UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION
Exhibit 10.4
UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
UNITED STATES OF AMERICA
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v.
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: | No. H-07-130 | ||
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XXXXX XXXXXX INCORPORATED,
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: | DEFERRED PROSECUTION | ||
: | AGREEMENT | |||
Defendant
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Defendant XXXXX XXXXXX INCORPORATED (“Xxxxx Xxxxxx”), Delaware Corporation, by its undersigned
attorneys, pursuant to authority granted by its Board of Directors, and the United States
Department of Justice, Criminal Division, Fraud Section (“Department of Justice” or the
“Department”) enter into this Deferred Prosecution Agreement (“Agreement”) which shall apply to
Xxxxx Xxxxxx and all its affiliates and subsidiaries including Xxxxx Xxxxxx Services International,
Inc. (“BHSI”). The terms and conditions of this Agreement are as follows:
1. Xxxxx Xxxxxx accepts and acknowledges that the United States will file a three-count
criminal Information in the United States District Court for the Southern District of Texas
charging Xxxxx Xxxxxx with conspiracy to violate the Foreign Corrupt Practices Act of 1977
(“FCPA”), as amended, 15 U.S.C. § 78dd-1, et. seq., in violation of 18 U.S.C. § 371 (Count One); a
substantive violation of the FCPA, 15 U.S.C. § 78dd-1(a) (Count Two); and falsification of books
and records in violation of 15 U.S.C. §§ 78m(b)(2)(A), 78m(b)(5) and 78ff(a) (Count Three). In so
doing,
Xxxxx Xxxxxx knowingly waives its right to indictment on these charges, as well as all rights
to a speedy trial pursuant to the Sixth Amendment to the United States Constitution, Title 18,
United States Code Section 3161, Federal Rule of Criminal Procedure 48(b), and all applicable Local
Rules of the United States District Court for the Southern District of Texas for the period during
which this Agreement is in effect.
2. Xxxxx Xxxxxx accepts and acknowledges that it is responsible for the acts of its officers,
employees and its wholly-owned subsidiary, BHSI, as set forth in the Statement of Facts annexed
hereto as “Attachment A.” Should the Department initiate the prosecution that is deferred by this
Agreement, Xxxxx Xxxxxx agrees that it, will neither contest the admissibility of, nor contradict,
in any such proceeding, the facts contained in the Statement of Facts. Xxxxx Xxxxxx does not
endorse, ratify or condone criminal conduct and, as set forth below, has taken and commits to
continue to take significant steps to prevent such conduct from recurring.
3. This Agreement is agreed to by the Department based upon the fact that Xxxxx Xxxxxx has
voluntarily disclosed the misconduct referenced in the Statement of Facts; conducted a thorough
investigation of that misconduct and other possible misconduct; regularly reported all its findings
to the Department; cooperated in the Department’s subsequent investigation of this matter; agreed
to implement remedial measures to ensure that this conduct will not recur and to continue to
cooperate with
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the Department in its ongoing investigation of the conduct of Xxxxx Xxxxxx, XXXX, and the
officers, directors, employees and agents thereof.
4. During the two (2) year term of this Agreement, Xxxxx Xxxxxx agrees to cooperate fully with
the Department, and any other authority or agency, domestic or foreign, designated by the
Department investigating Xxxxx Xxxxxx, BHSI, or any of its present and former directors, officers,
employees, agents, consultants, contractors and subcontractors, or any other party, in any and all
matters relating to corrupt payments in connection with its operations. Xxxxx Xxxxxx agrees that
its cooperation shall include, but is not limited to, the following:
x. Xxxxx Xxxxxx shall continue to cooperate fully with the Department, and with all other
authorities and agencies designated by the Department, and shall truthfully disclose all
information with respect to the activities of Xxxxx Xxxxxx and its present and former subsidiaries
and affiliates, and the directors, officers, employees, agents, consultants, contractors and
subcontractors thereof, concerning all matters relating to corrupt payments in connection with
their operations, related false books and records, and inadequate internal controls about which
Xxxxx Xxxxxx has any knowledge or about which the Department shall inquire. This obligation of
truthful disclosure includes the obligation of Xxxxx Xxxxxx to provide to the Department, upon
request, any document, record, or other tangible
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evidence relating to such corrupt payments, books and records, and internal controls about
which the Department shall inquire of Xxxxx Xxxxxx.
i. The Department specifically reserves the right to request that Xxxxx Xxxxxx provide the
Department with access to information, documents, records, facilities and/or employees that may be
subject to a claim of attorney-client privilege and/or the attorney work-product doctrine.
ii. Upon written notice to the Department, Xxxxx Xxxxxx specifically reserves the right to
withhold access to information, documents, records, facilities and/or employees based upon an
assertion of a valid claim of attorney-client privilege or application of the attorney work-product
doctrine. Such notice shall include a general description of the nature of the information,
documents, records, facilities and/or employees that are being withheld, as well as the basis for
the claim.
iii. In the event that Xxxxx Xxxxxx withholds access to the information, documents, records,
facilities and/or employees of Xxxxx Xxxxxx, the Department may consider this fact in determining
whether Xxxxx Xxxxxx has fully cooperated with the Department.
iv. Except as provided in this paragraph, Xxxxx Xxxxxx shall not withhold from the Department,
any information, documents, records, facilities and/or employees on the basis of an attorney-client
privilege or work product claim.
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b. Upon request of the Department, with respect to any issue relevant to its investigation of
corrupt payments in connection with the operations of Xxxxx Xxxxxx, or any of its former
subsidiaries or affiliates, related books and records and inadequate internal controls, Xxxxx
Xxxxxx shall designate knowledgeable employees, agents, or attorneys to provide to the Department
the information and materials described in Paragraph 4(a) above, on behalf of Xxxxx Xxxxxx. It is
further understood that Xxxxx Xxxxxx must at all times provide complete, truthful, and accurate
information.
c. With respect to any issue relevant to the department’s investigation of corrupt payments in
connection with the operations of Xxxxx Xxxxxx, or any of its present or former subsidiaries or
affiliates, Xxxxx Xxxxxx shall use its best efforts to make available for interviews or testimony,
as requested by the Department, present or former directors, officers, employees, agents and
consultants of Xxxxx Xxxxxx, or any of its present or former subsidiaries or affiliates, as well as
the directors, officers, employees, agents and consultants of contractors and sub-contractors.
