SBM Offshore N.V. settles bribery case for US$ 240,000,000
12 november 2014 - Functioneel Parket
SBM Offshore has accepted an offer from the Dutch Public Prosecutor's Service to enter into an out-of-court settlement. The settlement consists of a payment by SBM Offshore to the Openbaar Ministerie of US$ 240,000,000 in total.
SBM Offshore has accepted an offer from the Dutch Public Prosecutor's Service (Openbaar Ministerie) to enter into an out-of-court settlement. The settlement consists of a payment by SBM Offshore to the Openbaar Ministerie of US$ 240,000,000 in total. This amount consists of a US$ 40,000,000 fine and US$ 200,000,000 disgorgement (ontneming van wederrechtelijk verkregen voordeel). This settlement relates to improper payments to sales agents and foreign government officials in Equatorial Guinea, Angola and Brazil in the period from 2007 through 2011 as identified by the Openbaar Ministerie and the Dutch Fiscal Intelligence and Investigation Service (Fiscale Inlichtingen- en Opsporingsdienst; FIOD). According to the Openbaar Ministerie's those payments constitute the indictable offences of bribery in the public and the private sector as well as forgery (valsheid in geschrifte).
Appropriate disposal of the case The Openbaar Ministerie considers the settlement pursuant to section 74 of the Dutch Criminal Code an appropriate outcome of the case. The settlement consists of a fine and a disgorgement component. Furthermore, the Management Board of SBM Offshore, newly put together in the first half of 2012, at its own initiative took an extensive set of measures in order to enhance the company's compliance. The Openbaar Ministerie values this, in the expectation that criminal offences as mentioned above do not occur again in the future. In addition, if it so wishes the Openbaar Ministerie will receive access to the continued implementation of SBM Offshore's compliance policies.
The reasons for the Openbaar Ministerie to offer an out-of-court settlement include:
SBM Offshore itself brought the facts to the attention of the authorities, including the Openbaar Ministerie, SBM Offshore itself investigated the matter and agreed to fully cooperate with subsequent criminal investigations by the Openbaar Ministerie and the FIOD;
there has been a new Management Board since 2012;
after it became aware of the facts, the newly established Management Board of SBM Offshore, at its own initiative, has taken significant measures to improve the company's compliance; and
as noted in SBM Offshore's press release, the current Management Board and Supervisory Board regret the failure of control mechanisms in place in the past.
Reasons for the investigation by the FIOD and the Openbaar Ministerie In the spring of 2012, SBM Offshore, at its own initiative, informed the Openbaar Ministerie of its self-initiated internal investigation into potentially improper payments made to its sales agents for services.
The internal investigation was conducted in the period from 2012 through 2014 and focused on the period from 2007 through 2011. The extent of the internal investigation was determined in consultation with the Openbaar Ministerie and the FIOD.
In addition, the FIOD conducted its own investigation under the direction of the Openbaar Ministerie.
Countries involved in the investigation From 2007 through 2011, SBM Offshore paid approximately US$ 200 million in commissions to foreign sales agents for services. The largest part of these commissions, totalling US$ 180.6 million, relate to Equatorial Guinea, Angola and Brazil.
The investigation conducted by the Openbaar Ministerie and the FIOD focused on these three countries. The Openbaar Ministerie considers the investigation into these three countries sufficiently representative for the entirety, taking into account the portion these three countries represented in SBM Offshore's business.
Equatorial Guinea In early 2012, it came to SBM Offshore's attention that one of its former sales agents might have given certain items of value to government officials in Equatorial Guinea. This reportedly involved one or more cars and a building. In the opinion of the Openbaar Ministerie and the FIOD, SBM Offshore's former sales agent paid a significant portion of the commissions paid to him by SBM Offshore on to third parties, who in turn would have forwarded parts of these payments to one or more government officials in Equatorial Guinea. There also are other payments, such as education and health insurance costs. In the opinion of the Openbaar Ministerie and the FIOD, such (forwarded) payments took place with the knowledge of people who at the time were SBM Offshore employees, including someone who at the time was a member of the Management Board. From 2007 through 2011, SBM Offshore paid that particular sales agent USD 18.8 million in total in relation to Equatorial Guinea.
Angola In the period from 2007 through 2011, SBM Offshore also used several sales agents in Angola. These sales agents received commissions for services regarding certain projects in Angola. In the opinion of the Openbaar Ministerie and the FIOD, Angolan government officials, or persons associated with Angolan government officials, who are associated with at least one of these sales agents, received funds. In addition, there are payments for travel and study costs to one or more Angolan government officials or their relatives. Also with respect to Angola, the Openbaar Ministerie and the FIOD are of the opinion that such payments took place with the knowledge of people who at the time were SBM Offshore employees. In the period from 2007 through 2011, SBM Offshore paid USD 22.7 million in commissions to its sales agents in connection with Angola.
Brazil With regard to Brazil, certain "red flags" relating to the main sales agent used in Brazil were found during the internal investigation commissioned by SBM Offshore. These red flags included:
the high amounts (in absolute terms) of commission that were paid to the sales agent and its companies;
a split between commissions paid to the sales agent between its Brazilian and its offshore entities; and
documents indicating the sales agent had knowledge of confidential information about a Brazilian client.
The internal investigation conducted by SBM Offshore did not yield any concrete evidence that payments may have been made to one or more government officials in Brazil. In the period from 2007 through 2011, SBM Offshore paid USD 139.1 million in commissions to its sales agents in connection with Brazil.
A mutual legal assistance request in the context of the investigation conducted by the FIOD, under instruction of the Openbaar Ministerie, established that payments were made from the Brazilian sales agent's offshore entities to Brazilian government officials. These findings resulted from means of investigation inaccessible to SBM Offshore.
