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Petrofac Resolves Bribery Act Enforcement Action

Petrofac (a U.K. based oil and gas company with ADRs registered with the SEC) has been under scrutiny since 2016 regarding its relationship with Unaoil. (See here [1] for the prior post).

In 2019, the U.K. Serious Fraud Office announced that David Lufkin (the former Global Head of Sales for Petrofac International Ltd.) pleaded guilty to eleven counts of bribery related to “the making of corrupt offers to influence the award of contracts to Petrofac worth in excess of USD $730 million in Iraq and in excess of USD $3.5 billion in Saudi Arabia.” (See here [2]).

Recently, the SFO announced that it has “secured the conviction of Petrofac Limited for seven separate counts of failure to prevent bribery between 2011 and 2017.”

According to the release:

“Petrofac Limited admitted that it failed to prevent former senior executives of the Petrofac Group from paying GBP 32 million (USD 44 million) in bribes, to help the Petrofac Group win over GBP 2.6 billion (USD 3.5 billion) of contracts in the oil and gas industry in Iraq, Saudi Arabia and the United Arab Emirates.

The Court heard how, over a period of six years, senior executives within the Petrofac Group engaged in elaborate schemes to corrupt the awarding of contracts, using agents to systematically bribe officials to win lucrative contracts by unfair and dishonest means.

A key feature of the case was the complex and deliberately opaque methods used by these senior executives to pay agents across borders, disguising payments through sub-contractors, creating fake contracts for fictitious services and, in some cases, passing bribes through more than one agent and one country, to disguise their actions.”

According to the release, “Petrofac Limited was ordered to pay confiscation of GBP 22,836,985, they were fined over GBP 47,197,640 and the SFO’s costs of GBP 7 million.”

[3]

In the release, Lisa Osofsky (Director of the SFO) stated:

“By pleading guilty, Petrofac Limited has accepted that senior executives within the Petrofac Group acted deliberately and without conscience in the pursuit of greed. The company’s failure to prevent this conduct distorted competitive market conditions and tainted the oil and gas industry. [This] result should serve as a warning; the SFO will use all the powers at its disposal to root out and prosecute companies and individuals, whose criminal activity detrimentally affects the reputation and integrity of the United Kingdom. The SFO welcomes Petrofac Limited taking responsibility for its conduct.”

According to this Petrofac release [4], “all employees involved in the charges have left the business” and in the release Chairman René Médori stated:

“This draws a line under a regrettable period of our history. We have taken responsibility, reformed and learned from these past mistakes, as acknowledged by the SFO and the Court. Most importantly, the extensive work that we have done since the SFO investigation began means that the Petrofac of today has a comprehensive compliance and governance regime that meets or exceeds international best practice. The past behaviour uncovered by the SFO would not be possible today, and we look to the future a better and more focused company, well positioned to capitalise on the opportunities we see before us.”

Group Chief Executive Sami Iskander stated:

“We are now in a position to put this behind us. This part of our history does not represent the Petrofac of today – a company that as its new CEO I am proud to lead, and which operates upon the core principle of ethical business conduct, supported by a comprehensive governance regime. We have refined our best-in-class delivery capabilities, restructured the business around technical excellence, re-focused on our customers, hired new talent, and further sharpened our cost-competitiveness.

“We emerge from this cloud as the world needs more energy – both traditional energies that can be produced in the most efficient manner, and renewable energies on which a lower carbon world can be built. Petrofac is well positioned to support both, with the capabilities, experience, and expertise to deliver for our expanding customer needs. Our markets in both traditional and new energies are growing and we have a clear path to rebuild our business with a differentiated customer proposition that sets us apart.”

As noted here [5], Petrofac “shares jumped by as much as 17% after the [SFO] announcement to their highest since June 2020.”

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