UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 38343 / February 27, 1997 ACCOUNTING AND AUDITING ENFORCEMENT Release No. 889 / February 27, 1997 ADMINISTRATIVE PROCEEDING File No. 3-9262 : In the Matter of : : ORDER INSTITUTING CEASE-AND- David Gore, Robert Puetz, : DESIST PROCEEDINGS PURSUANT TO William McClure : SECTION 21C OF THE SECURITIES Robert P. Murphy, : EXCHANGE ACT OF 1934 AND : FINDINGS AND ORDER OF THE Respondents. : COMMISSION : : I. The Commission deems it appropriate and in the public interest to initiate public administrative proceedings pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") against David Gore ("Gore"), Robert Puetz ("Puetz"), William McClure ("McClure"), and Robert P. Murphy ("Murphy") (collectively, the "respondents"). In anticipation of the institution of these proceedings, the respondents have submitted Offers of Settlement ("Offers") for the purpose of disposing of the issues raised by these proceedings. Solely for the purpose of these proceedings and any other proceeding brought by or on behalf of the Commission or to which the Commission is a party, the respondents, without admitting or denying the matters set forth herein, consent to the issuance of this Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934 and Findings and Order of the Commission ("Order") as set forth below. The Commission has determined that it is appropriate and in the public interest to accept the respondents' Offers and accordingly is issuing this Order. ==========================================START OF PAGE 2====== II. FACTS The Commission finds-[1]- the following: A. Respondents David E. Gore ("Gore"), age 61, was a director and President of Triton Energy Corporation ("Triton Energy") from 1988 until his resignation in August of 1992. Robert W. Puetz ("Puetz"), age 55, became Triton Energy's Vice President of Finance and Chief Financial Officer ("CFO") in 1982 and was Senior Vice President of Finance and CFO from August 1989 until his resignation in April 1993. William L. McClure ("McClure"), age 44, was a contract auditor with Triton Indonesia, Inc. ("Triton Indonesia") from February 1990 until April 1990. He became Commercial Manager of Triton Indonesia in April 1990 and served in that capacity until November 1990 when he left the country. Robert P. Murphy, Jr. ("Murphy"), age 58, was a certified public accountant ("CPA") and was Controller of Triton Indonesia from January 1989 until November 1990. B. The Issuer Triton Energy Corporation is a Delaware corporation with headquarters in Dallas, Texas. During the relevant period, Triton Energy's common stock was registered with the Commission pursuant to Sections 12(b) and 12(g) of the Exchange Act and was listed on the New York Stock Exchange. Triton Energy, through its wholly-owned and partly-owned subsidiaries, is engaged principally in the exploration and production of crude oil and natural gas. Triton Indonesia, a Delaware corporation, is a wholly owned subsidiary of Triton Energy whose assets were sold on May 31, 1996. C. Other Relevant Persons Philip W. Keever ("Keever"), age 62, held the following positions in Triton Indonesia: Commercial Manager from December 1988 until December 1989; Vice President and General Manager from January 1990 until May 1990; and President and General Manager from May 1990 until December 1990. Keever retired from Triton in ---------FOOTNOTES---------- -[1]- The findings herein are solely for the purpose of these proceedings and are not binding on any other person in this or any other proceeding. ==========================================START OF PAGE 3====== January 1996. Richard L. McAdoo ("McAdoo"), age 42, was Vice President and General Manager of Triton Indonesia from September/October 1988 until his termination by Triton in December 1989. -[2]- D. Background In September 1988, Triton Indonesia entered into an agreement with Nordell International Resources Ltd. ("Nordell" or "predecessor") whereby it became the operator of an oil and gas recovery project in the Enim oil fields ("Enim Project") located on the island of Sumatra in the Republic of Indonesia. As part of the joint venture, Triton Indonesia assumed all operational and financial control over the Enim Project. By entering into the joint venture, Triton Indonesia became a party to a Rehabilitation and Secondary Contract ("RSRC contract") with Perusahaan Pertambangan Minyak & Gas Bumi Negara ("Pertamina"), a national oil company owned by the Republic of Indonesia. The joint venture's activities in Indonesia were supervised chiefly by Pertamina. The RSRC contract required that all oil recovered from the project be delivered to Pertamina through a pipeline owned and controlled by Pertamina. Triton Indonesia paid a tariff to Pertamina for use of the pipeline. The RSRC contract obligated Pertamina to reimburse Triton Indonesia for certain costs incurred by the company during oil exploration and recovery. Triton Indonesia submitted monthly crude oil invoices to Pertamina that documented, among other things, the volume of oil delivered through the pipeline at agreed-upon