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Halliburton, KBR Settle Bribery Allegations

By Zachary A. Goldfarb
Washington Post Staff Writer
Thursday, February 12, 2009

Halliburton and Kellogg Brown & Root have agreed to pay $579 million in fines related to allegations of foreign bribery, the biggest fines ever paid by U.S. companies in a foreign corruption case, federal authorities and the companies said yesterday.

The Securities and Exchange Commission and Department of Justice alleged that Houston-based Halliburton and KBR were part of a joint venture that spent $182 million to bribe Nigerian government officials over a 10-year period to win more than $6 billion in construction contracts.

Halliburton, which owned KBR during the time of the alleged actions and spun it off in April 2007, will be responsible for paying all but $20 million of the penalty.

KBR, one of the top U.S. government contractors, pleaded guilty to violating the federal law banning companies from paying bribes to get business in foreign countries. Halliburton did not admit or deny wrongdoing.

Federal authorities alleged that the companies used agents in Tokyo and Gibraltar to funnel money to Nigerian officials, who gave the companies contracts to build liquefied natural gas facilities on Bonny Island, on the Western African country's coast.

The companies' efforts to obtain the contracts, alleged in court documents, sound like scenes from a James Bond movie.

In June 2002, KBR's then-chairman, Albert "Jack" Stanley, authorized a $23 million payment to a consultant in Gibraltar if a joint venture in which KBR participated won a contract to build natural gas facilities. Stanley intended that the fee would be used in part to pay bribes to Nigerian officials, with whom he had arranged for the bribes, according to the documents. The payment would wired to Swiss and Monaco bank accounts.

Two months later, a subcontractor hired by the consultant allegedly visited an official of the Nigerian National Petroleum Corp. in Abuja, Nigeria's capital, with a pilot's suitcase containing $1 million in $100 bills. In April 2003, the subcontractor drove $500,000 in Nigerian currency to an NNCP official. The car, filled with the cash, was left in a hotel parking lot until the NNCP official unloaded it, according to the documents.

The joint venture won the contract -- to build a structure to pipe raw natural gas from wellheads, convert it to liquefied natural gas and deliver it to tankers.

Last year, Stanley pleaded guilty to conspiring to violate federal anti-bribery laws. He also settled with the SEC. His lawyer, Larry Veselka, yesterday said Stanley is cooperating with authorities and has no further comment. An official from the Nigerian embassy could not be reached for comment.

Under its agreement with the Justice Department, KBR agreed to retain an independent compliance monitor for three years to ensure the company follows anti-bribery regulations. The investigations began in 2003.

"Today's guilty plea by KBR ends one chapter in the department's long-running investigation of corruption in the award of $6 billion in construction contracts in Nigeria. This bribery scheme involved both senior foreign government officials and KBR corporate executives who took actions to insulate themselves from the reach of U.S. law enforcement," said Rita M. Glavin, acting assistant attorney general.

The SEC's complaint charged that KBR violated the Foreign Corrupt Practices Act and said that KBR and Halliburton committed violations related to maintaining their books, records and internal compliance systems.

The SEC has been bringing an increasing number of foreign corruption cases. It settled its largest case ever late last year, against the German corporation Siemens, which agreed to pay $800 million in fines in the United States and a similar amount to German authorities.

"Multinational companies should take heed that attempting to conceal bribes by funneling them through intermediaries or offshore entities will not be successful," said Antonia Chion, associate director of the SEC's division of enforcement.

KBR chief executive William Utt said yesterday he was pleased "to finally conclude this very difficult but necessary settlement." He said it closes a "regrettable and unfortunate chapter in KBR's rich and storied history. KBR has fully cooperated with the U.S. government through the extensive investigations over the last five years."

Staff writer Dana Hedgpeth contributed to this report.

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