Just before Easter in 2012 Dutch oil services company SBM Offshore called an emergency meeting after an internal investigation uncovered possible bribery in several countries.
Board members, corporate lawyers and accountants gathered at the Sheraton hotel by Amsterdam’s Schiphol Airport for meetings lasting 10 hours to plan what to do next. Ultimately, they decided to voluntarily report the matter to the US and Dutch authorities but not reveal the full scale of the potential problem until more was known.
Unbeknownst to them at the time, however, the meetings were being recorded by an employee concerned there could be a cover-up. The recording would form part of a body of evidence used by a Dutch magazine, Vrij Nederland, in 2017 to claim SBM Offshore tried to conceal certain bribery allegations.
The case would end with staggered enforcement actions by authorities in several countries, sparking disagreement over whether SBM’s early decisions in the investigation were to blame or if it became a victim as agencies unnecessarily piled on penalties.
Based on the recording and interviews with those who were there, GIR Just Anti-Corruption tells the story of that fateful crisis meeting and what happened next.
The incriminating emails
The crisis at SBM started on 31 January 2012. A compliance lawyer for Noble Energy, a Houston based natural gas exploration and production company, called SBM’s then head of legal affairs, Jay Printz, to inform him of emails suggesting bribery by the Dutch company in Equatorial Guinea, according to a recording of the SBM supervisory board meeting on 5 April 2012.
Noble warned SBM that it was considering reporting the information to government authorities as executives from Noble were also possibly implicated in the emails. The companies then entered into a “gentleman’s agreement” to inform the other before reporting anything to the authorities. Noble has faced no related charges and did not respond to requests for comment.
Noble’s call spurred SBM into action. It hired US law firm Paul Hastings and Dutch firm De Brauw Blackstone Westbroek to investigate and review where SBM’s payments to third-party agents were really going. Potential “red flag” payments were then identified in Equatorial Guinea, Angola and Brazil, according to a recording of a section of the meeting.
“The amount of money we are looking at, it is absolutely huge”
The man chairing the meeting was SBM’s new CEO, Bruno Chabas, who had only started in the role that January. He laid out to board members the situation. “One thing is clear... that the payments made to these agents are a total shamble,” he said, according to a recording of the meeting.
Chabas said that SBM had paid a total of $275 million to third-party agents around the globe since 2005. Although payments to third-party agents are fairly common in the oil industry and are not evidence of wrongdoing, Chabas admitted that SBM’s process of vetting agents “was not good”.
The concern for Chabas was what wasn’t known. As the investigation was only three months in, there was still a lot to uncover about the extent of any potentially corrupt payments and how long the company may have been paying them.
“When you see the amount of money we are looking at, it is absolutely huge,” Chabas warned.
Brazil, in particular, was important to the livelihood of SBM, accounting for almost half of the company’s revenues in 2012.
Also on Chabas’s mind would have been a financial headache affecting the company caused by delays on two offshore oil and gas projects, Deep Panuke in Canada and Yme in Norway. By the end of 2012, the company expected the two problematic projects to cost it as much as $1.5 billion, according to Reuters. Ultimately, SBM wrote off the value of the Yme project and paid damages to its joint venture partner Talisman Energy, costing the company a total of $600 million. But it was able to save the Deep Panuke project.
As a result, Chabas said he was “rather worried about the company survival” when the foreign bribery investigation piled on to the company’s list of problems, according to a letter written to SBM shareholders on 26 May 2015.
Disclosure in the face of “systemic” bribery
As the meeting continued, the discussion turned to whether the company should disclose any of this information to government authorities.
“Generally speaking, when it comes to disclosure, I should say that I’m a defence lawyer before anything else, and I do not like to disclose anything that I don't have to, and prefer to keep things internal whenever possible,” Tim Dickinson, the lead lawyer from Paul Hastings, said.
Dickinson, a well-known defence attorney with 30 years’ experience of anti-corruption law, had previously negotiated one of the largest Foreign Corrupt Practices Act related settlements ever reached by the US Department of Justice: engineering company KBR’s $579 million deal in 2009.