rates, the pipeline fee, and a calculation of Triton Indonesia's reimbursable monthly operating costs. After Pertamina reviewed the documents and determined that all documentation was complete and accurate, it paid the joint venture the invoiced amount. The Enim Project also was subject to taxation by the Indonesian Ministry of Finance. Tax liability was determined by auditors from the ---------FOOTNOTES---------- -[2]- On February 27, 1997, the Commission filed a Complaint in the United States District Court for the District of Columbia against Triton Energy, Philip W. Keever and Richard L. McAdoo alleging violations of Sections 30A(a), 13(b)(5), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rule 13b2-1 thereunder. Triton Energy and Keever consented, without admitting or denying the allegations in the Complaint, to the entry of permanent injunctions against Triton Energy for violation of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and against Keever for violations of Sections 30A(a) and 13(b)(5) of the Exchange Act and Rule 13b2-1 thereunder. See SEC v. Triton Energy Corporation, et al., C.A. No. 1:97CV00401 (February 27, 1997). ==========================================START OF PAGE 4====== Ministry of Finance's audit branch, Badan Pengawasan Keuangan Dan Pembangunan ("BPKP"). During the relevant period, Pertamina/BPKP auditors performed joint annual audits of the Enim Project. During these audits, Pertamina and BPKP auditors reviewed the books and records of Triton Indonesia, as well as those of its parent, Triton Energy. Pertamina auditors determined, after reviewing documentation submitted by Triton Indonesia and examining the company's books and records, whether costs were properly claimed as recoverable costs. BPKP auditors determined, after reviewing periodic corporate tax returns submitted by Triton Indonesia and Nordell, and examining the Enim Project's books and records, whether Triton Indonesia had paid the proper amount of corporate taxes. The annual Pertamina/BPKP audits of the Enim Project determined the amount of recoverable costs associated with the operation. Because the Enim Project never generated sufficient oil production in relation to costs incurred, the pool of unrecovered costs increased each year. In the annual audit for the fiscal year ending March 31, 1987, the unrecovered cost pool was approximately $10 million. In the annual audit for the fiscal year ending March 31, 1988, the unrecovered cost pool stood at more than $16 million. By the March 31, 1989 audit, the unrecovered cost pool had grown to more than $21 million. During the Pertamina/BPKP audits, after the auditors completed their review of the books and records, they had an exit meeting with representatives of Triton Indonesia during which they provided their preliminary written findings, including problems with the books and records that might lead to reductions in cost recovery. Following the auditors' presentation, Triton Indonesia prepared a written response to the audit exceptions. Triton Indonesia and Pertamina/BPKP auditors then entered into negotiations concerning the content of the final audit report. The Pertamina/BPKP auditors had discretion to make a determination as to whether audit exceptions would be included in their audit report or withdrawn. As set forth below, these "negotiations" culminated in numerous improper payments to the Indonesian auditors. In 1988, Triton Indonesia agreed with Nordell to retain Roland Siouffi as its business agent for the purpose of acting as an intermediary between Triton Indonesia and Indonesian government agencies, including Pertamina and the Ministry of Finance. Siouffi, a French citizen who had resided in Indonesia for twenty-five years, had been a director and chief executive officer of Nordell at the time Triton Indonesia took over the Enim Project. Upon entering into the joint venture agreement, Triton Indonesia adopted existing contracts between Nordell and entities controlled by Siouffi (the "Siouffi entities"), and later entered ==========================================START OF PAGE 5====== additional contracts with the same entities. These entities included Development, Engineering and Rehabilitation Company S.A. ("Derco"), Orix Resources, Inc. ("Orix"), Sumgait Resources Ltd. ("Sumgait"), and P.T. Windusari Danuta ("Windusari"). In March 1989, in addition to accepting Siouffi as Triton Indonesia's agent for the purpose of acting as an intermediary with Indonesian government officials and agencies, Triton Indonesia named Siouffi to the position of Senior Vice President of New Ventures. E. Triton Indonesia Made Improper Payments, Created False Documentation, And Falsified Books And Records During 1989 and 1990, McAdoo and Keever authorized a number of improper payments to Siouffi entities for the purpose of influencing specific actions by various Indonesian government agencies. To conceal the true purpose of the payments, Triton Indonesia employees created false documents that indicated that the funds were expended for transactions with Siouffi entities for legitimate purposes, such as the