This includes, but is not limited to, sworn testimony before a federal grand jury or in federal
trials, as well as interviews with federal law enforcement authorities. Cooperation under this
Paragraph will include identification of witnesses who, to the knowledge of Xxxxx Xxxxxx, may have
material information regarding the matters under investigation.
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d. With respect to any information, testimony, document, record, or other tangible evidence
provided to the Department pursuant to this Agreement, Xxxxx Xxxxxx consents to any and all
disclosures to other government agencies, whether agencies of the United States or a foreign
government, of such materials as the Department, in its sole discretion, shall deem appropriate.
5. In return for the full and truthful cooperation of Xxxxx Xxxxxx, and compliance with all
the terms and conditions of this Agreement, the Department agrees not to use any information
related to the conduct described in the attached Statement of Facts against Xxxxx Xxxxxx in any
criminal or civil case, except in a prosecution for perjury or obstruction of justice; in a
prosecution for making a false statement after the date of this Agreement; in a prosecution or
other proceeding relating to any crime of violence; or in a prosecution or other proceeding
relating to a violation of any provision of Title 26 of the United States Code. In addition, the
Department agrees, except as provided herein, that it will not bring any criminal or civil case
against Xxxxx Xxxxxx, or any subsidiary of Xxxxx Xxxxxx, related to the conduct of present and
former employees as described in the attached Statement of Facts, or relating to information Xxxxx
Xxxxxx disclosed to the Department prior to the date of this Agreement, concerning its business
affairs in Kazakhstan, Angola, Nigeria, Indonesia, Russia, Uzbekistan, Turkmenistan and Azerbaijan,
among other countries. This Paragraph does not provide any protection against prosecution for any
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corrupt payments or false accounting, if any, made in the future by Xxxxx Xxxxxx, or any of
its officers, directors, employees, agents or consultants, whether or not disclosed by Xxxxx
Xxxxxx, pursuant to the terms of this Agreement. This paragraph also does not provide any
protection against prosecution for any corrupt payments made in the past which are not described in
the attached Statement of Facts or were not disclosed to the Department prior to the date of this
Agreement. In addition, this Paragraph does not provide any protection against criminal
prosecution of any present or former officer, employee, director, shareholder, agent or consultant
of Xxxxx Xxxxxx for any violations committed by them.
6. Xxxxx Xxxxxx represents that it has implemented and will continue to implement a compliance
and ethics program designed to detect and prevent violations of the FCPA, U.S. commercial bribery
laws and foreign bribery laws throughout its operations, including those of its subsidiaries,
affiliates, joint ventures, and those of its contractors and subcontractors, with responsibilities
that include interactions with foreign officials. Implementation of these policies and procedures
shall not be construed in any future enforcement proceeding as providing immunity or amnesty for
any crimes not disclosed to the Department as of the date of the execution of this Agreement for
which Xxxxx Xxxxxx would otherwise be responsible.
7. In particular, Xxxxx Xxxxxx represents that, at a minimum, it has undertaken, or agrees
that it will undertake, the following steps:
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a. Adopt a system of internal accounting controls and a system designed to ensure the making
and keeping of accurate books, records, and accounts; and
b. Adopt a rigorous anti-corruption compliance code (“Compliance Code”), as described further
below, that is designed to detect and deter violations of the FCPA, U.S. commercial bribery laws
and foreign bribery laws. The anti-bribery Compliance Code of Xxxxx Xxxxxx will consist of the
following elements, at a minimum:
i. A clearly articulated corporate policy against violations of the FCPA, U.S. commercial
bribery laws and foreign bribery laws;
ii. Promulgation of compliance standards and procedures to be followed by all directors,
officers, employees and, where appropriate, business partners, including, but not limited to,
agents, consultants, representatives, teaming partners, joint venture partners and other parties
acting on behalf of Xxxxx Xxxxxx in a foreign jurisdiction (respectively, “agents” and “business
partners”), that are reasonably capable of reducing the prospect that the FCPA, U.S. commercial
bribery laws, foreign bribery laws or the Compliance Code of Xxxxx Xxxxxx will be violated;
iii. The assignment to one or more senior corporate officials of Xxxxx Xxxxxx, who shall
report directly to the Audit/Ethics Committee of the Board of Directors, of responsibility for the
implementation and oversight of
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compliance with policies, standards, and procedures established in accordance with the
Compliance Code of Xxxxx Xxxxxx;
iv. The effective communication to all directors, officers, employees and, where appropriate,
agents and business partners, of corporate and compliance policies, standards, and procedures
regarding the FCPA, U.S. commercial bribery laws and foreign bribery laws. This shall include: (A)
training concerning the requirements of the FCPA, U.S. commercial bribery laws and foreign bribery
laws on a periodic basis to all directors, officers and employees; and (B) periodic certifications
by all directors, officers, employees, including the head of each Xxxxx Xxxxxx business or
division, and, where appropriate, agents and business partners, certifying compliance therewith;
v. A reporting system, including a “Helpline” for directors, officers, employees, agents and
business partners to report suspected violations of the Compliance Code or suspected criminal
conduct;
vi. Appropriate disciplinary procedures to address violations of the FCPA, U.S. commercial
bribery laws, foreign bribery laws, or the Compliance Code;
vii. Extensive pre-retention due diligence requirements pertaining to, as well as
post-retention oversight of, all agents and business partners, including the maintenance of
complete due diligence records at Xxxxx Xxxxxx;
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viii. Clearly articulated corporate procedures designed to ensure that Xxxxx Xxxxxx exercises
due care to assure that substantial discretionary authority is not delegated to individuals whom
Xxxxx Xxxxxx knows, or should know through the exercise of due diligence, have a propensity to
engage in illegal or improper activities;
ix. A committee consisting of senior officials of Xxxxx Xxxxxx and each Xxxxx Xxxxxx business
or division to review and to record, in writing, actions relating to: (A) the retention of any
agent or subagents thereof; and (B) all contracts and payments related thereto;
x. The inclusion in all agreements, contracts, and renewals thereof with all agents and
business partners provisions that are reasonably calculated to prevent violations of the FCPA, U.S.