If the bribes were confined to one specific country such as Equatorial Guinea, Dickinson said he would recommend the company remediate the problem and move on without informing government officials. His fear, he said, was that SBM’s bribery was “systemic”.
Chabas told the board what he believed the company should do: “We are at the point that, in my view, not doing a disclosure is simply not an option.”
The tail wagging the dog
“Yes, we are going to disclose, then the next question is to whom, because the ‘to whom?’ will dictate what type of words we use,” Dickinson said.
At the time, the US was arguably the only major foreign bribery enforcer in the world and was of the biggest concern to SBM’s lawyers. While less worried about prosecutors in the Netherlands, SBM still discussed disclosing to the Dutch authorities because it’s a Dutch company. Marnix Somsen, the Dutch legal counsel, told board members the anti-corruption law in the Netherlands had been in place since 2001 but was “not enforced at all”.
In the recording reviewed by GIR Just Anti-Corruption, SBM never discussed disclosing the case to authorities in the countries where possible wrongdoing took place, Angola, Brazil and Equatorial Guinea. Brazil, for example, did not have an established anti-corruption regime until 2014 when the Clean Companies Act came into force.
A priority emphasised by Dickinson was to first figure out if the DOJ would have any jurisdiction in the case, which would be a “worst-case scenario”.
The connection to the US was unclear at this point in the investigation, but there was discussion that many of the potentially corrupt contracts and payments to third parties were negotiated in Houston, Texas.
Houston could become the “tail wagging the dog” according to Dickinson, meaning that a seemingly small part of the whole scheme could become the centre of the investigation and legal effort if US jurisdiction is established.
Somsen added that finding a potential US connection was the top priority and said he “only needed two minutes” to discuss potential disclosure of the investigation to the Dutch authorities.
“[T]he reason for that is that Dutch law, I don't think, is very relevant here as a matter of strategy, because the FCPA is the dominant jurisdiction, but nonetheless Dutch law may play a very important role in the ending,” Somsen said.
Dickinson said he would call the DOJ and tell the agency that SBM was looking into “issues”, but that the company does not know “where they are going to end up, but we wanted to make sure that the government knows that we are on the job and doing everything appropriate.”
He stressed to board members that in this phone call he would not admit any wrongdoing or admit jurisdiction. He said the positives of reporting to the DOJ before it potentially found out on its own was “it buys us first through the door, and it gets us all the advantages of voluntary disclosure as opposed to getting a subpoena from the Justice Department at some point, where we are able to pretty much control how we position the company.”
The downside to self-reporting at this point meant whatever SBM did end up uncovering would have to be shared with the DOJ. “The sizeable disadvantage of doing this is that we will have to report back to the US government as to what we find,” Dickinson said. “We would obviously have to be full, accurate and truthful.”
If he goes public, “we’ll sue”
“One of the major factors in this case is what is the likelihood of the US government finding out about this from one source or another?” Dickinson told board members.
At the meeting potential ways information about the investigation could be leaked were discussed. The possibility of leaks had created a sense of urgency; the company needed to decide the next steps at the meeting and move quickly.
“There are lots of places where this could come out in the public domain – agents that would be terminated, employees that have been terminated or employees who may be terminated – Jay Printz – there are multiple ways this could come out into the public domain,” Dickinson said.
Printz was a major concern at the time. According to Chabas, the former head of legal affairs was upset that SBM hired a new compliance officer rather than promoting him to the position, causing Printz to take a negative view of the investigation.
The disagreement resulted in Printz requesting €1 million “to settle his position”, warning the company he would “take the next step” if it didn’t pay up. As to what this next step was, Chabas couldn’t say.
Dickinson tried to allay concerns, explaining that if Printz publicly disclosed any information about the bribery investigation, he would face legal action.
“So, if he [Printz] has a good lawyer, he is going to give us the time to negotiate a deal with any threats that he can throw out there as leverage,” Dickinson told the meeting. “But he’s not going to go public because the minute he does that all bets are off and we’ll sue.”