purchase of seismic data or repair to equipment used for oil exploration. The expenditures were then recorded on Triton Indonesia's books and records as having been made for the purpose reflected in the false documentation. These false entries were made in the books and records of Triton Indonesia with the knowing participation of certain Triton Indonesia employees, as described herein. As Commercial Manager, McClure assumed direct supervisory authority over the accounting function at Triton Indonesia. McClure was required to review and initial documents to authorize certain expenditures. These documents contained the descriptions of expenditures that determined how expenses were recorded in Triton Indonesia's books and records. -[3]- As Controller, Murphy had direct responsibility for preparing entries in Triton Indonesia's books and records. McClure supervised Murphy's preparation of entries for the books and records of Triton Indonesia. Murphy was responsible for determining that all underlying documentation was present when a bank voucher was issued and initialling the voucher to signify that all required documents were present. F. Specific Payments 1. Triton Indonesia Made Improper Payments In Connection With A Tax Audit ---------FOOTNOTES---------- -[3]- Triton Indonesia required that a series of documents be reviewed and initialed by several employees to authorize expenditures. The typical package of documents which required authorization included service contracts or purchase orders, invoices, and bank vouchers. ==========================================START OF PAGE 6====== In May 1989, Pertamina/BPKP auditors audited the books and records of Nordell and determined that Nordell had failed to pay withholding tax in connection with payments to it for technical services and interest on funding. The auditors assessed approximately $385,000 in additional taxes based on the payments for technical services and approximately $233,000 in additional taxes based on interest for intercorporate funding. In July 1989, prior to the submission of Triton Indonesia's response to the tax audit report, McAdoo and Keever spoke with Siouffi about making a payment of approximately $150,000 to Indonesian government auditors to obtain a favorable decision reducing the tax liability relating to technical service fees. On July 26, 1989, McAdoo told Keever that he had been informed by Siouffi that one of the auditors had been "taken care of" and another auditor "can most likely." In or about August 8, 1989, Triton Indonesia agreed to pay Siouffi $165,000 for the purpose of obtaining a favorable decision from Indonesian government officials on the tax issue relating to technical service fees. On the same day, Triton Indonesia entered into a fictitious transaction pursuant to which Triton Indonesia would pay Orix $165,000. Triton Indonesia paid Orix $80,000 on August 9, 1989, and $85,000 on or about August 31, 1989. Murphy signed fabricated documentation relating to the payment and participated in recording falsely the expenditure as a payment for the purchase of seismic data. On August 15, 1989, Keever wrote a two-page letter to the Pertamina/BPKP auditors presenting Triton Indonesia's position that it should not be liable for withholding tax on technical service fees. On August 18, 1989, the Indonesian auditing board responded by accepting Triton Indonesia's position that the company was not liable for any additional taxes on technical service fees. On or about October 17, 1989, Siouffi told Keever that $120,000 had been paid to one of the auditors and $40,000 to others at Pertamina. In its reply to Keever's August 15, 1989 letter, the Indonesian government auditing board reiterated that Triton Indonesia still owed $233,134 in withholding tax relating to interest charges. In October 1989, Triton Indonesia management began to discuss with Siouffi how to reduce its tax liability for the interest charges. By November 1989, these discussions had evolved into a plan to make a payment to obtain a favorable decision reducing the tax rate on the interest charges. Siouffi told Keever that reducing the tax rate on interest would cost Triton Indonesia approximately $20,000. On December 1, 1989, McAdoo, following Siouffi's instructions, wrote a brief letter to the Indonesian auditing board concerning the withholding rate on interest charges and agreeing to pay $155,423 rather than $233,134, a reduction of approximately $80,000 from the liability imposed as a result of ==========================================START OF PAGE 7====== the audit. On December 12, 1989, Siouffi told Keever that a BPKP auditor would be paid $20,000 in connection with obtaining this decision to reduce taxes on interest. Keever had several subsequent conversations with Siouffi concerning this $20,000 payment to the BPKP auditor. On December 14, 1989, the Indonesian government responded to McAdoo's December 1 letter with a brief letter accepting Triton Indonesia's position regarding the applicable interest rate and that the tax liability relating to interest charges should be reduced to a figure of $155,423. On January 4, 1990, Triton Indonesia paid Siouffi $22,500 for the reduction which had been obtained in the tax rate on interest charges. On the same day, Triton Indonesia entered into a sham $22,500 transaction with Windusari, a Siouffi company. Murphy signed fabricated documentation relating to this payment and participated in recording falsely the expenditure as a payment for repairs to equipment in the Enim oil fields. On January 6, 1990, Siouffi told Keever that the BPKP auditor had been paid in connection with the decision on the tax audit issue concerning the tax rate on interest payments. ==========================================START OF PAGE 8====== 2. Triton Indonesia Made Improper Payments In Connection With The Fiscal 1988 And 1989 Annual Pertamina/BPKP Audits a. The March 31, 1988 Audit Between January 9, 1989 and February 10, 1989, the Pertamina/BPKP auditors conducted their field work relating to the annual audit for the fiscal year ending March 31, 1988. In April 1989, prior to receipt by Triton Indonesia of a final audit report, Keever and McAdoo began to communicate with Siouffi about making a payment for the purpose of obtaining from Pertamina/BPKP auditors an audit report certifying the unrecovered cost pool at issue in the March 31, 1988 audit. On April 3, 1989, Siouffi informed Keever that obtaining a final audit report with certification of the full cost pool would require a payment of approximately $21,000. Siouffi informed Keever that McAdoo had already authorized such a payment. Triton Indonesia paid Siouffi $21,000 for obtaining from the auditors a favorable final report and cost certification. In September 1989, Triton Indonesia entered into a fictitious $21,000 transaction with Windusari. Murphy signed fabricated documentation relating to this payment and participated in recording falsely the expenditure as a payment for service and repair to equipment in the Enim oil field. The auditors allowed all but $139,547 of over $8 million in unrecovered costs. b. The March 31, 1989 Audit Between November 23, 1989 and January 7, 1990, the Pertamina/BPKP auditors performed their field work relating to the audit for the fiscal year ending March 31, 1989. Triton Indonesia management and Siouffi began discussing a payment to Indonesian officials to obtain a final audit report and full certification of unrecovered costs even before the audit field work was completed. Keever had discussions with Siouffi beginning in the third quarter of 1989 about what steps Triton Indonesia would need to take to obtain the audit report and certification of costs. In December 1989, Siouffi informed Keever that obtaining a final report with full cost certification would require a payment of $35,000 which would be allocated $28,000 to BPKP and $7,000 to Pertamina. Between March 2, 1990 and March 12, 1990, Triton Indonesia paid Siouffi $38,500 for the purpose of obtaining a favorable final audit report with full cost certification. During this time, Triton Indonesia entered into several fictitious transactions with Windusari in which Triton Indonesia paid ==========================================START OF PAGE 9====== Windusari a total of $38,500. Murphy signed fabricated documentation relating to this payment and participated in recording falsely the expenditures as payments for repairs to equipment used in the Enim oil fields. Triton Indonesia received the final audit report on or about March 8, 1990. The auditors made only $275,571 in reductions, while certifying over $8 million in costs. 3. Triton Indonesia Made An Improper Payment For A Corporate Tax Refund In the fall of 1988, Triton Indonesia engaged Siouffi to contact Indonesian government officials concerning Triton Indonesia's corporate tax status and a refund of corporate taxes paid by Nordell. Shortly after this engagement, Siouffi informed Triton Indonesia's then finance manager that a payment would be necessary both to obtain a decision from the Indonesian government that Triton Indonesia was in a nontaxable position and for a refund of the corporate tax paid by Nordell. In December 1988, McAdoo wrote to the Monetary Directorate of the Indonesian Ministry of Finance, the government agency responsible for tax collections, requesting a determination that the Enim Project was not currently obligated to pay the corporate tax because it was not earning a profit. On March 11, 1989, the Monetary Directorate responded to Triton Indonesia's request by letter stating that Triton Indonesia would not be obligated to pay corporate taxes as long as it did not earn a profit from the operation of the Enim Project. Keever wrote to the Monetary Directorate on March 14, 1989 and again on May 1, 1989, enclosing the March 11 letter from the Monetary Directorate and arguing that because the predecessor had not earned a profit during its period as operator, Triton Indonesia should receive a refund of approximately $94,000 in corporate taxes erroneously paid by the predecessor. On May 1, 1989, Siouffi informed Triton Indonesia's former finance manager and Keever that obtaining a favorable decision