SBM Offshore

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.

SBM Offshore: Anatomy of a cover-up - Part 2

"What the butler saw (and heard)"

Agatha Christie's whodunits invariably rotate around what someone (often the butler) had seen , and so it is with the SBM Offshore bribery case. As I said yesterday the whistleblower,  Jonathan Taylor (aka "FE") was the number two in-house lawyer at the company and his original exposé can still be found on the DeepWeb. In that post not only does he detail the countries and bribes paid, but he sets out in detail the reaction and planning of the senior management. Mr Taylor also refers to various recordings: he had recorded a number of key meetings on his telephone, something which under Monaco's laws is permitted in certain circumstances.

Effective use of Open Source Intelligence techniques enables one to put together a fairly clear picture of who did what, who paid what, and who was at the receiving end of the company's generosity - I use Angola as an example below. Verification is a key issue, hence independent evidence or proof is important. Whilst press articles and governance blogs are good sources, the real meat tends to come from sites accessed within the DeepWeb, where a simple Google search will not reveal anything. 

Issue #1: Who was the company paying?

The initial section of the post ("Section A - Documents") sets out who was being "paid". I note that in Angola the recipient was a Panamanian company Mardrill Inc. which is said to have been "controlled by 3 Sonangol executives: Messrs. Sumbe, Benge and Dos Santos".  Sumbe will probably refer to Baptista Sumbe the Chairman of Sonangol Holdings and non-exec director of GALP; as a side note I would point to a recent MakaAngola article on Mr Sumbe alleging money-laundering in the USA. Next up is Benge; the is probably José Pedro Benge, director of Sonangol USA, of Sonangol Shipping Holding and various other positions.

As to which member of the Dos Santos family the post refers to, one has to turn to Open Corporates, a wonderful site that documents what public information there is on millions of "secret" offshore companies. Mardrill Inc. of Panama is listed on the site and is still operational. Fernando Dos Santos (aka "Nando") is listed as a director. Nando Dos Santos, a cousin of the country's President, is currently the President of the National Assembly and previously was the country's Prime Minister and then Vice President. A useful contact for SBM Offshore given its business interests.

In terms of verification, the company that Mr Taylor named in his "allegations" exists; the surnames he mentioned also exist and would seem to relate to senior members of the Angolan establishment; and finally, external data-sources show these three men as being directors of that Panamanian company. So whilst SBM cast aspersions about Mr Taylor, his character and his motives, the data he has made public is looking pretty firm.

The seniority of the contacts being paid was the same in other countries: in Equatorial Guinea it was mainly  cash for Gabriel Obiang - youngest son of the President and the current Minister of Mines, Industry and Energy (some call him the "Lord and Master" of EG's oil). Then in Brazil, as we know, and as the company has admitted, two-thirds of all payments went to senior Petrobras executives and from there supposedly  to the coffers of the Workers Party. So SBM Offshore was well used to greasing the wheels.

The fines and settlements reached to date cover "wrongdoings" by SBM's agents in three countries: Angola, Equatorial Guinea, and Brazil. Yet recent court documentation from the Netherlands sets out a history of bribes being paid in other countries. This is a copy of the defence document of Jonathan Taylor against SBM Offshore, who are now trying to sue him for (amongst other things) 'lying' - so one has to read the content with that in mind.  Clause 2.21 on page 10 reads: "In addition, under the Moswen Resources Sales Consultancy Agreement, Tagher was contracted to pay bribes on behalf of SBM in Tanzania, Congo, Ghana, Gabon, Greece, Bulgaria, Nigeria, India, Vietnam, Equatorial Guinea and Angola."  Further to these other countries the Wiki page refers to Unaoil being used to pay bribes in Iraq, Kazakhstan and Italy. Unaoil is being investigated by the UK's Serious Fraud Office.

Issue #2: what triggered the alleged cover-up?

In an interview given in 2015 to the Dutch magazine Vrij Nederland  Jonathan Taylor tells that on Tuesday 31st January 2012 the company received a call from a US-based lawyer calling on behalf of Noble Energy (a large US oil services company). The lawyer said the his client has discovered information on a company laptop incriminating SBM Offshore in the payment of bribes. The company immediately launched an internal investigation (see section "Absolute Chaos"): or some of the company did, whilst other senior managers took a different approach.

As stated one of the types of evidence Mr Taylor uses in his defence against SBM is transcripts of meetings within the company that he attended. Clearly this content cannot be verified, but given his record for accuracy to date, the transcripts are at the very least "embarrassing" to the company. Very little was known publicly about this content until the company made yet another attempt to silence Mr Taylor. Now much of the juicier content has been posted on the web, making the company's position all the more uncomfortable.

In future posts we will deal with the allegations of a physical cover-up...