Nick Snow
Washington Correspondent
Eric Watkins
Senior Correspondent
WASHINGTON, DC, and LOS ANGELES, Feb. 7 -- Three Vetco International Ltd. subsidiaries pled guilty to violating antibribery provisions of the Foreign Corrupt Practices Act and agreed to pay $26 million—the largest criminal fine in an FCPA prosecution by the US Department of Justice so far, Deputy Atty. Gen. Paul J. McNulty reported Feb. 6.
The pleas by Vetco Gray Controls Inc., Vetco Gray Controls Ltd., and Vetco UK Ltd. came before US District Judge Lynn N. Hughes in the Southern District of Texas. The three subsidiaries also pleaded guilty to conspiracy to violate the FCPA.
A fourth Vetco subsidiary, Aibel Group Ltd., entered into a deferred prosecution agreement with DOJ regarding the same underlying conduct.
The settlement fulfills a closing condition for the previously announced sale of Vetco Gray to GE, the Houston-based oil field service and supply company said in a separate statement.
As part of the plea and deferred prosecution agreements, Vetco Gray Controls Ltd. agreed to pay a $6 million fine, Vetco Gray Controls Ltd., $8 million, and Vetco Gray UK Ltd., $12 million.
In the charging and plea documents, DOJ said that the three Vetco subsidiaries admitted that they violated and conspired to violate the FCPA in connection with the payment of about $2.1 million in corrupt payments over 2 years to Nigerian government officials.
These corrupt payments were paid through a major international freight forwarding and customs clearance company to employees of the Nigerian Customs Service, and coordinated largely through Vetco Gray Controls Inc.'s offices in Houston. Additionally, Aibel Group Ltd. agreed in its deferred prosecution agreement to accept responsibility for similar conduct by its employees.
As the charging and plea documents reflect, beginning in February 2001, Vetco Gray UK began providing engineering and procurement services and subsea construction equipment for Nigeria's first deepwater oil drilling project, the Bonga Project. Several Vetco Gray UK affiliates, including Aibel Group, Vetco Gray Controls Inc., and Vetco Gray Controls Ltd., supplied Vetco Gray UK with employees and manufacturing equipment for the project.
Period of payments
From at least September 2002 to at least April 2005, each of the defendants engaged the services of a major international freight forwarding and customs clearing company and, collectively, authorized that agent to make at least 378 corrupt payments totaling $2.1 million to Nigerian Customs Service officials to induce those officials to provide the defendants with preferential treatment during the customs process, DOJ said.
It said that this was the second time that Vetco Gray UK has pled guilty to violating the FCPA. On July 6, 2004, the company, then named ABB Vetco Gray UK Ltd., and an affiliated company pleaded guilty to violating the antibribery provision of the FCPA in connection with the payment of more than $1 million in bribes to officials of NAPIMS, a Nigerian government agency which evaluates and approves potential bidders for contract work on oil exploration projects.
ABB Vetco Gray UK Ltd. was renamed Vetco Gray UK Ltd. following an acquisition by two private equity firms, Candover and JP Morgan Partners, of the upstream oil and gas businesses and assets of its parent corporation, ABB Handels-und Verwaltungs AG. The July 12, 2004 acquisition included the sale of Vetco Gray UK and the predecessors to the two other Vetco International subsidiaries, which pleaded guilty in the most recent case.
In anticipation of the acquisition, the private equity firms requested and obtained an opinion release from DOJ that required the new owners to institute and implement a compliance system, internal controls, training, and other procedures sufficient to have deterred and detected violations of the FCPA, among other obligations, the federal agency said.
It said that the corrupt payments underlying the latest guilty pleas continued unabated from the period prior to the acquisition until at least mid-2005, despite the acquiring equity firms' commitments to DOJ under the Opinion Release. The sale to new owners, the prior directives issued by DOJ, and Vetco Gray UK's prior FCPA conviction were all taken into account under the U.S. Sentencing Guidelines in calculating the $12 million criminal fine against Vetco Gray UK, DOJ said.
Resolution of the criminal case against Vetco International and its subsidiaries resulted, in large part, from the Houston-based oilfield service and supply company voluntarily disclosing the matter to DOJ and the subsidiaries' agreement to take significant remedial steps.
In addition to the criminal fines, DOJ said that the plea agreements also require the defendants to: 1. Hire an independent monitor to oversee the creation and maintenance of a robust compliance program. 2. Undertake and complete an investigation of the companies' conduct in various other countries as originally required under FCPA Opinion Release No. 2004-02. 3. Ensure that in the event that any of the companies are sold, the sale shall bind any future purchaser to the monitoring and investigating obligations.
Contact Nick Snow at [email protected] and Eric Watkins at [email protected].