concerning the refund would require a payment of $7,000. McAdoo and Keever discussed Siouffi's proposal and agreed to make the payment. In May 1989, Triton Indonesia agreed to pay Siouffi $7,500 for obtaining a favorable decision on the tax refund. On or about June 1, 1989, Triton Indonesia received a refund of the full $94,000 from the Ministry of Finance. In September 1989, after Windusari had invoiced Triton Indonesia for approximately $23,000, of which $7,500 was for the favorable decision on the tax refund, Murphy signed fabricated documentation relating to this payment and participated in recording falsely the expenditure as a payment for service and repair to equipment in the Enim oil field. ==========================================START OF PAGE 10====== 4. Triton Indonesia Made An Improper Payment For The Refund Of Value Added Tax According to Indonesian tax law, certain Indonesian vendors are required to collect a ten percent value added tax ("VAT") in connection with the provision of goods and services. The vendors covered under this law are required to deliver the taxes they collect to the Indonesian government. Subsequently, entities that have been charged value added taxes can seek to obtain reimbursement of any VAT inappropriately paid by submitting the resulting invoices and other documents to the Indonesian government for review. Pertamina was responsible for reviewing the propriety of Triton Indonesia's VAT payments and for reimbursing any overpayments. Between May and September 1989, Triton Indonesia submitted documentation to Pertamina concerning VAT payments it had made during the period from March through August 1989. Triton Indonesia submitted all invoices, totalling $119,000, due to uncertainty concerning the amount of reimbursement to which it was entitled, leaving Pertamina to make the decision concerning whether VAT had been correctly paid and was subject to reimbursement. A few days after the final submission to Pertamina, while Triton Indonesia's application for reimbursement was still pending, Siouffi informed McAdoo and Keever that obtaining a favorable decision on the VAT refund would require a payment of $22,500. Beginning on October 25, 1989, Triton Indonesia paid Siouffi $23,000 for the purpose of obtaining a favorable decision on the VAT tax reimbursement. At the same time, Triton Indonesia entered into a $23,000 transaction with Derco, a Siouffi company. Murphy signed fabricated documentation relating to this payment and participated in recording falsely the expenditure as a payment for the acquisition and interpretation of seismic data. On November 6, 1989, Pertamina reimbursed Triton Indonesia in the amount of approximately $109,000. 5. Triton Indonesia Made An Improper Payment Relating To A Pipeline Tariff The RSRC contract required the Enim Project to deliver all crude oil produced to Pertamina through a pipeline owned by Pertamina. The Enim Project was required to reimburse Pertamina for use of the pipeline in accordance with the terms of a Pipeline Transportation Agreement. In early 1990, a difference of opinion arose between Pertamina and Triton Indonesia concerning the correct Consumer Price Index ("CPI") for determining the pipeline fee. After Triton Indonesia's former finance manager had told Keever that Nordell and Triton Indonesia had overpaid for use of the ==========================================START OF PAGE 11====== Pertamina pipeline, Siouffi contacted Keever and offered to assist Triton Indonesia in obtaining a refund of the purported overcharge from Pertamina. Siouffi stated that obtaining a favorable decision to revise the pipeline rates and procure a refund of the purported overpayment would require a payment of approximately $10,000. On April 30, 1990, Keever sent a letter to Pertamina requesting that the pipeline fees for the period from May 1, 1987 to December 31, 1989 be adjusted retroactively and that Pertamina refund the purported overpayment of approximately $50,000. In a letter dated June 7, 1990, Pertamina recalculated Triton Indonesia's pipeline fee obligation using a different CPI and agreed to refund the purported overpayment. Shortly thereafter, Pertamina reimbursed the purported overpayment. Between May 29 and June 7, 1990, Triton Indonesia paid Siouffi $10,000 for the purpose of obtaining a favorable decision on the pipeline fee reimbursement. During the same time, Triton Indonesia entered into a fictitious transaction in approximately the same amount with Windusari. Murphy signed fabricated documentation relating to this payment and participated in recording falsely the expenditure as a payment for service and repair to equipment in the Enim oil field. Keever informed McClure about the true purpose of this transaction. G. Triton Indonesia Recorded Other False Entries In Its Books And Records Triton Indonesia also recorded other false entries in its books and records. For example, McClure and Murphy initialled documents authorizing cash payments totalling $1,000 per month to Pertamina clerical employees made for the purpose of expediting payment of monthly crude oil invoices