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SEC Charges Key Energy Services, Inc. with FCPA Violations

Aug. 11, 2016

Houston-based Key Energy Services, Inc. has agreed to pay $5 million in disgorgement to settle SEC charges that it violated the internal controls and books-and-records provisions of the Foreign Corrupt Practices Act. The violations arose from payments its Mexican subsidiary, Key Mexico, made to a contract employee at Petróleos Mexicanos (Pemex), Mexico’s state-owned oil company.

An SEC investigation found that Key Mexico made payments to the Pemex employee to induce him to provide advice, assistance and inside information that was used by Key Energy and Key Mexico in negotiating contracts with Pemex. Key Mexico paid the Pemex employee through an entity that provided purported consulting services to Key Mexico, even though Key Energy had not authorized the relationship with the consulting firm and lacked supporting documentation regarding the purported consulting work performed. The hiring of the consulting firm was arranged and approved by Key Mexico’s then-country manager, who did not disclose to Key Energy the connection between the consulting firm and the Pemex employee. Key Mexico improperly recorded the transfers to the consulting firm as legitimate business expenses in Key Mexico’s books and records, which were consolidated into Key Energy’s books and records.

The SEC’s investigation was conducted by Akita Adkins and Laura Bennett of the SEC’s FCPA Unit and Fort Worth Regional Office, and supervised by Kara N. Brockmeyer and Jonathan P. Scott. See here for more information.