Record FCPA Penalties Imposed on Baker Hughes
Baker Hughes and its affiliate, Baker Hughes Services International Inc. (BHSI), have agreed to pay civil and criminal penalties totaling $44 million for alleged violations of the U.S. Foreign Corrupt Practices Act (FCPA). The $44 million penalty against Baker Hughes is the largest FCPA monetary penalty to date.
In the criminal proceeding, BHSI agreed to plead guilty to one count of violating the anti-bribery provisions of the FCPA, one count of aiding and abetting the falsification of the books and records of Baker Hughes and one count of conspiracy to violate the FCPA. In its guilty plea BHSI admitted that it violated the FCPA by paying approximately $4.1 million in bribes over approximately a two-year period to an intermediary whom the company understood and believed would transfer all or part of the corrupt payments to an official of Kazakhoil, the state-owned oil company. These corrupt payments were allegedly paid through a consulting firm retained as an agent for Baker Hughes in connection with a major oil field services contract.
BHSI agreed to pay a criminal fine of $11 million. DOJ also entered into an agreement with Baker Hughes to defer prosecution for two years on charges of violating the anti-bribery and books and records provisions of the FCPA. Under the agreement, Baker Hughes must retain a compliance monitor for three years that will be responsible for reviewing and assessing the company's compliance program and to monitor Baker Hughes' implementation and and compliance with new internal policies and procedures.
In the civil proceeding, the Securities and Exchange Commission (SEC) filed a settled enforcement action in the United States District Court for the Southern District of Texas alleging that 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. In addition, the SEC also alleged violations of the books and records and internal controls provisions of the FCPA in Nigeria, Angola, Indonesia, Russia, Uzbekistan and Kazakhstan.
Under the settlement agreement, Baker Hughes agreed to pay more than $23 million in disgorgement and prejudgment interest for the FCPA violations and to pay a civil penalty of $10 million for violating a 2001 Commission cease-and-desist Order prohibiting violations of the books and records and internal controls provisions of the FCPA. In the same complaint, the SEC also charged Roy Fearnley, a former business development manager for Baker Hughes, with violating and aiding and abetting violations of the FCPA. Fearnley has not reached any settlement with the SEC regarding these charges.
The SEC's complaint can be found here (pdf).