The investigation In the context of the internal investigation by SBM Offshore, hard drives and other electronic data and documents were analysed. Also, interviews were conducted with current and former SBM Offshore employees, including members of the Management Board, Supervisory Board, employees of the Legal, Sales and Marketing, Accounting and Finance departments and the relevant project teams.
This internal investigation was conducted by specialised law firms and forensic accountants, who were assisted by an internal team of SBM Offshore which, as of his appointment, was led by Sietze Hepkema, SBM Offshore's Chief Governance and Compliance Officer, and consisted of members of SBM Offshore's Legal, Compliance Finance/Internal Controls and Internal Audit departments.
SBM Offshore has always given full disclosure to the Openbaar Ministerie and the FIOD. The Openbaar Ministerie and the FIOD were kept informed of the progress of the internal investigation by SBM Offshore via meetings. The preliminary findings of the internal investigation were reported to the Openbaar Ministerie and the FIOD. The internal investigation was completed in early 2014, after which SBM Offshore filed a complaint with the Openbaar Ministerie.
In addition, the FIOD, under the direction of the Openbaar Ministerie, conducted its own investigation. Administration was seized, witnesses and other persons involved were interviewed and mutual legal assistance was requested from countries involved. SBM Offshore cooperated with this investigation conducted by the FIOD under the direction of the Openbaar Ministerie that was also instigated as a result of the findings of the internal investigation conducted by SBM Offshore.
Measures to prevent recurrence SBM Offshore's Supervisory Board constituted a new Management Board, which took office in the first half of 2012. This new Management Board constantly stresses the importance of compliance inside and outside the organisation. One of the members, Sietze Hepkema, was appointed Chief Governance and Compliance Officer, a newly created position in the Management Board. Another experienced employee has been appointed to the position of Group Compliance Director. In the next few years, these positions will continue to be held by people with the necessary expertise, authority and stature to continue the compliance programme.
As of its appointment in the course of 2012, the current Management Board has taken many (remedial) measures to prevent recurrence. For example, the use of sales agents within SBM Offshore has been restricted directly from the beginning of 2012. SBM Offshore first suspended all payments to sales agents pending the completion of the compliance assessment of these sales agents. A newly created "Compliance Task Force", composed of representatives of the Internal Audit, Compliance and Group Internal Control departments, investigated payments of commissions to sales agents during the period from 2007 through 2011. In addition, SBM Offshore established a Validation Committee consisting of the CEO, the Chief Governance and Compliance Officer, the Group Controller and the Group Sales Director, in order to assess all its sales agents and to decide whether to approve the sales agent and its commission, or to discontinue use of the sales agent. All sales agents that were and are used by the company are subject to this stringent procedure. Sales agents that were unable to meet the compliance requirements of SBM Offshore are no longer used by the company. In addition, SBM Offshore decided to no longer use sales agents in those countries where the company itself has a substantial presence.
In addition, the compliance policy was enhanced to ensure the integrity of the company. For this purpose, guidelines and procedures with regard to entering into, continuing and dealing with relationships with sales agents, other intermediaries and joint venture partners were drawn up and/or enhanced. The sales agents themselves have to contractually commit to the policies that apply within SBM Offshore.
In addition to the measures imposed on sales agents, disciplinary actions were taken against employees who were involved in or had knowledge of the payments concerned. Furthermore, all employees in compliance-sensitive positions, approximately 2,540 each year over the past four years, have attended updated anti-corruption trainings. They will be kept updated annually by additional training modules. In order to ensure the integrity of its employees in the future, SBM Offshore also enhanced its HR procedures. As a result, future employees will be subject to a stricter screening. In addition, current and future employees are required to adhere to SBM Offshore's compliance commitments.
With its voluntary disclosure of the internal investigation to the Openbaar Ministerie and the market in April 2012, SBM Offshore made it clear that it wants to conduct its business transparently. It closely monitors at strict adherence to its compliance policy now and in the future. The Openbaar Ministerie and the FIOD, also based on conversations with the Supervisory Board and Management Board, came to the conclusion that after discovery of the events, SBM Offshore has put itself on the right compliance track and that it will continue to follow this track in the future.
Further investigation It appears from the criminal investigation that certain natural persons have been involved in the criminal offences committed in the opinion of the Openbaar Ministerie. In a case like the one at hand, the Openbaar Ministerie has jurisdiction if criminal acts are committed in the Netherlands, or when criminal acts are committed abroad by persons with the Dutch nationality. From the current state of affairs of the investigation, this does not appear to be the case. The Openbaar Ministerie will cooperate fully with the countries that have jurisdiction to prosecute the natural persons involved.
The Openbaar Ministerie and SBM Offshore are confident that with the measures taken by the new Management Board and the importance which the management of the company attaches to transparency, potential past abuses, as described above, will not occur in the future.
The Openbaar Ministerie has, partly because of the reasons mentioned above, seen reason to offer an out-of-court settlement to SBM Offshore, and sees this as an appropriate outcome of this matter.
SBM Offshore will continue to provide its full cooperation in any potential ongoing investigations of third parties by the Openbaar Ministerie.
Finally With this matter, the Netherlands shows that it takes action against foreign corruption. The Openbaar Ministerie considers corruption and related criminal offences severe because of the undermining and corrupting character they impose on society.
In the eyes of the Openbaar Ministerie, out-of-court settlements involve punishment, restoration, and prevention. In that context, the Openbaar Ministerie also takes into account the positioning of the suspected company and the measures the company has taken at its own initiative.