commercial bribery laws, foreign bribery laws and other relevant laws, which may, depending upon
the circumstances, include: (A) setting forth anti-corruption representations and undertakings
relating to compliance with the FCPA, U.S. commercial bribery laws, foreign bribery laws and other
relevant laws; (B) allowing for internal and independent audits of the books and records of the
agent or business partner to ensure compliance with the foregoing; and (C) providing for
termination of the agent or business partner as a result of any breach of anti-corruption laws and
regulations or representations and undertakings related thereto;
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xi. Financial and accounting procedures designed to ensure that Xxxxx Xxxxxx maintains a
system of internal accounting controls and makes and keeps accurate books, records, and accounts;
and
xii. Independent audits by outside counsel and auditors, at no longer than three-year
intervals beginning after the completion of the term of the Monitor, as discussed below, to ensure
that the Compliance Code, including its anti-corruption provisions, are implemented in an effective
manner.
8. Xxxxx Xxxxxx agrees to engage an independent monitor (“Monitor”) within sixty (60) calendar
days of the signing of this Agreement, to monitor the Company’s compliance program with respect to
the FCPA, U.S. commercial bribery laws, and foreign bribery laws for a period of three (3) years
from the execution of this Agreement, subject to the provisions of paragraphs 9 through 15 below.
For thirty (30) calendar days after the signing of this Agreement, the Company and the Department
shall use mutual best efforts to identify a mutually acceptable person to serve as the Monitor.
If, after that period, the parties have been unable to identify a mutually acceptable person then
the Department in its sole discretion shall select a person to serve as the Monitor. The Monitor
will review and evaluate the effectiveness of Xxxxx Hughes’s internal controls, record-keeping, and
financial reporting policies and procedures as they relate to Xxxxx Hughes’s compliance with the
books and records, internal accounting controls, and anti-bribery provisions of the
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FCPA, U.S. commercial bribery laws, and foreign bribery laws. This review and evaluation shall
include an assessment of those policies and procedures as actually implemented.
9. Xxxxx Xxxxxx shall cooperate fully with the Monitor and the Monitor shall have the
authority to take such reasonable steps, in his or her view, as may be necessary to be fully
informed about the operations of Xxxxx Xxxxxx within the scope of his or her responsibilities under
this Agreement. To that end, Xxxxx Xxxxxx shall provide the Monitor with access to all
information, documents, records, facilities and/or employees that fall within the scope of
responsibilities of the Monitor under this Agreement. Any such disclosure to the Monitor retained
by Xxxxx Xxxxxx concerning corrupt payments, related books and records and internal controls, shall
not relieve Xxxxx Xxxxxx of its obligation to truthfully disclose such matters to the Department.
a. The parties agree that no attorney-client relationship shall be formed between Xxxxx Xxxxxx
and the Monitor.
b. In the event that Xxxxx Xxxxxx seeks to withhold from the Monitor access to information,
documents, records, facilities and/or employees of Xxxxx Xxxxxx which may be subject to a claim of
attorney-client privilege or to the attorney work-product doctrine, Xxxxx Xxxxxx shall promptly
provide written notice of this determination to the Monitor and the Department. Such notice shall
include a
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general description of the nature of the information, documents, records, facilities and/or
employees that are being withheld, as well as the basis for the claim. The Department may then
consider whether to make a further request for access to such information, documents, records,
facilities and/or employees, as provided in Paragraph 4(a) of this Agreement.
c. Except as provided in this paragraph, Xxxxx Xxxxxx shall not withhold from the Monitor any
information, documents, records, facilities and/or employees on the basis of an attorney client
privilege or work product claim.
10. Xxxxx Xxxxxx agrees that the Monitor shall assess whether these entities’ policies and
procedures are reasonably designed to detect and prevent violations of the FCPA, U.S. commercial
bribery laws, and foreign bribery laws, and, during the three (3) year period, shall conduct an
initial review and prepare an initial report, followed by two (2) follow-up reviews and follow-up
reports as described below. With respect to each of the three (3) reviews, after initial
consultations with Xxxxx Xxxxxx and the Department, the Monitor shall prepare a written work plan
for each of the reviews, which shall be submitted in advance to Xxxxx Xxxxxx and the Department for
comment. In order to conduct an effective initial review and to fully understand any existing
deficiencies in controls, policies and procedures related to the FCPA, U.S. commercial bribery
laws, and foreign bribery laws, the Monitor’s initial work plan shall include such steps as are
necessary to develop an understanding of the
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facts and circumstances surrounding any violation that may have occurred. Any disputes
between Xxxxx Xxxxxx and the Monitor with respect to the work plan shall be decided by the
Department in its sole discretion.
11. In connection with the initial review, the Monitor shall issue a written report within one
hundred twenty (120) calendar days of his or her retention setting forth the Monitor’s assessment
and making recommendations reasonably designed to improve the policies and procedures of Xxxxx
Xxxxxx for ensuring compliance with the FCPA, U.S. commercial bribery laws, and foreign bribery
laws. The Monitor shall provide the report to the Board of Directors of Xxxxx Xxxxxx and
contemporaneously transmit copies to Xxxx X. Xxxxxxxxxx, (or his successor), Deputy Chief, Fraud
Section, Criminal Division, U.S. Department of Justice, 10th and Constitution Ave.,
N.W., Bond Building, Fourth Floor, Washington, D.C. 20530. The Monitor may extend the time period
for issuance of the report with prior written approval of the Department.
