The Securities and Exchange Commission charged Halliburton Co. with violating the books and records and internal accounting controls provisions of the Foreign Corrupt Practices Act (FCPA) while selecting and making payments to a local company in Angola in the course of winning lucrative oilfield services contracts.
Halliburton, which profited by approximately $14 million from the deals, has agreed to pay more than $29.2 million to settle the SEC’s case. The company also agreed to obtain an independent compliance consultant to oversee its anti-corruption policies and procedures in Africa. Halliburton’s former vice president Jeannot Lorenz has agreed to pay a $75,000 penalty for causing the company’s violations, circumventing internal accounting controls, and falsifying books and records.
According to the SEC’s order, officials at Angola’s state oil company Sonangol advised Halliburton management in 2008 that it was required to partner with more local Angolan-owned businesses to satisfy local content regulations for foreign firms operating in Angola. Halliburton tasked Lorenz to spearhead these efforts. When a new round of oil company projects came up for bid, Lorenz began a lengthy effort to retain a local Angolan company owned by a former Halliburton employee who was a friend and neighbor of the Sonangol official who would ultimately approve the award of the contracts. It took three attempts but Halliburton ultimately outsourced more than $13 million worth of business to the local Angolan company.
“Halliburton committed to using a particular supplier that posed significant FCPA risks and a company vice president circumvented important internal accounting controls to get the deal done quickly,” said Antonia Chion, Associate Director in the SEC’s Enforcement Division. “Companies and their executives must comply with these internal accounting controls that help ensure the integrity of corporate transactions.”
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Lorenz failed to conduct competitive bidding or substantiate the need for a single source of supply, and he avoided an internal accounting control that required contracts of more than $10,000 in countries like Angola with high corruption risks to be reviewed and approved by a special committee within Halliburton, the SEC says. The company eventually paid $3.705 million to the local Angolan firm, and Sonangol approved the award of seven lucrative subcontracts to Halliburton.
Without admitting or denying the findings, Halliburton and Lorenz consented to the order requiring them to cease and desist from committing or causing any violations or any future violations of the books and records and internal accounting controls provisions of the FCPA. Halliburton agreed to pay $14 million in disgorgement plus $1.2 million in prejudgment interest and a $14 million penalty. Halliburton must retain an independent compliance consultant for 18 months to review and evaluate its anti-corruption policies and procedures, particularly in regard to local content obligations for business operations in Africa.
SEC Announces 2 Whistleblower Awards
The SEC announced a whistleblower award of more than $1.7 million to a company insider who provided the agency with critical information to help stop a fraud that would have otherwise been difficult to detect. Millions of dollars were returned to harmed investors as a result of the SEC’s ensuing investigation and enforcement action.
“When whistleblowers tip the SEC, it not only can bring wrongdoers to justice but also relief to investors,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower. “This whistleblower’s valuable information enabled us to stop further investor harm and ultimately return money to victims.”
The SEC also announced an award of nearly $2.5 million to an employee of a domestic government agency whose whistleblower tip helped launch an SEC investigation and whose continued assistance enabled the SEC to address a company’s misconduct.
“This whistleblower not only helped us open the case, but also provided timely ongoing assistance along with critical documents and testimony that accelerated the pace of our enforcement action,” Norberg said in a statement.
Approximately $158 million has now been awarded to 46 whistleblowers who voluntarily provided the SEC with original and useful information that led to a successful enforcement action.
Energy Exec Fined for Taking Investor Funds to Enrich His Family, Pay Psychics
The SEC announced fraud charges against the founder of a collection of businesses known as Citadel Energy, which provided fluid management solutions to the oil and gas industry in North Dakota.
According to the SEC’s complaint, from approximately November 2012 through December 2014, Joey Stanton Dodson, of Porter Ranch, California, made numerous material misstatements and statements that were materially misleading as a result of omissions to investors.
According to the SEC, Dodson misled investors regarding, among other things, his compensation arrangements, the intended use of investor proceeds, the status of an important land lease agreement, the ownership of certain assets or income streams, and prior litigation against himself. The SEC alleges that, most significantly, Dodson commingled funds among three ventures funded by separate investor groups and then misappropriated at least $1.7 million from investors for his personal benefit, including for large cash payments to himself and his family members, Ponzi-like payments to prior investors in unrelated projects, casino vacations, lease payments for a BMW automobile, and psychic readings and spiritual products. As a result of Dodson’s alleged misconduct, approximately 50 investors suffered substantial, and in some cases total, losses.
Without admitting or denying the allegations in the SEC’s complaint, Dodson consented to entry of a final judgment enjoining him from violating the charged provisions of the federal securities laws and requiring him to pay disgorgement of $1,718,026, plus prejudgment interest of $189,389, and a civil penalty of $859,013. The settlement is subject to court approval.
Former Connecticut Resident Pleads Guilty to Bitcoin Mining Fraud
Homero Joshua Garza, a defendant in a pending SEC civil fraud action, pleaded guilty on July 20 in federal court in Connecticut to criminal charges in connection with his scheme to defraud investors in a digital bitcoin mining scheme in 2014 and 2015, according to an SEC litigation release. Garza is scheduled to be sentenced in October.