Halliburton has announced the resolution of the previously disclosed Foreign Corrupt Practices Act (FCPA) investigations by the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC).
These investigations commenced in 2003 as a result of allegations of improper payments to government officials in Nigeria through the use of agents or subcontractors in connection with the construction and subsequent expansion by a joint venture known as TSKJ of a natural gas liquefaction project on Bonny Island, Nigeria, in which Halliburton's former subsidiary KBR, Inc. has an approximate 25 percent interest.
On February 11, a subsidiary of KBR pleaded guilty to conspiring to violate the FCPA and to substantive counts charging violations of the anti-bribery provisions of the FCPA in connection with the Bonny Island project. The scheme commenced in the 1990's prior to Halliburton's 1998 acquisition of Dresser Industries, Inc.
To enhance KBR's financial stability and solvency, making possible the separation of KBR, Halliburton indemnified KBR from fines or other monetary penalties or direct monetary damages, including disgorgement, as a result of a claim made or assessed by a governmental authority in the United States and certain other countries related to alleged or actual violations occurring prior to November 20, 2006 of the FCPA or particular, analogous applicable foreign statutes, laws, rules, and regulations in connection with investigations pending as of that date.
The DOJ investigation was resolved with respect to Halliburton with a non-prosecution agreement in which the DOJ agreed not to bring FCPA or bid coordination-related charges against Halliburton, and in which Halliburton agreed to continue to cooperate with the DOJ’s ongoing investigation and to refrain from and self-report certain FCPA violations. That agreement does not provide for a monitor.
As a result of the indemnity and the KBR subsidiary's criminal plea, Halliburton has agreed to pay in eight installments over the next two years $382 million of $402 million in criminal fines payable by KBR as part of KBR’s resolution of the DOJ investigation, with KBR consenting to pay the remaining $20 million.
With respect to the SEC, without admitting or denying the allegations in the complaint, Halliburton consented to the entry of a final judgment that permanently enjoins Halliburton from violating the record-keeping and internal control provisions of the FCPA. KBR also entered into a related settlement with the SEC. As part of Halliburton's settlement, Halliburton agreed to be jointly and severally liable with KBR for and, as a result of the indemnity, to pay to the SEC, $177 million in disgorgement. KBR has agreed that Halliburton's indemnification obligations with respect to the DOJ and SEC investigations have been fully satisfied.
In addition, as part of the resolution of the SEC investigation, Halliburton will retain an independent consultant to perform a 60-day initial and, approximately one year later, a 30-day follow-up review and evaluation of Halliburton's anti-bribery and foreign agent internal controls and record-keeping policies and to adopt any necessary improvements.
As previously announced on January 26, as a result of these settlements, Halliburton recorded in the fourth quarter of 2008 an additional charge to discontinued operations of $303 million or $0.34 per diluted share.
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