12. Within sixty (60) calendar days after receiving the Monitor’s report, Xxxxx Xxxxxx shall
adopt all recommendations in the report; provided, however, that within thirty (30) calendar days
after receiving the report, Xxxxx Xxxxxx shall advise the Monitor and the Department in writing of
any recommendations that Xxxxx Xxxxxx considers unduly burdensome, impractical, or costly. With
respect to any recommendation that Xxxxx Xxxxxx considers unduly burdensome, impractical, or
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costly, Xxxxx Xxxxxx need not adopt that recommendation within that time but shall propose in
writing an alternative policy, procedure or system designed to achieve the same objective or
purpose. As to any recommendation on which Xxxxx Xxxxxx and the Monitor do not agree, such parties
shall attempt in good faith to reach an agreement within thirty (30) calendar days after Xxxxx
Xxxxxx serves the written advice. In the event Xxxxx Xxxxxx and the Monitor are unable to agree on
an alternative proposal, Xxxxx Xxxxxx shall abide by the determination of the Monitor. With
respect to any recommendation that the Monitor determines cannot reasonably be implemented within
sixty (60) calendar days after receiving the report, the Monitor may extend the time period for
implementation with prior written approval of the Department.
13. The Monitor shall undertake two (2) follow-up reviews to further monitor and assess
whether the policies and procedures of Xxxxx Xxxxxx are reasonably designed to detect and prevent
violations of the FCPA, U.S. commercial bribery laws, and foreign bribery laws. Within sixty (60)
calendar days of initiating each follow-up review, the Monitor shall: (a) complete the review; (b)
certify whether the anti-bribery compliance program of Xxxxx Xxxxxx, including its policies and
procedures, is appropriately designed and implemented to ensure compliance with the FCPA, U.S.
commercial bribery laws, and foreign bribery laws; and (c) report on the Monitor’s findings in the
same fashion as set forth in Paragraph 11 with respect to the
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initial review. The first follow-up review shall commence one year after appointment of the
Monitor under this Agreement. The second follow-up review shall commence at least one year after
completion of the first review. The Monitor may extend the time period for these follow-up reviews
with prior written approval of the Department.
14. In undertaking tale assessments and reviews described in Paragraphs 10 through 13 of this
Agreement, the Monitor shall formulate conclusions based on, among other things: (a) inspection of
documents, including all the policies and procedures relating to the anti-bribery compliance
program of Xxxxx Xxxxxx and all its affiliates and subsidiaries; (b) onsite observation of the
systems and procedures of Xxxxx Xxxxxx, including its internal controls and its recordkeeping and
internal audit procedures; (c) meetings with and interviews of employees, officers, and directors
of Xxxxx Xxxxxx and all its affiliates and subsidiaries, and any other relevant persons; and, (d)
analyses, studies and testing of the anti-bribery compliance program of Xxxxx Xxxxxx and all its
affiliates and subsidiaries.
15. The charge of the Monitor, as described above, is to review the controls, policies and
procedures of Xxxxx Xxxxxx and all its affiliates and subsidiaries related to compliance with the
FCPA, U.S. commercial bribery laws and foreign bribery laws. Should the Monitor during the course
of his or her engagement discover that questionable or corrupt payments or questionable or corrupt
transfers of
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property or interests may have been offered, promised, paid, or authorized by any Xxxxx Xxxxxx
entity or person, or any entity or person working directly or indirectly for Xxxxx Xxxxxx, or that
related false books and records have been maintained, the Monitor shall promptly report such
payments to Xxxxx Xxxxxx for further investigations, unless the Monitor believes, in the exercise
of his or her discretion, that such disclosure should be made directly to the Department. If the
Monitor refers the matter only to Xxxxx Xxxxxx, Xxxxx Xxxxxx shall promptly report the same to the
Department. If Xxxxx Xxxxxx fails to make such disclosure within ten (10) calendar days of the
report of such payments to Xxxxx Xxxxxx, the Monitor shall independently disclose his or her
findings to the Department at the address listed above in Paragraph 11. Further, in the event that
Xxxxx Xxxxxx, or any entity or person working directly or indirectly for Xxxxx Xxxxxx, refuses to
provide information necessary for the performance of the Monitor’s responsibilities, the Monitor
shall disclose that fact to the Department. Xxxxx Xxxxxx and its shareholders shall not take any
action to retaliate against the Monitor for any such disclosures or for any other reason. The
Monitor may report other criminal or regulatory violations discovered in the course of performing
its duties, in the same manner as described above.
16. In consideration of the action of Xxxxx Xxxxxx in voluntarily disclosing and conducting an
investigation by outside legal counsel regarding the matter set out in the attached Statement of
Facts and other matters disclosed to the Department, and
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the cooperation of Xxxxx Xxxxxx with the investigation conducted by the Department; and the
willingness of Xxxxx Xxxxxx to: (a) acknowledge responsibility for its behavior and that of its
subsidiaries and affiliates; (b) continue its cooperation with the Department; (c) adopt and
maintain remedial measures and independently review and audit such measures; and (d) cause its
subsidiary, BHSI, to enter into a plea agreement and plead guilty to the charges set forth in a
separate criminal Information, the Department agrees that any prosecution of Xxxxx Xxxxxx for the
conduct set forth in the attached Statement of Facts, and for the conduct relating to information
Xxxxx Xxxxxx disclosed to the Department prior to the date of this Agreement concerning its
business affairs in Kazakhstan, Angola, Nigeria, Indonesia, Russia, Uzbekistan, Turkmenistan and
Azerbaijan, among other countries, be and hereby is deferred for a period of two (2) years from the
date of this Agreement.
17. The Department further agrees that if Xxxxx Xxxxxx is in full compliance with all of its
obligations under this Agreement, including its obligation to adopt the recommendations of the
Monitor in accordance with the terms of Paragraph 12, the Department will not continue the criminal
prosecution against Xxxxx Xxxxxx described in Paragraph 1 and, after two (2) years, this Agreement
shall expire.
18. If the Department determines, in its sole discretion, that Xxxxx Xxxxxx at any time during
the two-year term of this Agreement, has committed any federal
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crimes subsequent to the date of this Agreement, has provided deliberately false, incomplete,
or misleading information under this Agreement, or has otherwise breached the Agreement, Xxxxx
Xxxxxx shall, in the Department’s sole discretion, thereafter be subject to prosecution for any
federal criminal violation of which the Department has knowledge. Any such prosecutions may be
premised on information provided by Xxxxx Xxxxxx. Moreover, Xxxxx Xxxxxx agrees that any such
prosecution that is not time-barred by the applicable statute of limitations on the date of this
Agreement may be commenced against Xxxxx Xxxxxx in accordance with this Agreement, notwithstanding
the expiration of the statute of limitations between the signing of this Agreement and the
termination of this Agreement. By this Agreement, Xxxxx Xxxxxx expressly intends to and does waive
any rights in this respect.
