that was “openly” available for analysts to capture at that time; today there will be a multiple of that amount that is information of that year. Not only is current information being digitised, but importantly for the investigator, past information is also being digitalised making discovery all the more interesting. Yet most commentators cite the data deluge and information overload as a massive problem: not if you know how to build your filters!

In the example of Total’s near-disaster on the Elgin Platform the content was being delivered as text; hence easily processed and searchable.  By definition “open source” means any format of information that can be imagined. This causes problems for investigators who are more used to thinking (and investigating) within a predefined concept: they think within the box and need to be shown how to “think outside of the box” and sometimes how to think without any box being present.

Today it is not about wondering in a certain item of information exists, but rather in what format is does exist, or where one can find collateral information that would point towards it.

Apologies for using another example from the energy industry, but it fits perfectly. A few years ago a hedge-fund client asked if it was possible to build an alert system that would track new oil or gas discoveries being made by companies that had shares quoted on the stock market, getting that information before any formal (regulated) announcement by the company. After a couple of days of thinking and investigating, we informed the client that a monitoring system could be put together than would alert him within 24 hours of any discovery anywhere in the world – possibly before the company’s own head office might receive the news. The client’s immediate assumption was that we planned to hack the internal communication systems of the relevant companies: living and working in a highly regulated industry, that obviously was not the case. The next assumption was that we knew how to put a large number of people on rubber dinghies or camels, close by the drilling rigs.

The reality was far simpler and infinitely more elegant. Whenever a drilling rig hits hydrocarbons, i.e. makes a discovery, there is what is called “associated gas”. It doesn’t matter whether it is an oil discovery or a gas discovery; there will always be gas present, and this gas needs to be burnt off in a controlled manner. That action of burning off the associated gas would generate considerable heat, and that heat could be picked up by any commercial satellite that was trained on a specific position looking for a heat signature with its infra-red cameras. Thus in answer to the clients query; with the geographic coordinates of every drilling rig or drill-ship (Lloyds shipping register) and by hiring capacity on a number of commercial satellites, one could set up a very simple tracking system that would deliver the required intelligence within the suggested 24 hours.  Notionally the initial request would have been impossible to answer using legal methods; but by “thinking outside of the box” and thinking through how such information might be generated, it was possible to deliver a solution – albeit overly costly for that client.

Alstom and its alleged "How to Bribe Guide"

One of the more alarming items to have been dug up by the Brazilian press as it investigated the price fixing scandal which pointed the finger Alstom's transport and power divisions, was a three-page document that apparently acted as in-house guide to the company's employees and third-party agents on "how to bribe". [Note for users: use Google Chrome with the Google-translate extension enable - that way the Portuguese article will automatically appear in English. Kind of helps! Sorry IE users - Bing translator is decidedly inferior].  One of Alstom's commercial team in Brazil, André Botto told one of the investigating judges that the commission rate (bribe rate) was 15%, with half going to the decision makers (politicians and senior executives of the purchaser) and half to the agent.

The internal document, which soon became known as the "how to bribe guide", was apparently was created in 1997 when another key Alstom character was in charge of corporate ethics.   Bruno Kaelin was the group's head of compliance (see para 16 in the WSJ article of 2008) immediately prior to Jean-Daniel Lainé, who I mentioned in the last Alstom entry. Mr Kaelin was in residence, as it were, when the "How to Bribe" document was initially circulated. Mr Kaelin was also a director of Alstom Network UK (or Alstom International Ltd) as it was then known, between January of 2001 and his group resignation in December 2005. In both the Swiss and the UK companies he was replaced upon resignation by Jean-Daniel Lainé as the new global head of Compliance and Ethics.

