A&O Shearman FCPA Digest | SEC v. Chevron Corp. (S.D.N.Y. 2007)

Source Documents

Nature of Business
Chevron Corporation, a Delaware corporation, produces, processes, markets, and transports of crude oil, natural gas, and petroleum products. Its common stock is registered with the SEC pursuant to Section 12(b) of the Exchange Act and trades on the New York Stock Exchange

Influence to be Obtained
In April 1995, the U.N. adopted Security Council Resolution 986, which permitted the government of Iraq to sell oil and to use proceeds from those sales to purchase humanitarian supplies such as food for the Iraqi people (“U.N. Oil‑for‑Food Program”). In an extensive scheme, the Iraqi government received illicit payments in the form of surcharges from oil purchasers and kickbacks, often termed “after sales service fees,” from humanitarian goods suppliers. The kickback payments were masked by inflating the contract price, usually by 10% of the contract value.

According to the SEC’s complaint, from approximately April 2001 through May 2002, Chevron allegedly purchased 78 million barrels of crude oil from Iraq pursuant to 36 contracts with third parties, paying premiums to the third parties that, in turn, were paid to Iraq’s State Oil Marketing Organization as illegal surcharges, paid to bank accounts in Jordan and Lebanon controlled by the Iraqi government and in the names of Iraqi government officials and other individuals. The complaint alleges that Chevron improperly recorded the true nature of the payments.

The government did not allege bribery of any individual foreign governmental officials.

Enforcement
On November 14, 2007, the SEC filed a settled complaint against Chevron. Without admitting or denying the allegations, Chevron consented to the entry of an injunction as well as to disgorgement of $25 million ($20 million to the U.S. Attorney’s Office for the Southern District of New York and $5 million to the New York County District Attorney’s Office) and a civil penalty of $3 million.

Chevron also agreed to pay the Office of Foreign Asset Controls of the U.S. Department of Treasury a penalty of $2 million, and entered into a two‑year non‑prosecution agreement with the U.S. Attorney’s Office for the Southern District of New York and the District Attorney of New York County, New York.