which Murphy falsely documented and recorded as tax consulting fees and entertainment expenses. McClure and Murphy also initialled documents authorizing a $4,300 payment made in connection with the resignation of another Triton Indonesia employee which Murphy falsely documented and recorded as a payment to Windusari for service and repair to equipment in the Enim oil field. Keever told McClure and Murphy about the true purpose of the transaction. Finally, Murphy initialled documents authorizing a $3,400 payment made for the purpose of permitting Triton Indonesia to make tax payments in three installments which he falsely documented and recorded as a payment to Windusari for repairs to equipment in the Enim oil fields. In addition, McClure learned that a $73,000 payment made in December 1990 in connection with the termination and subsequent reinstatement of Triton Indonesia's finance manager was falsely documented and recorded as a payment to Windusari for service and ==========================================START OF PAGE 12====== repair to equipment in the Enim oil field. H. Triton Energy Management Received Information Concerning Improper Payments And False Books And Records Gore and Puetz were each members of Triton Energy senior management who had significant responsibility for the operations of both Triton Energy and Triton Indonesia. As president of Triton Energy, Gore was responsible for all Triton Energy production and exploration operations worldwide. Puetz, senior vice president and CFO of Triton Energy, had oversight for preparation of financial statements for all foreign operations. Triton Energy's senior management was aware that Siouffi's role with Triton Indonesia included exerting influence with the Indonesian government. Gore and Puetz were well aware that Triton Indonesia had entered into contracts with Siouffi entities. From the start of Triton Indonesia's role as operator, some Triton Energy officers and managers had concerns about the relationship with Siouffi, including concerns about the vagueness of his contractual duties, the large amounts of money he was receiving, how he might be using that money, and his honesty. Despite these concerns, Triton Energy's former management did not establish any policies or procedures concerning the circumstances under which Triton Indonesia could make payments to Siouffi for the purpose of influencing a government decision or what activities Siouffi could engage in on Triton Indonesia's behalf. At the outset of Triton Energy's involvement in Indonesia, Triton Energy's former management became aware of additional information that should have led to a heightened degree of vigilance about the possibility of violations of the Foreign Corrupt Practices Act ("FCPA"). Instead, Triton Energy management ignored danger signals and took no precautions. For example, in September 1988, Triton Energy's former assistant controller traveled to Indonesia to perform due diligence prior to the company taking over operation of the Enim Project from the predecessor. At that time, the assistant controller was informed about certain practices that had become routine during the predecessor's tenure. The assistant controller was informed that one of Triton Indonesia's finance manager's chief functions was to make cash payments to Pertamina employees to obtain timely payment of crude oil invoices. In 1991, Triton Energy's former management eventually became aware that another of the finance manager's primary duties with Triton Indonesia was to act as a liaison to Pertamina/BPKP auditors in connection with the annual audits. Although the finance manager was terminated by Keever in late September 1990, he was reinstated in response to pressure from Pertamina. Despite the objections from the Director of Internal Audit and Triton Energy's Assistant Controller, Triton ==========================================START OF PAGE 13====== Energy's former management failed to remove the finance manager from his liaison position. The finance manager remained in a position of responsibility in the Triton Indonesia accounting department until mid to late 1993, long after Triton Energy management had obtained information regarding the payments referred to above. After Triton Indonesia began to operate the Enim Project, Triton Indonesia management periodically briefed Triton Energy management about the payments and false books and records made in connection with government decisions. During 1989 and 1990, Keever briefed Gore and Puetz about certain of the payments and false books and records. The Triton Energy officers expressed concern about such practices which they had neither directed nor authorized, but failed to require Triton Indonesia to discontinue these practices. In September 1989, Triton's new Internal Auditor visited Indonesia as part of a worldwide introductory tour of Triton's facilities. While there, he reviewed some accounting documents and had discussions with McAdoo, Keever, and other Triton Indonesia personnel. Shortly after his return to Dallas, the internal auditor, at the direction of a Triton Energy