Nigeria: Halliburton Faces US Probe for Bribes
The Justice Department has opened up an inquiry into whether Halliburton Co. was involved in the payment of $180 million in possible kickbacks to obtain contracts to build a natural gas plant in Nigeria during a period in the late 1990's when Vice President Dick Cheney was chairman of the company, Newsweek has
There is no evidence that Cheney was aware of the payments in
question and an aide said today the vice president has not been
contacted about the probe. Still, the inquiry by the Justice
Department's fraud section-which prosecutes federal anti-bribery law
violations-is likely to bring new public attention to the vice
president's past at the giant oil-services firm. Halliburton has been
under intense scrutiny in recent months over its handling of hundreds
of millions of dollars contracts relating to the rebuilding of Iraq.
The Justice inquiry, along with a related probe by the Securities and
Exchange Commission, parallels a separate investigation into the
Nigerian payments that is being conducted by a French magistrate and
has received widespread attention in recent months in the European
press. But the Justice Department and SEC probes have not previously
been reported, although they were briefly mentioned by Halliburton
last week near the end of a lengthy filing with the SEC.
In the filing, the Houston-based company disclosed that the French
magistrate was investigating the Nigerian payments and then added:
"The U.S. Department of Justice and the SEC have asked Halliburton
for a report on these matters and are reviewing the allegations in
light of the US. Foreign Corrupt Practices Act. Halliburton has
engaged outside counsel to investigate any allegations and is
cooperating with the government's inquiries. If illegal payments were
made, this matter could have a material adverse effect on our
business and results of operations."
A Justice Department official confirmed to Newsweek today that
prosecutors have been seeking information from Halliburton related to
the Nigerian contract and that the company was cooperating. But the
official said the company's reference to being asked for "a report"
by Justice was "not accurate." Rather than a report, Justice has
sought documents from the company-and Halliburton has been turning
them over, the official said. Another Justice official described the
inquiry as a review of documents supplied by Halliburton and said it
was still in its early stages.
In an e-mail response to questions from Newsweekabout its
disclosure, a Halliburton official, Cathy Gist, said: "Management
made the decision to include these statements because of the
politically charged environment in which we now operate. We are
trying to keep the investment community informed of the accurate
facts about the company's business." She added that that "while
Halliburton has no basis to assume that any of its employeeshave
ever done anything in violation of the FCPA (Foreign Corrupt
Practices Act), it has undertaken an examination and intends to
cooperate with officials of the U.S. government." (In a later e-mail
response, Gist added: "In future SEC filings, Halliburton will
include more precise language regarding the nature of this
examination as well as our continued commitment to cooperate with
U.S. government officials regarding this matter.")
The investigation could raise sensitive political questions for the
Justice Department because-unlike Pentagon probes now underway into
Halliburton's Iraq contracts-the Nigerian matter specifically
involves corporate conduct during the period between 1995 and 2000
when Cheney was chairman and chief executive officer of the company.
That could raise potential conflict-of-interest questions for
Attorney General John Ashcroft similar to those that recently
prompted Ashcroft to recuse himself in another investigation
involving the Bush White House-the probe into who leaked information
that disclosed the undercover identity of the wife of former U.S.
Ambassador Joseph Wilson. The Justice official declined to comment on
what role Ashcroft has played in the Halliburton probe so far and
whether there have been any discussions about whether he might need
to recuse himself from decisions relating to it. So far, there is no
evidence suggesting any involvement by Cheney in the matters under
review, another Justice official said.
The Justice Department inquiry involves a trail of payments to
unknown recipients that were routed through off-shore bank accounts
and were allegedly handled by a longtime Halliburton lawyer in London
who, according to French press reports, was also a financial advisor
to Nigeria's late dictator Gen. Sani Abacha. The payments were made
in connection with the construction of a giant liquefied natural gas
plant on a remote island in Nigeria.
The plant, one of the largest in the world, was built by TSKJ, a
consortium of four major international construction firms, including
Kellogg, Brown & Root, a major Halliburton subsidiary that has been
the principal recipient of the company's contracts in Iraq.
Halliburton touted its role in the Nigerian project in a March, 2000
press release headlined: "Four Industry Leaders United to Execute
World Class Project in Nigeria."
The question Justice is probing is how exactly Halliburton's
subsidiary came to play that role. According to lengthy accounts of
the probe in the French newspaper, Le Figaro, the TSKJ consortium in
1994 had created a subsidiary called LNG Services on Madeira, a
Portuguese island in the Atlantic where companies are not required to
pay any taxes. The French investigation was triggered, according to
Le Figaro, when an official of one of the consortium's French
partners, Technip, was charged two years ago with embezzlement
growing out of a separate, long-running corruption case involving the
French oil company Elf Aquitaine.
According to Le Figaro, George Krammer, the accused Technip official,
was outraged when Technip refused to defend him and turned state's
evidence. The paper reported that he told French authorities about an
alleged $180 million "slush fund" that TSKJ maintained to bribe
Nigerian officials relating to the natural gas plant in Nigeria.
French authorities then tracked close to the same amount in "support
contracts" from LNG Services-the subsidiary on the Portuguese
island-to yet another obscure entity called Tri-Star, which was
located on the British tax haven of Gibraltar. Tri Star, according to
Le Figaro,/i>, was headed by a London lawyer named Jeffrey Tesler, who
has long done work for Halliburton, and was known to have close
relations with officials in Abacha's Nigerian government. Tesler did
not respond to a request for comment from Newsweek.
The allegations that TSKJ may have made improper payments to Nigerian
officials prompted a Paris prosecutor to open up an investigation
into the case in October, 2002. The probe was among the first in
France under a new international treaty banning the payment of bribes
in commercial contracts-a prohibition that became part of French law
in 2000. (U.S. law has banned such payments for more than 25 years.)
The case in France has since been transferred to a French
investigative magistrate, Reynaud van Ruymbeke-an indication that it
is being taken seriously by French authorities.
One key question for Justice Department prosecutors is what
knowledge, if any, Halliburton officials in the United States had of
any illicit payments that might have been made in Nigeria. According
to lawyers familiar with the Foreign Corrupt Practices Act cases,
U.S. corporate officials are only liable for the actions of their
foreign subsidiaries if it can be determined that they had a control
or personal knowledge of the subsidiary's improper actions.
In this case, Halliburton would seem to have a natural defense: the
conduct in question involved actions of a consortium, TSKJ, in which
it was only a 25 percent owner. But a Technip official told Newsweek
that the Halliburton subsidiary, Kellogg, Brown & Root, was the chief
principal and decision-maker in the venture. "Halliburton is the
leader of the JV (joint venture)," said Christopher Welton, chief of
Technip's investor and analyst relations. Welton also said that his
company recently had conducted its own internal audit of the
venture's operations and found no evidence of any improper payments.
Halliburton, in one of its e-mail responses to Newsweek today,
referred to itself as only a 25 percent owner of the joint venture.