In the Matter of Vantage Drilling International (2018)

• Case Name
• In the Matter of Vantage Drilling International (2018)

• Date Filed
• 11/19/2018

• Enforcement Agency
• SEC

• Foreign Official
• Unnamed senior official from Petrobras' International Division.

• Date of Conduct
• 2007 to 2013

• Nature of Business
• Vantage Drilling International (“Vantage”) is an offshore drilling company headquartered in Houston, Texas and organized under the laws of the Cayman Islands. Until February 2016, Vantage was a subsidiary of Vantage Drilling Company (“VDC”) and currently Vantage owns and controls all of the tangible assets and operations of VDC.
  
  VDC is headquartered in Houston, Texas and is organized under the laws of the Cayman Islands. Until December 2015, the company maintained common stock that was registered with the SEC under Section 12(b) of the Exchange Act and traded on the New York Stock Exchange. VDC commended liquidation proceedings in December 2015 in the Cayman Islands.

• Influence to be Obtained
• According to the SEC, VDC failed to create a system of internal accounting controls to monitor transactions it entered into with its only supplier of drilling assets who was also its largest shareholder and outside director ("Director A"). The SEC alleged that VDC's lack of proper internal accounting controls put VDC at risk of providing or reimbursing Director A with funds it intended to use towards improper payments.
  
  VDC and Director A entered into an agreement whereby Director A would retain ownership of a drillship and VDC would be authorized to market the ship to potential clients. VDC's CEO contacted a Brazilian third-party agent for assistance with marketing VDC to Petroleo Brasileiro SA Petrobras (“Petrobras”), a Brazilian state-owned oil and gas company. The agent assisted VDC in responding to a marketing inquiry by Petrobras' International Division ("PBID") seeking proposals from drilling operators who could provide an ultra-deepwater drillship. A senior official from PBID reached out to the agent during the bidding process to inform the agent that the official would award the contract to VDC in return for a monetary payment—some of which was earmarked for Brazilian politicians. In a private conversation with Director A, the agent notified the director of the monetary conditions, which Director A agreed to. In total, Director A agreed to pay $31 million from his personal funds in order to secure an 8-year drilling contract (with an approximate value of $1.8 billion) for VDC unbeknownst to the CEO and another director. In 2009 and 2010 he went on to make some of the improper payments to the third-party marketing agent and official at PBID. The SEC alleged that VDC did not effectively respond to red flags that indicated Director A had made improper payments to obtain the contract. In 2012, a contractor working with Director A had hinted to VDC that Director A expected VDC to reimburse him for his “payment to P.” Additionally, in 2013 VDC’s CEO and marketing department received an email from a Brazilian reporter asking about the alleged payments from Director A. The SEC alleged that despite these red flags, VDC did not take steps to determine if payments it made to Director A were utilized to fund or reimburse the improper payments.
  
  The SEC also alleged that VDC failed to properly implement internal accounting controls when interacting with a third-party marketing agent. Specifically, it alleged that VDC failed to conduct due diligence and implement prudent safeguards consistent with its internal policies when interacting with an agent acting on its behalf with foreign government officials.

• Enforcement
• On November 19, 2018, the SEC settled its enforcement action against Vantage for violations of the FCPA’s internal controls provision. According to the cease-and-desist order, Vantage agreed to pay $5,000,000 in disgorgement.

• Amount of the Value
• Approximately $21.7 million.

• Amount of Business Related to Payment
• Approximately $1.8 billion.

• Intermediary
• Agent.

• Citizenship of Parent Entity
• United States

• Total Sanction
• $ 5,000,000

• Compliance Monitor
• No

• Reporting Requirements
• No

• Case is Pending?
• No

• Total Combined Monetary Sanction
• $ 5,000,000

Vantage Drilling International

• Citation
• In the Matter of Vantage Drilling International, Admin. Proc. File No. 3-18899 (Nov. 19, 2018).

• Date Filed
• 11/19/2018

• Filed Under Seal
• No

• FCPA Statutory Provision
• • Internal Controls

• Other Statutory Provision
• None.

• Disposition
• Cease-and-Desist Order, Cease-and-Desist Order

• Defendant Jurisdictional Basis
• Issuer

• Defendant's Citizenship
• United States

• Individual Sanction
• $5,000,000.