officer, wrote a confidential memorandum ("Internal Auditor's Memorandum") to Triton Energy's former management describing his concerns about, among other things, improper payments by Triton Indonesia to Indonesian government officials. The Internal Auditor's Memorandum was distributed to Gore and Puetz, among others. In the memorandum, among other things, the internal auditor described Indonesia as a "country of state supported corruption" and described certain practices allegedly engaged in by Triton Indonesia. Specifically, the Internal Auditor's Memorandum charged that Triton Indonesia "pay[s] BPKP auditors working on the audit of our records to determine what is cost recoverable." It further stated: "What is worse, and this is extremely confidential, is that we paid the auditors in order to have their audit exceptions taken care of." The Internal Auditor's Memorandum noted that these payments are then documented in a "creative way" to make them cost recoverable. In October 1989, Gore, after reading the Internal Auditor's Memorandum in the internal auditor's presence, ordered the internal auditor to collect all copies of the memorandum and destroy them. Gore and Puetz made no effort to determine whether the allegations in the Internal Auditor's Memorandum were supported by facts. Instead, after learning that the source of the information in the memorandum came from conversations with Triton Indonesia officers and personnel, Triton Energy's former management dismissed the allegations in the Internal Auditor's Memorandum. As a result, they did not conduct an investigation or revise any policies or procedures relating to the various issues raised in the Internal Auditor's Memorandum. ==========================================START OF PAGE 14====== After becoming aware of the Internal Auditor's Memorandum, and during their preparation for their 1991 fiscal year audit of Triton, Triton Energy's outside auditors raised concerns about possible unlawful activities by Triton Indonesia. Keever prepared a memorandum delineating each of the payments made in connection with Indonesian government decisions and the false books and records created by Triton Indonesia. Rather than fully disclosing each of these transactions to the auditors, Triton Energy management made a partial disclosure, omitting most of the improper payments and most of the false books and records. At a meeting with the auditors, Keever, among others, represented that there was no evidence that money was paid to Indonesian auditors. In September 1989, shortly before Gore received the Internal Auditor's Memorandum, Keever informed Gore that Triton Indonesia was making payments to Siouffi in connection with decisions by the Indonesian government and told Gore that money may have been paid to Indonesian auditors, including payments in connection with the predecessor's tax audit, and the corporate tax refund. Keever also told Gore that the payments were recorded inaccurately in Triton Indonesia's books and records. Gore responded that he had worked in another foreign country and understood that such things had to be done in certain environments. In January 1990, Keever also informed Puetz about the $23,000 predecessor tax audit payment and the false entry in Triton Indonesia's books and records. I. Triton Indonesia Reclassified Payments In Its Books And Records In 1992 and 1994, the payments described above, totalling approximately $450,000, were reclassified. III. OPINION A. Applicable Law Section 30A(a) of the Exchange Act, the antibribery provision of the FCPA, prohibits any issuer which has a class of securities registered pursuant to Section 12 of the Exchange Act or any officer, director, employee, or agent of such issuer from making use of instruments of interstate commerce corruptly to pay, offer to pay, promise to pay, or to authorize the payment of any money, gift, or promise to give, anything of value to (1) any foreign official for purposes of (A)(i) influencing any act or decision of such foreign official in his official capacity, or (ii) inducing such foreign official to do or omit to do any act in ==========================================START OF PAGE 15====== violation of the lawful duty of such official, or (B) inducing such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality, in order to assist such issuer in obtaining or retaining business for or with, or directing business to, any person. B. Record Keeping and Internal Controls Provisions of the Exchange Act Section 13(b)(2) of the Exchange Act is comprised of two accounting provisions referred to as the "books and records" and "internal controls" provisions. These accounting provisions were enacted as part of the FCPA to strengthen the accuracy of records and to "promote the reliability and completeness of financial information that issuers are required to file with the Commission or disseminate to investors pursuant to the Exchange Act." SEC v. World-Wide Coin Invs. Ltd., 567 F.Supp. 724, 747 (N.D.Ga 1983). The accounting provisions were enacted by Congress along with the antibribery provisions because Congress