According to the Swiss Punishment Order, Alstom restructured its global network of third-party agents and the corporate structure via which they were remunerated (see clauses 2 and 3). It is important to understand that this is not some journalistic conjecture; it is a Swiss judicial finding, which is to say that it is verified information. Two companies were "founded to centralize the execution of compliance procedure and payments": Alstom Network Schweiz AG and Alstom Network UK Ltd. To be accurate, two existing Alstom group companies were re-named and their responsibilities amplified to make them respectively the payment hubs for power and transport. Whilst Kaelin left Alstom in 2005, it should be noted that Lainé was in charge of compliance for the power group (2003-05) prior to taking on the global role on Jan 1st 2006.

The "how to bribe guide" had five sections (see paragraph 2 here) that covered the basic objective (practical guide to paying third-party commissions, the need to keep the information from being discovered, to keep it off the tax-books, to ensure that the work undertaken was "consulting and support" and to have the papers signed by the contracted company's CFO.

Times of India Sept 2014

So how did this document come to light, and how did the Brazilian press get hold of it? It was part of a package of information sent by the Swiss prosecutors to the Brazilian authorities (and hence on the front pages of the local Press.  Having initially thrown a mild tantrum when their evidence turned up in the press, the Swiss authorities eventually sent the relevant bank account proof on various of the "commissions" paid for Brazilian power and transport contracts.

Indian press reports that extradition orders had been sent by the UK authorities to Switzerland for Bruno Kaelin and France for Graham Hill: both are thought to be in poor health, and I note that Mr Kaelin's name has been dropped from the SFO's suit.

Whilst the SFO's case against Alstom Transport UK focussed on issues in Poland, Tunisia, India and Hungary, the implication of the Swiss sentencing ties the company to all of the Brazilian transport corruption cases.

The reality behind the Rolls Royce DPA

Good on you, Dick Taylor: eleven years after you began your stint as whistleblower, your work has finally been vindicated and Rolls Royce hopes to sort out its "issues" by paying some $800mn through a Deferred Prosecution Agreement with the SFO and jointly the US Department of Justice and the MFP of Brazil. I sincerely hope that you get some form of recognition for what you have had to go through: if not a back-payment of the salary and benefits that you lost because you are an honorable man, perhaps an OBE for "services rendered" - if not a CB.

Good on you, the Serious Fraud Office, you have finally caught a very big fish and will now get the undivided attention of Corporate UK: and thank you Lord Rose for being the great lord that finally slayed the dragon.

Life in 'corporate UK' has now changed; as the Americans would add - period. This is a great moment.

But there are a few details and definitions that cause concern. 

1. Just how have the authorities managed to define this as being a legitimate DPA?  Be in no doubt, this is a fudge. Rolls Royce say that the matter is a self-reported issue brought up by the comapny themselves in 2012.  That is being somewhat economical with the truth. Mr. Taylor started banging the drum in 2006: don't take my word for it; here he is in 2009 saying for all to hear, in a comment attached to a press article regarding the company, that the company had paid Tommy Suharto $20mn in cash plus a sparkling blue Rolls Royce in the mid-90's (scroll down to the "reader's comments" at the end of the article) to aid Indonesian airline Garuda in its decision of which aircraft engines to buy.  The whole concept of a DPA is that the company "self-reports".  In the case of Rolls Royce it is more likely that the subject was brought kicking and screaming to the bench, rather than approaching cap in hand.
2. The company initially stated that it had uncovered issues in Asia; yet $26mn of the fines are being paid to the MPF in Brazil relating to bribes paid to Petrobras officials. This issue was not self-reported but came directly from the testimony of Pedro Barusco, who gave evidence to a Brazilian judge that he had been paid $200,000 by Rolls Royce to help secure a gas turbine contract with Petrobras. The going rate for bribing Petrobras in those days is well-documented as having been 3% hence RR will likely have shelled out $3mn for this one contract; not $200,000 - hence the scale of the $26mn payment to the Brazilian regulators. It was not the company's only business in Brazil.
3. China: oh dear. June 25th 2011. That was the day the whole sad affair of how Rolls Royce had broken into the Chinese market (and of who had been their accomplices) was publically aired. Here is the link to the bulletin board explaining the role of Chen Qin and his master Ma Xulun. Whilst Mr Chen is doing life for corruption, Mr Ma remains Chairman of China Eastern.

