When the Securities and Exchange Commission approached Key Energy Services Inc. (KEGX) about bribery allegations in Mexico, the company went into high gear. It launched a major internal investigation and reformed its compliance efforts, including shaking up its legal department.
As part of the corporate reorganization, general counsel Kimberly Frye left last October, after chief compliance officer Garrett Cornelison left in June 2015. Cornelison is now chief compliance officer at Quantas Services Inc. Both have been replaced at Key Energy by Katherine Hargis, a former associate general counsel who was promoted to chief legal officer and chief compliance officer.
The changes and hard work paid off. Last week the SEC made the Houston-based company disgorge $5 million in profits, but the company escaped any other fines or penalties. The Department of Justice already had declined to criminally prosecute the company in April.
But there’s another major hitch. The company promised an orderly exit from all markets outside North America and an exit from Mexico by the end of this year.
The SEC accused Key Energy’s subsidiary in Mexico of violating the books and records and internal control provisions of the Foreign Corrupt Practices Act (FCPA) from August 2010 through April 2013 by making improper payments through a “consultant” to a contract employee at the Mexican state-owned oil company known as Pemex.
In its cease and desist order, the SEC credited the oilfield services company’s cooperation and remedial efforts, while it also noted Key Energy’s shaky financial condition “and its ability to maintain necessary cash reserves to fund its operations and meet its liabilities.”
In the company’s second quarter earnings report released Aug. 15, the company reported a pretax loss of $ $92.9 million. Its first quarter loss was $81.9 million.