U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21725 / November 4, 2010
Accounting and Auditing Enforcement Release No. 3202 / November 4, 2010
Securities & Exchange Commission v. Transocean Inc., Civil Action No. 1:10-CV-01891 (JDB) (D.D.C.)
SEC CHARGES TRANSOCEAN FOR BRIBERY SCHEME IN NIGERIA – TRANSOCEAN TO PAY DISGORGEMENT AND CIVIL PENALTIES OF $7,265,080
The Securities and Exchange Commission filed a settled enforcement action on November 4, 2010, in the U.S. District Court for the District of Columbia charging Transocean Inc. (“Transocean”), an international provider of offshore drilling services and equipment to oil companies throughout the world, with violations of the anti-bribery, books and records, and internal controls provisions of the Foreign Corrupt Practices Act (“FCPA”). Transocean has agreed to pay disgorgement, interest, and a civil penalty totaling $7,265,080 to settle the charges.
The SEC’s complaint alleges that:
From at least 2002 through 2007, Transocean made illicit payments through its customs agents to Nigerian government officials to extend the temporary importation status of its drilling rigs, to obtain false paperwork associated with its drilling rigs, and obtain inward clearance authorizations for its rigs and a bond registration. In addition, Transocean made illicit payments through Panalpina World Transport Holding Ltd.’s Pancourier express courier service to Nigerian government officials to expedite the import of various goods, equipment and materials into Nigeria. In most instances, customs duties for these items were not paid by either Panalpina or Transocean. Transocean also made illicit payments through Panalpina to Nigerian government officials to expedite the delivery of medicine and other materials into Nigeria. Transocean’s total gains from the conduct were approximately $5,981,693.
In 2002, certain Transocean managers, including the then Executive Vice President, Operations and Chief Operating Officer (“COO”), authorized four “paper moves” for two rigs operating in Nigeria because Transocean was unwilling to interrupt profitable drilling operations once the relevant Temporary Import Permit (“TIP”) or TIP extension had expired. On June 10, 2002, Transocean’s then Country Manager in Nigeria sent an e-mail to the then Africa Region Manager, indicating that there was a temporary import issue related to three rigs. In the e-mail the Country Manager sought permission to do paper moves, which would falsely depict the rigs leaving and reentering the country. The Country Manager indicated that the paper moves were necessary in order to create a more “defendable” file and to enable Transocean to avoid severe penalties connected to failing to move the rigs once the relevant TIP had expired. The e-mail also contained a quote from Transocean’s customs agent for the cost of obtaining false paperwork related to the paper moves from the Nigeria Customs Service (“NCS”). The Country Manager added that “The only alternative is to physically move the rigs out of the country, and this is clearly not acceptable.” On June 11, 2002, the Africa Region Manager sent an e-mail to the Executive Vice President, Operations and COO in Houston, seeking authorization for the paper moves. The same day, the Executive Vice President, Operations and COO sent an e-mail approving the paper moves. Another paper move involving a third rig also occurred in 2002, and two additional paper moves involving a fourth rig occurred in 2007. Transocean’s total gain from the paper moves was approximately $4,261,363.
Prior to the 2007 paper moves, Transocean was on notice of problems with its TIP process. On April 27, 2004, the Nigerian Temporary Import Permit Panel (the “TIP Panel”) notified Transocean that Transocean would be penalized approximately $1.17 million after an investigation showed Transocean had not complied with TIP laws. In May 2004, Transocean’s Corporate Affairs Manager in Nigeria sent several emails informing the Transocean customs supervisor that he had visited a member of the TIP Panel and discussed making a payment to reduce the penalty. In particular, the email stated that “We will spend money on them [TIP Panel members] through him, but definitely we will pay less to the Federal Government.” On July 28, 2004, the penalty was reduced to $340,000. While there is no record indicating what payment, if any, was in fact made to the Nigerian TIP Panel official, the TIP Panel investigation put Transocean on notice that there were problems with the TIP process.
From approximately 2002 to 2006, Transocean also made illicit payments totaling $207,170 to a second customs agent for what were described on invoices as “customs intervention” charges related to six rigs. Transocean’s employees believed that the invoiced “intervention” charges were likely illicit payments to customs officials. From 2002 to 2007, Transocean also made illicit payments to Nigerian customs officials through Panalpina, a freight forwarding company headquartered in Switzerland, and Panalpina’s express door to door courier service, Pancourier, to import goods and materials into Nigeria without paying applicable duties to Nigerian customs officials. Pancourier invoiced Transocean for “local processing charges” related to the shipments, and the invoice amounts were typically 25% to 40% of the actual duties owed.
The total customs duties that Transocean avoided through its use of Pancourier were approximately $1,480,419. Transocean also used Panalpina to make illicit payments to Nigerian government officials to expedite the delivery of medicine and other goods totaling $32,741.
Transocean violated Section 30A of the Securities Exchange Act of 1934 when its senior management and employees made illicit payments through their freight forwarding and customs agents to Nigerian government officials to obtain various customs-related benefits. Transocean violated Section 13(b)(2)(B) of the Exchange Act by failing to devise and maintain an effective system of internal controls to prevent or detect the violations. Transocean violated Section 13(b)(2)(A) of the Exchange Act by failing to make and keep accurate books and records. In related criminal proceedings, Transocean Ltd. and Transocean Inc. reached a settlement with the U.S. Department of Justice, Fraud Section and agreed to pay $13.44 million.
Without admitting or denying the Commission’s allegations, Transocean has consented to the entry of a court order permanently enjoining it from future violations of Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and ordering it to pay $5,981,693 in disgorgement, plus prejudgment interest of $1,283,387.
The SEC acknowledges assistance from the U.S. Department of Justice, Fraud Section and the Federal Bureau of Investigation.
See Also: SEC Complaint