The truth of today's DPA is that Rolls Royce was in a corner. Judicial processes has gone against the company in China (perhaps "judicial" is an exaggeration) and in Brazil.  In India the finding were clear, and the DOJ has been collecting considerable information on Petrobras payments that implicated RR through its own investigation. So Rolls Royce had nowhere to hide and if Dick Taylor is to be believed, the Suharto case was but the tip of the iceberg.

Should that be the case then Rolls Royce has gotten off lightly; but in so doing they will have helped to ensure a better breed of British corporate: one that finally fears the law.  After all, $800 million  is no mean amount of money.

SBM Offshore: COO shredded evidence, got promotion

The reaction: internal investigation, "containment" and "shredding of evidence"

The inside story on the corporate reaction to news of evidence of bribery by the company is carried in the second section of the whistle-blower's exposé. Senior management launched a defined-scope internal investigation that specifically put Brazil off-limits. (The recordings supposedly made by the whistle-blower cover this - see Key recordings 3: “We have not asked them [Paul Hastings - the US attorneys] to go there [Brazil] yet. We need to clarify this point. I did not give the go-ahead with Brazil!”).  Before that cranked up, one of the company's most senior managers was found in the act of disposing of relevant documents. Hence not only was the internal investigation skewed from the start, but a large amount of documentation had been tampered with. The investigation would take two years eventually and conclude that there was no wrong-doing in Brazil (50% of the company's revenues).

As set out in the above interview and in the Wiki exposé, the company's Chief Operating Officer, Jean-Philippe Laures,  shut himself into his office on or before February 7th and proceeded to start shredding documents: 12 black-sacks worth of documents (see Wiki Section B - Key Recordings). The first reaction of the management committee was to promote Mr Laures to being Chairman of SBM Atlantia Inc in April. Six months later the company sacked Mr Laures without giving any reason, and the CEO took over his role temporarily. Meanwhile the CEO, who admittedly had only taken up his post on Jan 1st of that year, allegedly admitted to having undeclared documents in the safe in his office that essentially defined many of the "commercial" agreements.

The company's external lawyers advised that it needed to make a full disclosure, not least in the legal Offering Memorandum it was about to publish in the USA regarding the financing of one of the Brazilian FPSO's - the Anchieta Bond Financing ($500m). Despite the ongoing internal investigation turning up clear evidence of wrong doing, no mention of any issues made it way into the Offering Memorandum; a fact that the DOJ will likely want to investigate.

From the whistle-blower's log:

BC (Bruno Chabas - CEO) acknowledges the need to disclose the Brazil bribes re the Anchieta Bond Financing ($500m), otherwise SBM would be “misleading the market” – BUT no mention is made in the offering memorandum! BC stresses that he did not give the go-ahead to PH with disclosure about Brazil, thus setting a trend that continues to this day. FE (the whistleblower) is already protesting at the lack of action against JPL (JP Laures - the COO) BUT the CEO’s explanation is that he is needed because he is the only one “with access to Sonangol”!!

As stated in last week's post, the management's initial "public position" as of April 2nd 2012 was that its internal investigation had uncovered evidence that agents may have bribed Government officials in Africa, adding specifically that  "it found no evidence of such practices in Brazil".  It should be noted that just days prior to this statement the company had published two regulatory documents (its 2011 Annual Report and the Offering Memorandum), with no mention of any of these issues being made. Under US Securities law that would amount to a serious offence and one has to question whether the SEC will join the DOJ investigation.

As stated last week: SBM's leniency deal with the Brazilian judiciary has been stalled at the Federal level, and the US Department of Justice has re-opened its FCPA investigation having received further information via its own investigation of Brazil's Petrobras. It will be an interesting year for SBM Offshore.