Printz left SBM a week after the meeting. He wrote in a final email to SBM’s HR team: “I have formally objected to certain events following my report to Bruno Chabas and the supervisory board of widespread corruption at SBM. I have also objected to the recent proposal by Bruno Chabas and the supervisory board to hire a lawyer to ‘sit on top of me’ for the next two or three years...In view of these objections...the best way forward is to promptly agree my terms of departure.”
Printz did not return requests for comment.
The next day, 6 April 2012, Dickinson disclosed the case to US prosecutors. He later emailed SBM’s legal team informing them he had called the DOJ and “downplayed the US activity of the company worldwide and emphasised that Marnix had been in touch with the Dutch prosecutors, who may take the lead as this progresses”, according to an email seen by GIR Just Anti-Corruption.
The country that was left out of these calls was Brazil, where there were concerns SBM may have bribed officials at the country’s state-controlled oil company Petrobras. In a letter later written to shareholders in 2015, Chabas explained that the investigation was initially focused on Equatorial Guinea and Angola but not Brazil because “the internal investigation prioritised countries with clear indications of possible wrongdoing over countries where indications were less apparent.”
The CEO added: “The investigation into Brazil found certain red flags, but no credible evidence of improper payments to government officials.”
The recording – and other documents produced as part of the company’s internal investigation – eventually emerged in the Dutch press, resulting in a scathing article that accused SBM of trying to cover up the misconduct. The DOJ would criticise the company for its untimely disclosure, despite noting it had been voluntary. Brazilian authorities, which joined the investigation in 2014, would later complain that SBM withheld information from them and only offered “limited cooperation”.
SBM’s subsequent settlements with Dutch, US and Brazilian authorities would be staggered over several years, prompting the defence bar to accuse the government agencies of ‘piling on’ – a term used to describe when multiple agencies penalise a company for the same conduct.
SBM settled first with Dutch authorities in 2014 for $240 million resolving allegations it bribed officials in Angola, Equatorial Guinea and Brazil. After initially declining to prosecute the company in 2014, the DOJ reopened its investigation and settled foreign bribery charges with SBM in 2017 for $238 million. Two former-SBM executives, including its ex-CEO Anthony Mace, also pleaded guilty to related charges in a federal court in Houston, Texas. SBM has yet to fully resolve the Brazilian probe, which is focused on the company’s bribery of Petrobras officials, but the Dutch company has so far agreed to pay almost $300 million to local authorities.
Since 2014, SBM Offshore filed defamation suits in Monaco and the Netherlands against the man who recorded the meeting and subsequently leaked it and the early findings of the internal investigation, Jonathan Taylor. Both cases have subsequently been dropped against Taylor, who was the company’s head of legal affairs for the sales and marketing department until he left SBM in 2012 following a dispute over the handling of the investigation.
Taylor said he is now seeking damages from SBM in the Netherlands for the effect the company’s defamation lawsuits had on his reputation.
In response to the transcript, an SBM Offshore spokesperson said: “To the extent we can judge, the document is partial, and to the extent factually correct is outdated and not representative of the facts as the company understood them then, or understands them now.”
Dickinson and Somsen declined to comment on the recording, both citing attorney–client privilege.
GIR Just Anti-Corruption recently interviewed Robert Luskin at Paul Hastings, who represented SBM in its settlement negotiations with the DOJ. He said the case is the prime example of the problem of “piling on”.
“SBM is roadkill in terms of an example of what has been wrong with the uncoordinated disjointed practice of serial prosecutions,” Luskin said.
But Taylor disagrees. “You don't have to self-report but if you do, I suggest that it is prudent that you don't tell only a part of the story,” he said. “You get yourself into more trouble if you don't tell the whole story. SBM tried to tie the whole thing up by just telling the authorities a small part of the story,” Taylor added in reference to SBM’s lack of disclosure to Brazilian authorities.
He said the “piling on” SBM received was ultimately the company’s fault.
“If it had gone and told the truth in one fell swoop, it would have gotten a joint resolution like Rolls-Royce. But it chose not to do this. It instead covered things up. Now, the hen is coming home to roost.”