SBM Offshore: Anatomy of a cover-up - Part 1

There are five key bribery and corruption cases that I will be monitoring that should see resolution this year, and #2 on the list after Alstom is SBM Offshore. Central to the story is a whistleblower. His full 3,700 word exposé is still available on the DeepWeb (if you know how and where to look). His allegations of payments have so far been proven in court: his allegations of willful cover-up have barely been discussed.

In November 2014 Dutch offshore engineering firm SBM Offshore reached an out-of-court settlement with the Dutch authorities, paying fines and disbursements totalling $240mn. The US Department of Justice had also been investigating the company, but called its probe off on the back of the Dutch settlement. That was before the true scale of the Petrobras scandal became clear. Last August the company reached a deal with the Brazilian authorities to pay $340mn in a leniency deal. Days later the Brazilian Federal prosecutors disallowed that deal stating that far more documentation was required and that "leniency" was not

acceptable - a decision upheld by the MPF just three weeks ago on December 16th.  Adding to the company's woes the DOJ then announced that it was reopening its investigation against the company based on information that came out of the Brazilian and US investigations into Petrobras. If SBM Offshore is found to have been economical with the truth, or worse, it will feel the full fury of the US regulators and the Dutch fine of $240mn could pale into insignificance.

In November 2014 the company settled out of court with the Dutch regulator, paying $240mn for having made improper payments in Equatorial Guinea, Angola and in Brazil totalling $186mn. There was no admission of guilt. On the back of the Dutch settlement, the US Department of Justice issued a declination, closing off its own probe. The Dutch regulator stressed that the "new" management of the company had self-reported the issue, hence some notional leniency was given to the company. If that self-reporting had not been the case, the fines would have been potentially far higher.

The company's "self-reporting" is a distortion of the truth, because at the heart of the case was a whistleblower. Calling himself by the initial "FE" for "former employee", the whistleblower posted a 3,700 word exposé setting out in detail not only the actuals sums and their payment, but a meeting by meeting account of the senior management's alleged cover up. He posted his  allegations on the company's Wikipedia page but within 24 hours the company had re-edited the page and locked him out. "FE", it later turned out, was Englishman Jonathan Taylor, the company's number two in-house lawyer.

Original Wiki page saved on DeepWeb site

The management clearly didn't understand much about Wikipedia or the workings of a site known as The WayBack Machine; because that original post was recorded and saved by the WayBack Machine and can still be read in  full detail here. The site's proper name is The Internet Archive, and it takes regular screen shots of popular sites and pages on the internet on a daily basis; currently there are almost 280 billion pages in its web-vaults. As the Dutch and US investigations took place the company's position gradually shifted from being that there may have been some "wrongdoing" in Africa, to finally admitting to each of the main country cases that had been stated as fact by "FE" in his exposé.

[Investigator's should note two issues: 1) that you cannot access content on the Internet Archive via a search engine and 2) that the search facility on it demands that you know the date and URL of the site you want to search.]

2017 is a critical year for SBM Offshore

Both the Brazilian and the US cases should see resolution this year and it will be interesting to see whether or not the DOJ takes the view that SBM Offshore management had wilfully concealed information from their investigators. SBM faces three major hurdles when it comes to settling

1. The Brazilian Federal prosecutor threw out a $340mn 'leniency deal'
2. The DoJ has been making its own investigation of the Petrobras corruption case and may have information that SBM Offshore senior management is alleged to had knowingly destroyed (see the whistle-blowers original post)
3. the company has finally admitted to the fact that the $129million paid in commissions to its Brazilian agent Julio Faerman was in a large part for bribes to be paid.  The going rate for a Petrobras commission was 3%: this has been corroborated by a number of players: Roberto Costa, the ex-head of the downstream business, and by several of the companies that have so far admitted to paying bribes.  SBM Offshore has written almost US$9.5billion of business with Petrobras over the past seven years, and three percent of that comes to US$ 285 million, not US$129 million. 

Consequently the SBM Offshore case is one of the top-5 FCPA cases we will be watching and reporting on throughout the year.