SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17126 \ September 12, 2001
Accounting and Auditing Enforcement Release No. 1445 / September 12, 2001
SECURITIES AND EXCHANGE COMMISSION v. ERIC L. MATTSON AND JAMES W. HARRIS, Civil Action No. H-01-3106 (S.D. Tex.)(filed September 11, 2001)
SEC SUES BAKER HUGHES INCORPORATED'S FORMER
CHIEF FINANCIAL OFFICER AND CONTROLLER FOR
AUTHORIZING THE PAYMENT OF A BRIBE
On September 11, 2001, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court for the Southern District of Texas, Houston Division, against Eric L. Mattson ("Mattson"), the former Chief Financial Officer of Baker Hughes Incorporated ("Baker Hughes"), and James W. Harris ("Harris"), Baker Hughes' former Controller. The Commission's complaint alleges that Mattson and Harris authorized the payment of a bribe of $75,000, through KPMG-Siddharta Siddharta & Harsono ("KPMG-SSH"), Baker Hughes' agent and accountant in Indonesia, to a local government official in Indonesia. Mattson and Harris directed that this payment be made while knowing that KPMG-SSH would pass all or part of the payment along to an Indonesian tax official for the purpose of influencing him to reduce a tax assessment from $3.2 million to $270,000 for PT Eastman Christensen ("PTEC"), an Indonesian company beneficially owned by Baker Hughes. This improper payment was authorized in violation of the antibribery provisions of the Foreign Corrupt Practices Act ("FCPA")
The complaint alleges that on March 9, 1999, Harris was told that an Indonesian tax official was demanding a $75,000 payment, in exchange for which he would reduce PTEC's tax assessment. Harris learned that KPMG-SSH had offered to make the improper payment on PTEC's behalf using PTEC's funds, and then issue an inflated invoice that would conceal the payment. The complaint further alleges that Baker Hughes' FCPA advisor advised Harris that any such payment to an Indonesian tax official would violate the FCPA. On March 10, 1999, Harris told Baker Hughes' General Counsel and Mattson of the Indonesian tax official's demand for an improper payment. During this meeting, the General Counsel stated that the Indonesian tax official's demands raised FCPA concerns and under no circumstances should Harris or Mattson enter into any transaction that could potentially violate the FCPA. On the evening of March 10, 1999, disregarding the FCPA advisor's instructions, and acting contrary to the advice of the General Counsel, defendants Mattson and Harris authorized the payment of the bribe to the Indonesian tax official. The complaint alleges that Mattson and Harris violated Sections 30A(a) and 13(b)(5) of the Exchange Act and Exchange Act Rule 13b2-1 promulgated thereunder and aided and abetted Baker Hughes' violations of the books and records and internal controls provisions of the Exchange Act, Sections 13(b)(2)(A) and 13(b)(2)(B).
Also on September 11, 2001, the Securities and Exchange Commission and the Department of Justice filed a joint civil injunctive action in the United States District Court for the Southern District of Texas, Houston Division, against KPMG-SSH and Sonny Harsono, a partner of KPMG-SSH, for their part in the payment of the bribe to the Indonesian tax official. This is the first time that the Commission and the Department of Justice, both of which have jurisdiction over the antibribery provisions of the FCPA, have combined to file a joint civil action. Without admitting or denying the allegations of the complaint, the defendants have consented to the entry of a Final Judgment that permanently enjoins both defendants from violating and aiding and abetting the violation of the antibribery provisions of the FCPA and the internal controls and books and records provisions of the Securities and Exchange Act of 1934 ("Exchange Act") (Sections 104A(a)(1), (2) and (3) of the FCPA and Sections 30A(a)(1), (2) and (3), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act). See Litigation Release No. 17127 (September 12, 2001).
Finally, in a related action, the Commission also instituted, on September 12, 2001, a settled administrative proceeding against Baker Hughes. The Commission's Order finds that, in March 1999, Baker Hughes' CFO and its Controller authorized the above-described illegal payment, through KPMG-SSH, its agent in Indonesia, to a local government official in Indonesia. The Order also finds that in 1998 and 1995, senior managers at Baker Hughes authorized payments to Baker Hughes' agents in India and Brazil, respectively, without making an adequate inquiry as to whether the agents might give all or part of the payments to foreign government officials in violation of the FCPA. Without admitting or denying the Commission's findings, Baker Hughes consented to the entry of the Commission's Order. The Order directs that Baker Hughes cease and desist from committing or causing any violation and any future violation of the internal controls and books and records provisions of the Exchange Act (Sections 13(b)(2)(A) and Section 13(b)(2)(B) of the Exchange Act). See Securities Exchange Act Release No. 44784 (September 12, 2001); Accounting and Auditing Enforcement Release No. 1447.
The Commission wishes to thank the United States Department of Justice for its assistance in this matter.