SEC v. Baker Hughes Inc. and Roy Fearnley (S.D. Tex 2007)
Case Details
- Case Name
- SEC v. Baker Hughes Inc. and Roy Fearnley (S.D. Tex 2007)
- Countries
- Kazakhstan, Angola, Nigeria, Indonesia, Russia, Uzbekistan
- Foreign Official
- Officials of Kazakhoil and KazTransOil, Kazakhstani state-owned entities; officials of Sonangol, an Angolan state-owned oil company; Nigerian tax and customs officials; Indonesian customs officials; government officials in Russia and Uzbekistan.
- Date of Conduct
-
1998 to 2003
- Nature of Business
- Baker Hughes Inc. (“Baker Hughes”), a U.S. corporation, provides oil field development services. Roy Fearnley is a former Kazakhstan-based Baker Hughes business executive.
- Influence to be Obtained
- Baker Hughes allegedly made payments to agents in Kazakhstan to secure a major services contract relating to the development of Karachaganak, a large gas and oil field in northwestern Kazakhstan. Although Baker Hughes was unofficially notified that it would win the contract, Kazakhoil representatives insisted prior to official notification that Baker Hughes retain an Isle of Man‑based consultant and agree to pay it a percentage commission of the revenues from the Karachaganak contract. Baker Hughes and its subsidiaries complied, making payments totaling approximately $4.1 million to the consultant from May 2001 to November 2003. Baker Hughes also allegedly engaged in a host of other violations, including paying nearly $1.1 million in commission payments to another agent in Kazakhstan to influence government decision‑making. The SEC’s complaint further alleges that Baker Hughes failed to conduct adequate due diligence to assure itself that several payments, including (among others) a $10.3 million payment to an Angolan agent and payments totaling approximately $5.3 million to an agent active in Russia, Uzbekistan, and Kazakhstan were not partly or entirely passed on to government officials in those countries.
- Enforcement
- On April 26, 2007, Baker Hughes agreed, without admitting or denying the SEC’s allegations, to pay over $23 million in disgorgement and prejudgment interest for these alleged violations, as well as an additional $10 million penalty for violating an existing SEC cease‑and‑desist order issued against it in 2001 pursuant to an investigation of a bribe paid to an Indonesian tax official. The settlement also permanently enjoins Baker Hughes from further violations of the FCPA or the 2001 cease‑and‑desist order. On January 26, 2010, the court entered a default judgment against Roy Fearnley, who never appeared in the case, providing for the same injunctive relief and disgorgement and prejudgment interest in the amount of $12,635.
- Amount of the Value
- At least $5.2 million in Kazakhstan; approximately $10.3 million in Angola; indeterminate amounts in Nigeria, Indonesia, Russia, and Uzbekistan.
- Amount of Business Related to Payment
- At least $208 million in Kazakhstan; undisclosed amounts in Angola, Nigeria, Indonesia, Russia, and Uzbekistan.
- Intermediary
- Agents; Tax Consultant; Customs Brokers; Freight Forwarders.
- Citizenship of Parent Entity
- United States
- Total Sanction
- $ 33,078,015
- Reporting Requirements
- No
- Total Combined Monetary Sanction
- $ 44,078,015
Defendants
Baker Hughes Inc.
- Citation
- SEC v. Baker Hughes Inc., No. 4:07-cv-01408 (S.D. Tex. 2007).
- Other Statutory Provision
- Violation of SEC Cease-and-Desist Order (Baker Hughes).
- Disposition
- Complaint and Consent Order
- Defendant Jurisdictional Basis
- Issuer
- Defendant's Citizenship
- United States
Roy Fearnley
- Citation
- SEC v. Baker Hughes Inc., No. 4:07-cv-01408 (S.D. Tex. 2007).
- FCPA Statutory Provision
-
- Aiding and Abetting: Anti-Bribery
- Aiding and Abetting: Books-and-Records
- Aiding and Abetting: Internal Controls
- Other Statutory Provision
- Violation of SEC Cease-and-Desist Order (Baker Hughes).
- Disposition
- Complaint and Default Judgment
- Defendant Jurisdictional Basis
- Agent of Issuer
- Defendant's Citizenship
- United States
