With the calendar year end fast approaching, the SEC continues to crank out non-FCPA, FCPA enforcement actions (that is enforcement actions that charge or find violations of the FCPA’s books and records and internal controls provisions) have nothing to do with foreign bribery.
The latest example concerns Brooge Energy Limited – a company with its principal executive office located in Dubai, United Arab Emirates which owns and operates an oil storage facility in the UAE.
In summary fashion, this administrative order finds:
“These proceedings arise out of an accounting and offering fraud by Brooge, which is a publicly-traded company that owns and operates an oil storage facility in Fujairah, United Arab Emirates (“UAE”).
Brooge went public through a special purpose acquisition company (“SPAC”) transaction in December 2019. Before and after going public between thirty (30) and eighty (80) percent of Brooge’s revenues were unsupported and materially misstated from 2018 through early 2021 (“Relevant Period”). Subsequent to the SPAC transaction, Brooge registered the offer and sale of up to $500 million in different types of securities with the Commission and an affiliate of the company issued $200 million of 5-year senior secured bonds in the Nordic bond market.
The crux of the fraud was the creation of two sets of invoices. The first set consisted of actual invoices to customers who stored oil at Brooge’s facilities in Fujairah. Customers paid these invoices in the ordinary course. A second set of invoices which reflected significantly higher rates and volumes were ostensibly sent to customers who never used Brooge’s facilities. These invoices were “paid” through a complicated series of unsupported transactions involving an affiliated or related party. Brooge’s former Chief Executive Officer (“CEO”) Paardenkooper and former Chief Strategy Officer (“CSO”) and Interim CEO, Saheb (together “Senior Management”) knew, or were reckless in not knowing, of the accounting fraud.
Certain personnel reporting to Senior Management provided Brooge’s outside auditors with only the second set of invoices along with falsified ledger entries and other documents designed to support the inflated rates and volumes on the false second set of invoices. As a result, Senior Management misled the auditors regarding Brooge’s revenues. Further, in order to avoid an event of default on the Nordic bonds, an affiliate of the company created a third set of unsupported invoices, and certain persons at the company directed the creation of additional false documents during the pendency of our investigation.”
Based on the above findings, the order finds that Brooge violated, among other things, the FCPA’s books and records and internal controls provisions. The order further found that Nicolaas Lammert Paardenkooper (a citizen of the Netherlands who served as CEO of the company during the Relevant Period) and Lina Saheb (a citizen of Iraq who served as Chief Strategy Officer and Interim CEO during the Relevant Period) – among other things – caused Brooge’s violations of the books and records provisions.
Without admitting or denying the SEC’s findings, Brooge agreed to pay a $5 million civil penalty, and Paardenkooper and Saheb agreed to pay a $100,000 civil penalty.
