Bribery of foreign officials is prohibited by the Foreign Corrupt Practices Act (FCPA)1, a law passed in 1976 after a post-Watergate SEC investigation uncovered an epidemic of overseas bribery by American multinational corporations.###
A number of bribery cases involving large U.S. corporations have been reported in recent years. The companies involved include Enron, Xerox, Tyco, IBM, Accenture and Halliburton. There are two alleged bribery cases related to Halliburton.
In May of 2003, Halliburton reported to the Security Exchange Commission (SEC) that company employees made $2.4 million in "improper payments" to officials of Nigeria's Federal Inland Revenue Service in 2001 and 2002 "to obtain favorable tax treatment." "Based on the findings of the investigation we have terminated several employees," Halliburton said in the filing, adding that none of its senior officers was involved in the bribe.2 But the Houston Chronicle later pointed out, "left unanswered is how a 'low-level employee' could channel that much money from the company to the pockets of a corrupt official."3
The second case is more complicated and potentially much more controversial. It involves an international consortium of four companies, including Halliburton's Kellogg Brown & Root subsidiary. The other companies are from France (Technip), Italy (Snamprogetti SpA), and Japan (Japan Gasoline Corp.). Together, the companies formed a joint venture called TSKJ, which won a lucrative contract from international oil companies to build a large liquefied natural gas plant on Bonny Island in the eastern Niger delta.
According to news reports, French police launched a preliminary probe in October 2002. In June 2003, the prosecutor found enough merit in the case to assign it to an investigating anti-corruption judge, Renaud van Ruymbeke, a French judge with a reputation for probity and independence, who previously investigated bribe-giving by the French petrogiant Elf. It was the Elf investigation that led van Ruymbeke to open a formal investigation into the Nigerian deal in October 2003.
News reports suggest that TSKJ incorporated a subsidiary (LNG Services) in the Portuguese tax-haven Madeira which paid at least $180 million into a score of different off-shore bank accounts controlled by Gibraltar-based TriStar corporation for "commercial support services."4 Jeffrey Tesler, a British lawyer and the only TriStar official that could be identified, channeled the money through TriStar and bank accounts he controlled in Switzerland and Monaco.5 It is not known where the money ultimately ended up, but Tesler was reportedly also a financial advisor to Nigeria's late dictator, Gen. Sani Abacha. Georges Krammer, a former top Technip official, testified to French investigators that Tesler was imposed as an intermediary by Halliburton over the objections of Technip.6
In October 2003, Le Figaro reported the existence of a March 17 letter by William Chaudan, one of the directors of the LNG project, which explained: "Jeffrey Tesler has a professional and personal relationship with KBR since the '80s."7 The paper also reported that Dan Etete, the former Oil Minister to Nigeria's ex-dictator Sani Abacha, indicated that Shell and KBR were extremely well established in Nigeria and had close relationships with the ruling power. According to the Washington Post, "at the heart of the investigation is the question of whether those payments amounted to illegal commissions, or bribes, to Nigerian public officials." The payments would have been made during Vice President Cheney's tenure as CEO.8 The level of corruption in Nigeria, which at the time was under the control of the late dictator Sani Abacha, is notorious.
Judge Van Ruymbeke has suggested that he may summon Cheney to France to be questioned about what, if anything, he knew about the payments. The judge has reportedly ruled out directly prosecuting Cheney on a charge of bribing foreign officials, although the judge's investigation into the "misuse of funds" and "corruption of foreign public agents" continues. The Nigerian government, the U.S. Justice Department, and the SEC have opened their own investigations.
"If such payments were made and Cheney approved them, he could be guilty of violating the U.S. Foreign Corrupt Practices Act," the Boston Globe points out. (U.S. corporate officials are only liable for the actions of their foreign subsidiaries if it can be determined that they had personal knowledge of the subsidiary's improper actions.) The Globe editorialized that, "If the payments were made and he [Cheney] did not know about them, he could not have been a hands-on leader of his conglomerate. The nation, in any case, deserves answers before it votes in November."9
Halliburton says it is cooperating with US officials on the case and "has no basis to assume that any of its employees, or employees of the joint venture, has violated the US Foreign Corrupt Practices Act." Halliburton CEO David Lesar said in February that whatever happened in Nigeria was commenced by an independent company that was later bought by Halliburton.10 Nevertheless, the company reported to the SEC that there can be no assurance the matter "will not lead to additional allegations" or that "we will not have to defend against these and other similar allegations."
In February, the Corporate Crime Reporter reported that Halliburton hired James Doty - an attorney with the Washington office of the Baker Botts law firm -- to investigate the case. Doty represented George W. Bush when he bought the Texas Rangers and was general counsel to the Securities and Exchange Commission at a time when the SEC was investigating Bush for insider trading associated with his experience on the board of Harken Energy Corp. (Doty recused himself from that case, which was eventually closed without action.)11 Doty has also represented Baker Hughes in a corrupt payments scandal in Nigeria, Angola and Kazakhstan.12
1. 15 U.S.C.S. §§ 78dd-1, 78dd-2, and 78dd-3.
2. See Halliburton 10-K, 2002.
3. “The Cheney Factor,” Houston Chronicle, February 22, 2004.
4. Jon Henley, “French sleaze inquiry targets US oil subsidiary,” The Guardian, October 11, 2003.
5. David Pallister and Jon Henley, “UK lawyer named in bribery inquiry,” The Guardian (London), Febuary 6, 2004.
6. Doug Ireland, “Will the French Indict Cheney?” The Nation, December 29, 2003.
7. Eric Decouty, “A Nigerian Contract at the Heart of a Corruption Affair,” Le Figaro, December 20, 2003.
8. Keith B. Richburg, “French Judge Probes Unit of Halliburton,” Washington Post, January 24, 2004.
9. “A Cloud Over Cheney,” Boston Globe (editorial), February 10, 2004.
10. “Halliburton Smoke,” Boston Globe February 25, 2004.
11. Peter Behr, “Bush sold Stock After Lawyers’ Warning,” The Washington Post, November 1, 2002.
12. Corporate Crime Reporter, February 16, 2004.