WASHINGTON, Jul 25, 2007 (Dow Jones Commodities News)
The U.S. Justice Department is conducting a criminal inquiry of nearly a dozen oil and oil-services companies, focusing on potentially illegal payments to customs agents who provided freight forwarding and other services, in Nigeria, Dow Jones Newswires learned Tuesday.
A civil investigation by the Securities and Exchange Commission also is underway.
Eleven oil and oil-service firms received a July 2 letter from the Justice Department's criminal fraud section asking them to detail their relationship with Panalpina World Transport Holding Ltd. (PWTN), a Swiss-based shipping and logistics-management company, according to individuals familiar with the matter, who agreed to speak anonymously. The Justice Department letter, which was read to Dow Jones, cited concerns about payments that may violate the U.S. Foreign Corrupt Practices Act.
The oil and oil-service firms were asked to list the countries where Panalpina provided it with services in the past five years, and to specify what it paid for those services. Each firm also was asked to meet separately with federal prosecutors in Washington, D.C. A Justice Department spokesman didn't respond to requests for comment. SEC spokesman John Heine declined to comment.
Panalpina announced Tuesday that it is conducting an internal investigation and has been asked to provide documents to the Justice Department relating to services in Nigeria, Kazakhstan and Saudi Arabia for "a limited number of customers."
"Obviously, we are cooperating with the investigation," Panalpina spokesman Martin Spohn told Dow Jones.
The Justice Department probe underscores the difficulty of complying with U.S. anti-bribery laws in countries that may be as awash in corruption as they are in oil. Federal officials, in a bow to such concerns, called a meeting at the Justice Department in Washington, D.C., last Friday specifically to discuss the pitfalls of operating in Nigeria.
Participants included four companies that weren't recipients of the July 2 letter, and which had previously reported internal investigations of potential violations of U.S. anti-bribery laws in West Africa.
Tidewater Inc. (TDW), Noble Corp. (NE), GlobalSantaFe Corp. (GSF) and Global Industries Ltd. (GLBL), in announcing their own investigations, didn't identify any third parties by name, referring only to reimbursements to an unidentified "customs agent."
On the agenda at the July 20 meeting: how to comply with U.S. anti-bribery laws while doing business in Nigeria, where such laws aren't respected and bribery is rampant.
The meeting included officials from the Justice Department, the SEC, the Commerce Department and the State Department. U.S. State Department officials based in Lagos took part by telephone, but not Nigerian government officials, allowing U.S. corporations to freely discuss frustrations about doing business in Nigeria, said an individual close to the matter, who declined to be identified. A Commerce Department spokesman had no immediate comment and a State Department spokeswoman didn't return phone calls seeking comment.
"It's a very difficult operating environment, even if you're trying to do everything by the book," said an individual familiar with operating in Nigeria, who agreed to speak anonymously. Another individual, who has conducted business in Nigeria, who also agreed to speak anonymously, said corruption in Nigeria is so widespread, "you can't pass through the Lagos airport without being asked to pay a bribe."
Firms that refuse to pay bribes cannot obtain permits needed to conduct business in Nigeria, while those that pay run the risk of being charged with violating the U.S. Foreign Corrupt Practice Act, according to individuals familiar with the matter, speaking anonymously.
U.S. oil and oil-services companies that do business in Nigeria are keenly interested in having the U.S. government address such issues, and hope Nigeria's recent elections might offer an opportunity for change, these individuals said. They spoke on condition they not be identified because they are not authorized to talk to reporters.
Solutions are in short supply, however. Pulling out of Nigeria would help U.S. companies avert potential legal harm, but wouldn't benefit the nation's energy supply or U.S. consumers. Remaining in Nigeria carries other risks, particularly for companies found to be repeat offenders of the Foreign Corrupt Practices Act.
In February, Vetco Gray Controls, a Houston oil-services company, and two other Vetco International Ltd. subsidiaries, paid a $26 million settlement to the Justice Department, a record for a criminal foreign corrupt practices case. The units admitted paying about $2 million in bribes to Nigerian customs officials through an international freight forwarding and customs clearing company, ending in 2005. Vetco had agreed in 2004 not to make such payments.
Baker Hughes (BHI) and a subsidiary paid $44 million in April to settle criminal charges involving bribes in Kazakhstan and SEC civil charges involving payments elsewhere, including Nigeria, the largest combined penalty for such charges. Baker Hughes had a 2001 agreement not to pay bribes under an SEC settlement related to payments in Indonesia.
As the Justice Department focuses on 11 oil and oil-services firms that relied on Panalpina for services, including in Nigeria, four others are voluntarily scrutinizing operations, a process that might or might not yield criminal charges depending on the findings.
New Orleans-based Tidewater Inc. announced in April that it was investigating payments to a customs agent to obtain permits to operate in waters off Nigeria. It cited concerns stemming from the fact that its Nigerian affiliate used the same customs agent thought to be implicated in the Vetco case.
Noble Corp., of Sugar Land, Texas, GlobalSantaFe Corp., of Houston, and Global Industries Ltd., of Carlyss, Louisiana followed suit in June. Noble announced an internal investigation of its Nigerian operations, focusing on reimbursements to customs agents for expenses for import permits. GlobalSantaFe said it is examining agents who handled customs matters in Nigeria, and Global Industries reported it was probing payments in Nigeria that may violate laws meant to prevent U.S. firms from bribing officials overseas.
Noble spokesman John Breed declined to comment and officials from Tidewater, GlobalSantaFe and Global Industries weren't immediately available to comment. GlobalSantaFe, an offshore drilling firm, announced merger plans Monday with Transocean Inc. (RIG).
Copyright (c) 2007 Dow Jones & Company, Inc.
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