concluded that almost all bribery of foreign officials by American corporations was covered up in the corporations' books and that the requirement for accurate records and adequate internal controls would deter bribery. Lewis v. Sporck, 612 F.Supp. 1316, 1333 (N.D.Cal 1985). Section 13(b)(2)(A) of the Exchange Act requires issuers to make and keep books, records, and accounts that accurately and fairly reflect the transactions and dispositions of their assets. Section 13(b)(2)(B) requires issuers to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that, among other things, transactions are executed in accordance with management's general or specific authorization and that transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets. Exchange Act Rule 13b2-1 prohibits any person from, directly or indirectly, falsifying or causing the falsification of any books, records, or accounts subject to Section 13(b)(2)(A). C. Violations by McClure and Murphy Triton Indonesia maintained books and records that did not accurately or fairly reflect the underlying disposition of assets. Accordingly, Triton Energy violated Section 13(b)(2)(A) of the Exchange Act. As Triton Indonesia's Controller, Murphy knowingly participated in creating and recording false entries in Triton Indonesia's books and records. As Triton Indonesia's Commercial Manager, McClure failed to assure that the entries prepared by Murphy accurately reflected the underlying transactions. Keever informed both McClure and Murphy that the ==========================================START OF PAGE 16====== payments were for a purpose other than what was indicated in documents presented for their signatures. Nevertheless, Murphy signed documents authorizing the expenditures and mischaracterizing them as legitimate business expenses. In addition, Keever informed Murphy about the false characterization of payments which Murphy did not have any role in authorizing. Thereafter, Murphy participated in making false entries in Triton Indonesia's books and records characterizing the payments as expenses incurred for the purpose indicated in fabricated documentation. By engaging in this conduct, McClure and Murphy violated Exchange Act Rule 13b2-1, and caused Triton Energy to violate Section 13(b)(2)(A) of the Exchange Act. D. Violations by Gore and Puetz As members of Triton Energy senior management, Gore and Puetz each received information indicating that Triton Indonesia was engaged in conduct that was potentially unlawful. Gore and Puetz received the Internal Auditor's Memorandum in September and October 1989, respectively, but took no action to initiate an investigation of the serious issues raised by the internal auditor. Indeed, Gore ordered the internal auditor to collect and destroy all copies of the Internal Auditor's Memorandum. In addition, as described above, Keever described for Gore and Puetz certain payments made to Siouffi to obtain favorable Indonesian government decisions. After receiving such information, Gore and Puetz failed to investigate the potentially unlawful conduct. Instead, as the senior management of Triton Energy, Gore and Puetz simply acknowledged the existence of such practices and treated them as a cost of doing business in a foreign jurisdiction. The toleration of such practices is inimical to a fair business environment and undermines public confidence in the integrity of public corporations. Accordingly, Gore and Puetz caused Triton Energy to violate Sections 30A(a) and 13(b)(2)(A) of the Exchange Act. ==========================================START OF PAGE 17====== IV. FINDINGS Based on the above, the Commission finds that McClure and Murphy violated Exchange Act Rule 13b2-1 and caused Triton Energy to violate Section 13(b)(2)(A) of the Exchange Act, and Gore and Puetz caused Triton Energy to violate Sections 30A(a) and 13(b)(2)(A) of the Exchange Act. V. OFFERS OF SETTLEMENT McClure, Murphy, Gore and Puetz have submitted Offers in this proceeding which the Commission has determined to accept. McClure and Murphy, in their Offers, consent to this Order making findings, as set forth above, and ordering McClure and Murphy to cease and desist from violating Exchange Act Rule 13b2-1, and from causing violations of Section 13(b)(2)(A) of the Exchange Act. Gore and Puetz, in their Offers, consent to this Order making findings, as set forth above, and ordering Gore and Puetz to cease and desist from causing violations of Sections 30A(a) and 13(b)(2)(A) of the Exchange Act. VI. ORDER Accordingly, IT IS HEREBY ORDERED, pursuant to Section 21C of the Exchange Act, that: 1) McClure and Murphy cease and desist from committing or causing any violation of, and committing or causing any future violation of Exchange Act Rule 13b2-1; 2) Gore and Puetz cease and desist from committing or causing any violation of, and committing or causing any future violation of Section 30A(a); and 3) Gore, Puetz, McClure and Murphy cease and desist from causing any violation of, and causing any future violation of Section 13(b)(2)(A) of the Exchange Act. By the Commission. Jonathan G. Katz Secretary