19. It is further agreed that in the event that the Department determines that Xxxxx Xxxxxx
has breached this Agreement: (a) all statements made by or on behalf of Xxxxx Xxxxxx to the
Department or to the Court, including the attached Statement of Facts, and any testimony given by
Xxxxx Xxxxxx before a grand jury or any tribunal, at any legislative hearings, or to the Securities
and Exchange Commission (“SEC”), whether prior or subsequent to this Agreement, or any leads
derived from such statements or testimony, shall be admissible in evidence in any and all criminal
proceedings brought by the Department against Xxxxx Xxxxxx; and (b) Xxxxx Xxxxxx shall not assert
any claim under the United States Constitution, Rule 11(f) of the
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Federal Rules of Criminal Procedure, Rule 410 of the Federal Rules of Evidence, or any other
federal rule, that statements made by or on behalf of Xxxxx Xxxxxx prior to or subsequent to this
Agreement, or any leads developed therefrom, should be suppressed. The decision whether conduct or
statements of any individual will be imputed to Xxxxx Xxxxxx for the purpose of determining whether
Xxxxx Xxxxxx has violated any provision of this Agreement shall be in the sole discretion of the
Department.
20. Xxxxx Xxxxxx acknowledges that the Department has made no representations, assurances, or
promises concerning what sentence may be imposed by the Court if Xxxxx Xxxxxx breaches this
Agreement and this matter proceeds to judgment. Xxxxx Xxxxxx further acknowledges that any such
sentence is solely within the discretion of the Court and that nothing in this Agreement binds or
restricts the Court in the exercise of such discretion.
21. Xxxxx Xxxxxx agrees that in the event it sells, merges, or transfers all or substantially
all of its business operations as they exist as of the date of this Agreement, whether such sale is
structured as a stock or asset sale, merger, or transfer, they shall include in any contract for
sale, merger or transfer a provision binding the purchaser or any successor in interest thereto to
the obligations described in this Agreement.
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22. Xxxxx Xxxxxx expressly agrees that it shall not, through present or future attorneys,
Boards of Directors, officers, or any other person authorized to speak for Xxxxx Xxxxxx, make any
public statement, in litigation or otherwise, contradicting the acceptance of responsibility by
Xxxxx Xxxxxx set forth above or the factual statements set forth in the attached Statement of
Facts. Any such contradictory statement shall, subject to cure rights below by Xxxxx Xxxxxx,
constitute a breach of this Agreement and Xxxxx Xxxxxx thereafter shall be subject to prosecution
as set forth in Paragraphs 18 and 19 of this Agreement. The decision, whether any public statement
by any such person contradicting a fact contained in the Statement of Facts will be imputed to
Xxxxx Xxxxxx for the purpose of determining whether they have breached this Agreement shall be at
the sole discretion of the Department. If the Department determines that a public statement by any
such person contradicts in whole or in part a statement contained in the Statement of Facts, the
Department shall so notify Xxxxx Xxxxxx and Xxxxx Xxxxxx may avoid a breach of this Agreement by
publicly repudiating such statement(s) within two (2) business days after notification. Consistent
with the obligations of Xxxxx Xxxxxx as set forth above, Xxxxx Xxxxxx shall be permitted to raise
defenses and to assert affirmative claims in civil and regulatory proceedings relating to the
matters set forth in the Statement of Facts. This Paragraph is not intended to apply to any
statement made by any employee of Xxxxx
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Xxxxxx in the course of any criminal, regulatory, or civil case initiated against such
individual, unless such individual is speaking on behalf of Xxxxx Xxxxxx.
23. In connection with this Agreement, Xxxxx Xxxxxx shall only issue a press release if it
first determines that the text of the release is acceptable to the Department.
24. It is understood that this Agreement is binding on Xxxxx Xxxxxx and the Department but
specifically does not bind any other federal agencies, or any state or local law enforcement or
regulatory agencies, although the Department will bring the cooperation of Xxxxx Xxxxxx and its
compliance with its other obligations under this Agreement to the attention of such agencies and
authorities if requested to do so by Xxxxx Xxxxxx.
25. This Agreement sets forth all the terms of the Deferred Prosecution Agreement between
Xxxxx Xxxxxx and the Department. No modifications or additions to this Agreement shall be valid
unless they are in writing and signed by the Department, the attorneys for Xxxxx Xxxxxx, and a duly
authorized representative of Xxxxx Xxxxxx.
26. Any notice to Xxxxx Xxxxxx under this Agreement shall be given by personal delivery,
overnight delivery by a recognized delivery service or registered or certified mail, in each case
addressed to the General Counsel, Xxxxx Xxxxxx
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Incorporated, 0000 Xxxxx Xxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000. Notice shall be effective
upon actual receipt by Xxxxx Xxxxxx.
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AGREED:
FOR XXXXX XXXXXX INCORPORATED:
/s/ Xxxx X. Xxxxx
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Xxxxxxx, Xxxxx, Xxxxxx, Xxxx, Xxxxx | ||||
& Xxxxx, P.L.L.C. | ||||
Washington, D.C. 20036 | ||||
Counsel for Xxxxx Xxxxxx Incorporated | ||||
/s/ Xxxx X. Xxxxx, Xx.
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Senior Vice-President and General Counsel | ||||
Xxxxx Xxxxxx. Incorporated |
FOR THE DEPARTMENT OF JUSTICE:
XXXXXX X. XXXXXXX | ||||||
Chief, Fraud Section | ||||||
By: | /s/ Xxxx X. Xxxxxxxxxx
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XXXX X. XXXXXXXXXX | ||||||
Deputy Chief, Fraud Section | ||||||
By: | /s/ Xxxx X. Xxxxxxxxx
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XXXX X. XXXXXXXXX | ||||||
Senior Trial Attorney, Fraud Section | ||||||
United States Department of Justice | ||||||
Fraud Section, Criminal Division | ||||||
10th & Constitution Avenue, NW | ||||||
Washington, D.C. 20530 | ||||||
(000) 000-0000 |
Filed at Houston, Texas, on this 11 day of April, 2007.
