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.