Baker Hughes to pay record $44 million to settle FCPA charges

Baker Hughes and a subsidiary agreed to pay more than $44 million in fines to settle federal charges that it and one of its employees violated the FCPA , said the US DOJ and the SEC on Apr. 26.

Nick Snow
Washington Correspondent

WASHINGTON, DC, Apr. 27 -- Baker Hughes Inc. and a subsidiary agreed to pay more than $44 million in fines to settle federal charges that it and one of its employees violated the Foreign Corrupt Practices Act, said the US Department of Justice and the Securities and Exchange Commission on Apr. 26.

The combined fines and penalties are the largest sanction so far in an FCPA case, the two federal agencies said. The charges stemmed from allegations that Baker Hughes Services International Inc. (BHSI) and one of its employees paid more than $4 million in bribes over 2 years to an intermediary that the company believed would relay the payments to a Kazakhstan national oil company official. Separate SEC charges alleged additional FCPA violations by Baker Hughes in Nigeria, Angola, Indonesia, Russia, Uzbekistan, and Kazakhstan.

BHSI pleaded guilty in federal district court in Houston to violating the FCPA's antibribery provisions, conspiracy to violate the FCPA, and aiding and abetting falsification of its parent company's records. It simultaneously entered into a deferred prosecution agreement with DOJ and accepted responsibility for its employees' conduct.

BHSI agreed to pay an $11 million criminal fine, serve 3 years of organizational probation and adopt a comprehensive antibribery compliance program, DOJ said. In related charges, said the SEC, Baker Hughes agreed to pay $10 million in civil penalties and more than $23 million in disgorgement and prejudgment interest.

The SEC said it also charged Roy Fearnley, a former business development manager for Baker Hughes, with violating the FCPA and aiding and abetting violations of the act. It said Fearnley has not reached a settlement with the commission.

DOJ said BHSI submitted a bid in February 2000 on behalf of Baker Hughes to perform project management, oil drilling, support, and other services as four international oil companies and Kazakhoil developed Karachaganak oilfield in Kazakhstan.

Soon after, Kazakhoil demanded that Baker Hughes pay a commission to an Isle of Man consulting firm, which supposedly was the national oil company's agent. Although the consulting firm performed no services for Baker Hughes, BHSI agreed in September 2000 to pay it an amount equal to about 2% of its revenue on the Karachaganak project and 3% on future projects in Kazakhstan.

BHSI was awarded the contract the following month, DOJ said. From May 2001 through November 2003 it paid $4.1 million in commissions to the consulting firm's account in a London bank from a BHSI account in Houston, the federal agency said.

Baker Hughes and BHSI voluntarily disclosed the violations and cooperated in investigations of the allegations and implementation of reforms, DOJ and the SEC said.

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