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ATTACHMENT A
STATEMENT OF FACTS
STATEMENT OF FACTS
The following Statement of Facts is incorporated by this reference as part of the
Deferred Prosecution Agreement (the “Agreement”) between the United States Department of
Justice (the “Department”) and Xxxxx Xxxxxx Incorporated (“Xxxxx Xxxxxx”), and the parties
hereby agree and stipulate that the following information is true and accurate. As set
forth in Paragraph 2 of the Agreement, Xxxxx Xxxxxx accepts and acknowledges that it is
responsible for the acts of its officers and employees, and those of its wholly-owned
subsidiary, defendant Xxxxx Xxxxxx Services International, Inc. (“BHSI”), that are set
forth below. Should the Department initiate the prosecution that is deferred by this
Agreement, Xxxxx Xxxxxx agrees that it will neither contest the admissibility of, nor
contradict, this Statement of Facts in any such proceeding. If this matter were to proceed
to trial, the United States would prove beyond a reasonable doubt, by admissible evidence,
the facts alleged in the Information. This evidence would establish the following:
Xxxxx Xxxxxx Incorporated
1. Xxxxx Xxxxxx, headquartered in Houston, Texas, was a corporation organized under
the laws of the State of Delaware, with principal offices in Houston, Texas. Xxxxx Xxxxxx
was a global provider of
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comprehensive oil-field services and products which it provided through several
subsidiaries and operating divisions, and operated in more than 80 countries.
2. Xxxxx Xxxxxx issued and maintained a class of securities registered pursuant to
Section 12(b) of the Securities Exchange Act of 1934 (15 U.S.C. § 781) and was required to
file periodic reports with the United States Securities and Exchange Commission under
Section 13 of the Securities Exchange Act (15 U.S.C. § 78m). Accordingly, Xxxxx Xxxxxx was
an “issuer” within the meaning of the Foreign Corrupt Practices Act, 15 U.S.C. § 78dd-1(a).
Xxxxx Xxxxxx Services International, Inc.
3. From in or about 1993 to the present, Xxxxx Xxxxxx maintained BHSI, a wholly owned
subsidiary which was organized under the laws of the State of Delaware and which conducted
business in the Republic of Kazakhstan, the Southern District of Texas and elsewhere.
Accordingly, BHSI was a “domestic concern” within the meaning of the FCPA, (15 U.S.C. §
78dd-2). XXXX was engaged in the business of providing comprehensive oil-field services and
products in the Republic of Kazakhstan and elsewhere and, during the relevant period,
maintained an office in Almaty, Kazakhstan.
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4. XXXX regularly sought approval for management decisions from superiors at Xxxxx
Xxxxxx management offices in Houston, Texas. XXXX maintained a bank account at the Chase
Bank of Texas, N.A., in Houston, Texas. For internal accounting purposes, XXXX regularly
sent invoices to the various Xxxxx Xxxxxx operating divisions requesting them to remit
funds directly to XXXX’s account at Chase Bank in Houston. Accordingly, BHSI operated
within the territorial jurisdiction of the United States.
The Karachaganak Project in Kazakhstan
5. The government of the Republic of Kazakhstan managed its national petroleum
exploration and production through Kazakhoil, its state-owned oil company. Kazakhoil is a
government instrumentality and its employees are foreign government officials within the
meaning of the Foreign Corrupt Practices Act, 15 U.S.C. § 78dd-1(f)(1)(A). From time to
time, Kazakhoil would form consortiums, in which Kazakhoil would join with several
different oil companies, in order to undertake collectively particular petroleum
exploration and production projects.
6. Karachaganak was a giant gas and oil field located in northwestern Kazakhstan.
Beginning in or about 1997, the government of Kazakhstan and Kazakhoil entered into a Final
Production Sharing Agreement with a consortium of four international oil companies known as
the
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Karachaganak Integrated Organization (“KIO”), for the development and operation of the
oil production facilities in Karachaganak.
7. The four international oil companies formed the Karachaganak Petroleum Operating
Company, B.V. (“KPO”), a company organized and registered under the laws of The
Netherlands, which maintained its principal offices in the Republic of Kazakhstan. KPO was
responsible for developing and operating the Karachaganak field on behalf of partners in
the joint venture. KPO solicited bids from outside vendors for comprehensive oil-field
drilling services and products including project management, oil drilling and engineering
support. In December, 1999, Xxxxx Xxxxxx was invited to submit a bid to KPO for a contract
to provide a wide range of oil-field drilling and production services for the Karachaganak
project.
The Co-Conspirators
8. BHSI Employee A (hereinafter, “Employee A”), who is named in the Information as a
co-conspirator but not as a defendant, was employed as Country Manager and Business
Development Manager of BHSI. Employee A also served as a Business Development Manager and
as the Team Leader for the Karachaganak tender. Employee A’s duties included, among other
things, the coordination of the various Xxxxx Xxxxxx operating divisions relating to the
Xxxxx Xxxxxx bid on the Karachaganak project. As such, Employee A
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was an employee of a “domestic concern” within the meaning of the FCPA, 15 U.S.C. §
78dd-2.
9. Consulting Firm A, which is named in the Information as a co-conspirator but not as
a defendant, was a consulting firm incorporated and registered as a private limited
liability company in the Isle of Man, where it maintained its principal place of business.
Consulting Firm A maintained a business office in London, United Kingdom, and also
maintained a bank account in the name of Consulting Firm A at Xxxxxxx’x Bank in London,
United Kingdom. Generally, Consulting Firm A provided unspecified administrative and
consulting services and acted as an agent for companies doing business in the Republic of
Kazakhstan and elsewhere.
10. Agent A, who is named in the Information as a co-conspirator but not as a
defendant, was a director of Consulting Firm A, and acted as the representative of
Consulting Firm A and as the agent for Xxxxx Xxxxxx regarding its bid for Karachaganak.
Agent A informed Employee A that a Kazakhoil official demanded that BHSI pay a commission
to Consulting Firm A in order for BHSI to obtain the Karachaganak contract. Agent A is a
citizen of the United Kingdom.
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The Xxxxx Xxxxxx Bid for Karachaganak
11. In or about February 2000, Xxxxx Xxxxxx, through BHSI, submitted a consolidated
bid to KPO for various categories of work on the Karachaganak project. The bid was
submitted for work to be performed by Xxxxx Xxxxxx operating divisions Xxxxx Atlas, Xxxxx
Oil Tools and INTEQ, and was coordinated and submitted by Xxxxx Xxxxxx Enterprise Services
& Technology Group (“BEST”). BEST was a team of Xxxxx Xxxxxx business development managers
responsible for coordinating, structuring and marketing Xxxxx Xxxxxx oilfield services for
significant contracts across its various operating divisions, and was not itself a business
unit.
12. Although it was not a member of the KPO consortium, Kazakhoil wielded considerable
influence as Kazakhstan’s national oil company and, in effect, the ultimate award of a
contract by KPO to any particular bidder depended upon the approval of Kazakhoil officials.
Kazakhoil was controlled by officials of the Government of Kazakhstan and, as such, was an
“instrumentality” of a foreign government and its officers and employees were “foreign
officials,” within the meaning of the FCPA, 15 U.S.C. § 78dd-1(f)(1)(A). Xxxxx Xxxxxx
understood that KPO’s approval of their bid for the contract depended heavily on a
favorable recommendation from Kazakhoil.
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Kazakhoil Directs BHSI to Retain an Agent
13. In or about early September 2000, Xxxxx Xxxxxx managers and executives received
unofficial notification that their bid was successful and that Xxxxx Xxxxxx would win the
Karachaganak tender. Nevertheless, in or about mid-September 2000, a Kazakhoil official
demanded that, in order for Xxxxx Xxxxxx to win the Karachaganak contract, BHSI should pay
Consulting Firm A, an agent located on the Isle of Man, a commission equal to 3.0% of the
revenue earned by Xxxxx Xxxxxx on the Karachaganak contract.
14. On September 17, 2000, Employee A sent an e-mail informing his supervisor that
Kazakhoil officials were demanding that Xxxxx Xxxxxx retain an agent in order to receive
approval for the Karachaganak project and stated, among other things, that “. . . Xxxxxxxxx
approached me through an agent in London stating that to get Kazakhoil approval a 3%
commission is required. This as you know I refused and said that it is utterly outrageous
to wait until a contractor is chosen and start demanding amounts that have been suggested.”
Further, Employee A suggested that Xxxxx Xxxxxx should make a counter-offer to retain the
agent only for future business which “. . . keeps us clear of any criticism (sic) for this
KIO contract.” Further, Employee A stated, “. . . unless we do something we are not going
to get the Kazakhoil support . . .”
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and “. . . we are in the driving seat but if one our (sic) competitors comes in
with a pot of gold, it is not going to be our contract.”
15. On September 19, 2000, Employee A sent an e-mail to Agent A, director of
Consulting Firm A, in London, stating that Employee A had the “green light” from his
corporate superiors to proceed with the agency agreement as proposed.
16. Although Consulting Firm A had performed no services to assist Xxxxx Xxxxxx or
BHSI in preparing and submitting their bid for Karachaganak, BHSI sought and obtained
approval from executives of operating divisions Xxxxx Atlas, Xxxxx Oil Tools, and INTEQ, to
retain and pay a commission to Consulting Firm A of 2.0% of the revenue earned by each
operating division in the Karachaganak project.
17. On or about September 24, 2000, Employee A sent an e-mail to his supervisor and
others informing them that Xxxxxxxxx had rejected the Xxxxx Xxxxxx counter-offer to hire an
agent only for future business in Kazakhstan, and stated “unless we pay a commission
relative to the KIO contract we can say goodbye to this and future business.” Also,
Employee A sent an e-mail to Agent A of Consulting Firm A and attached a side-letter
agreement retaining Consulting Firm A as an agent for BHSI and agreeing to pay a 2.0%
commission based upon revenue earned by Xxxxx Xxxxxx on the
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Karachaganak contract and 3.0% of revenue for all future services it would perform in
Kazakhstan. In the e-mail, Employee A stated, “You will note the consideration has been
greatly increased and trust this will receive the recognition it deserves in the necessary
corners of Kazakhstan in confirming their support to Xxxxx Xxxxxx.” The side-letter, dated
September 1, 2000, stated that Consulting Firm A had been retained by Xxxxx Xxxxxx “ . . .
in recognition of said work and assistance given by [Consulting Firm A] towards Xxxxx
Xxxxxx in pursuit of the Karachaganak contract. . .” and that Xxxxx Xxxxxx had decided to
reward Consulting Firm A by payment of consideration equal to 2.0% of the contract
revenues.
18. On September 25-26, 2000, Employee A and his supervisor began to canvass officers
of operating divisions Xxxxx Atlas, Xxxxx Oil Tools and INTEQ requesting their agreement to
pay their share of the agency commission. On September 26, 2000, Employee A received an
e-mail from his supervisor directing Employee A not to sign any agency agreement until they
had discussed several remaining issues. On September 27, 2000, Employee A received an
e-mail from his supervisor informing him that the operating divisions had approved the plan
to pay a 2.0% to 3.0% commission to Consulting Firm A for the Karachaganak contract.
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Xxxxx Xxxxxx Wins the Karachaganak Contract
19. On September 27, 2000, Employee A signed a “Sales Representation Agreement” on
behalf of BHSI with Consulting Firm A, which was backdated to September 1, 2000. In early
October 2000, officials of KPO notified XXXX and Xxxxx Xxxxxx that the Xxxxx Xxxxxx tender
was successful and the Karachaganak contract was awarded to Xxxxx Xxxxxx. The Integrated
Services Contract between KPO and BHSI became effective on or about October 23, 2000.
Thereafter, Xxxxx Xxxxxx and operating divisions Xxxxx Atlas, Xxxxx Oil Tools and INTEQ,
through Xxxxx Hughes’s subsidiary BHSI, performed services pursuant to the contract with
KPO.
Xxxxx Xxxxxx Divisions and BHSI Pay Commissions
20. On approximately a monthly basis, beginning in May 2001, and continuing through at
least November 2003, XXXX would notify the three Xxxxx Xxxxxx operating divisions of the
amount of commission charges each division owed based upon calculating 2.0% of that
division’s revenue for the month. BHSI sent an invoice to each operating division
requesting it to send its commission payment to the BHSI bank account at Chase Bank in
Houston, Texas.
21. Beginning in May 2001, and continuing through at least November 2003, BHSI and
Xxxxx Xxxxxx made commission payments to
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Consulting Firm A totaling $4,100,162.70, which represented 2.0% of the revenue earned
by Xxxxx Xxxxxx and its sub-contractors on the Karachaganak project. Each commission
payment was wire-transferred from the BHSI bank account at Chase Bank in Houston to an
account in the name of Consulting Firm A at Xxxxxxx’x Bank in London, United Kingdom.
22. On the dates set forth below, the following payments were made via wire transfer
from a BHSI bank account at Chase Bank in Houston, Texas, to a bank account maintained by
Consulting Firm A at Xxxxxxx’x Bank, in London, United Kingdom:
Commission Payments to
Consulting Firm A
Consulting Firm A
Date | Amount in USD | |||
May 24, 2001 |
$ | 32,540.00 | ||
June 20, 2001 |
$ | 97,116.00 | ||
August 1, 2001 |
$ | 117,336.00 | ||
August 22, 2001 |
$ | 108,680.00 | ||
October 26, 2001 |
$ | 278,999.00 | ||
December 6, 2001 |
$ | 323,399.00 | ||
December 13, 2001 |
$ | 34,123.00 | ||
January 16, 2002 |
$ | 147,211.02 | ||
February 21, 2002 |
$ | 125,367.00 |
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Date | Amount in USD | |||
April 5, 2002 |
$ | 281,741.00 | ||
May 15, 2002 |
$ | 170,950.00 | ||
June 25, 2002 |
$ | 143,107.00 | ||
August 1, 2002 |
$ | 380,682.47 | ||
September 27, 2002 |
$ | 400,488.58 | ||
November 27, 2002 |
$ | 139,819.00 | ||
December 31, 2002 |
$ | 118,843.00 | ||
January 29, 2003 |
$ | 122,146.93 | ||
February 25, 2003 |
$ | 121,810.62 | ||
March 3, 2003 |
$ | 123,737.08 | ||
April 8, 2003 |
$ | 111,760.42 | ||
May 8, 2003 |
$ | 96,535.78 | ||
May 27, 2003 |
$ | 126,761.96 | ||
July 1, 2003 |
$ | 103,600.98 | ||
July 30, 2003 |
$ | 111,362.50 | ||
September 16, 2003 |
$ | 105,170.33 | ||
October 28, 2003 |
$ | 83,052.94 | ||
November 25, 2003 |
$ | 93,821.11 | ||
Total |
$ | 4,100,162.70 |
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23. Xxxxx Xxxxxx and XXXX failed to properly account for the purported commission
payments to Consulting Firm A, and failed to describe accurately the transactions in its
books and records. Instead, Xxxxx Xxxxxx and BHSI improperly characterized the payments
made as legitimate payments for, among other things, “commissions,” “fees,” or “legal
services.” However, Consulting Firm A had no office or presence in Kazakhstan and rendered
no goods or ancillary agency services to Xxxxx Xxxxxx or BHSI in Kazakhstan or elsewhere.
In fact, the so-called “commission” payments made to Consulting Firm A were bribes, paid
and authorized by employees of BHSI, all or part of which XXXX understood and intended to
be transferred to an undisclosed official or officials of Kazakhoil, in exchange for which
Xxxxx Xxxxxx and XXXX would receive the contract to provide services in the Karachaganak
oilfield project.
24. Net revenues realized by Xxxxx Xxxxxx on the Karachaganak project were $189.2
Million. After offsetting net revenues by the company’s expenses, Xxxxx Xxxxxx recognized
a profit of approximately $19.9 million.
Conclusion
25. Based upon the facts as set forth above, Xxxxx Xxxxxx admits that it is an
“issuer” within the meaning of the Foreign Corrupt Practices Act, 15 U.S.C. § 78dd-1, et
seq., and that its officers, employees and agents made
use of and caused the use of the mails and means and instrumentalities of interstate
commerce corruptly in furtherance of a payment of money to Consulting Firm A, while knowing
that all or a portion of such money would be given, directly or indirectly, to an official
of Kazakhoil, an instrumentality of the government of Kazakhstan, for the purpose of
influencing acts and decisions of a foreign official in his official capacity to secure an
improper advantage for Xxxxx Xxxxxx and BHSI, and to assist Xxxxx Xxxxxx in obtaining and
retaining business; and that Xxxxx Xxxxxx failed to accurately reflect in its books and
records the payment of commissions to Consulting Firm A totaling $4,100,162.70.
AGREED:
FOR XXXXX XXXXXX INCORPORATED:
/s/ Xxxx X. Xxxxx
|
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Xxxxxxx, Xxxxx, Xxxxxx, Xxxx, Xxxxx | ||||
& Xxxxx, P.L.L.C. | ||||
Washington, D.C. 20036 | ||||
Counsel for Xxxxx Xxxxxx Incorporated | ||||
/s/ Xxxx X. Xxxxx, Xx.
|
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Senior Vice-President and General Counsel | ||||
Xxxxx Xxxxxx Incorporated |
FOR THE DEPARTMENT OF JUSTICE:
XXXXXX X. XXXXXXX | ||||||
Chief, Fraud Section | ||||||
By: | /s/ Xxxx X. Xxxxxxxxxx
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Deputy Chief, Fraud Section | ||||||
By: | /s/ Xxxx X. Xxxxxxxxx
|
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Senior Trial Attorney, Fraud Section | ||||||
United States Department of Justice | ||||||
Fraud Section, Criminal Division | ||||||
10th & Constitution Avenue, NW | ||||||
Washington, D.C. 20530 | ||||||
(000) 000-0000 |
Filed at Houston, Texas, on this ___day of April, 2007.