Hallibuton Offers $559m to Settle Corruption Charges

Halliburton is the latest in a string of Western companies settling charges or paying fines in connection with bribing foreign officials to get contracts. The company has agreed to pay $559 million to the U.S. to settle charges that one of its former units, Kellog, Brown and Root, bribed Nigerian officials during the construction of a gas plant, according to media reports.

The case under the U.S. Foreign Corrupt Practices Act against Kellogg, Brown & Root engineering unit stems from the construction of a giant liquefied natural gas plant on the Nigerian coast near Port Harcourt from 1996 through the mid-2000s. KBR was part of a consortium that built the facility, which at the time was the largest industrial investment ever made in Africa. Former U.S. Vice President Dick Cheney was the CEO of Halliburton during this period. Mr. Cheney is not named in the Justice Department charges and there is no evidence Mr. Cheney knew of the bribes.

The $559m payment would be the largest paid by a U.S. company in a bribery investigation, eclipsing the previous record $44 million fine in 2007 against U.S. oil-field services firm Baker Hughes Inc. for improper payments in Kazakhstan. In December, German industrial conglomerate Siemens AG agreed to pay $800 million in U.S. fines to settle bribery investigations involving alleged payments to government officials around the world to win infrastructure contracts. As part of the settlement, Siemens didn't admit to bribery allegations but it admitted to having had inadequate controls and keeping improper accounts.

There is a lot of anecdotal evidence of widespread corruption in many parts of the world. The rarity of the formal charges or convictions indicates that the behavior of large multinationals in their dealings with corrupt politicians and officials in many Asian and African countries has received only scant attention. There have been serious allegations and at least preliminary evidence to suggest that illegal payments were made to Bhutto-Zardari controlled fronts by companies in France, Switzerland and Poland. There was some action pursued in Switzerland at the request of Pakistani Government under Pervez Musharraf. However, France and Poland have not pursued the charges of corruption involving their companies in Pakistan. The only explanation being offered is that foreign corruption laws did not exist in France prior to the year 2000.

There are currently laws on the books in the West such as the Foreign Corrupt Practices Act (FCPA) in the United States. Almost all ethics classes taught in the Western management schools and company training courses cover this topic. However, the question is whether these laws are really enforced and how often are the companies held accountable? Or do they simply rely on the foreign governments to report misbehavior? It would be a fantasy to expect the officials and politicians on the receiving end to report incidents of bribery as they are the main beneficiaries. But I think the German, French, US, British and other governments of developed nations who claim higher moral positions should be cracking down on these reprehensible practices just to enforce their own laws and live up to their own higher standards. While it may be argued and it is like putting the shoe on the wrong foot, I see it as the only hope we have of containing such widespread corruption in developing nations that is robbing their people blind.

Related Links:

Bhutto Convicted in Switzerland

Corruption in Pakistan

Transparency International Survey 2007

Is Siemens Guilty?

Zardari Corruption Probe

Corruption in Pakistan: Can the West help end it?

As I saw the recent reports from Munich about Siemens pleading guilty to bribing politicians and officials in Nigeria, Russia and Libya, it reminded me that Siemens is a large player in Pakistan. Has any one looked into Siemens engaging in similar corrupt practices in Pakistan?

And, how about the behavior of other American and European companies operating in Pakistan? There are definitely laws on the books in the West such as the Foreign Corrupt Practices Act (FCPA) in the United States. All ethics classes taught in the West in management schools and company training cover this topic. However, the question is whether these laws are really enforced and how often are the companies held accountable? Or do they simply rely on the foreign governments to report misbehavior? It would be a fantasy to expect the officials and politicians on the receiving end to report incidents of bribery as they are the main beneficiaries. But I think the German, French, US and other western governments and other developed nations who claim higher moral positions should be cracking down on these reprehensible practices just to enforce their own laws and live up to their own higher standards. While it may be argued and it is like putting the shoe on the wrong foot, I see it as the only hope we have of containing such widespread corruption in developing nations that is robbing their people blind.
Looking at Pakistan, there have been serious allegations and at least preliminary evidence to suggest that illegal payments were made to Bhutto-Zardari controlled fronts by companies in France, Switzerland and Poland. There was some action pursued in Switzerland at the request of Pakistani Government under Pervez Musharraf. However, France and Poland have not pursued the charges of corruption involving their companies in Pakistan. The only explanation I have heard is that the FCPA style laws did not exist in France prior to the year 2000. It has made me wonder whether there is an inherent conflict when it comes to European or American governments taking action against their own companies. After all, there are jobs in these countries that depend on exports to the developing nations. Would they rather be pristine in their efforts in enforcing their laws even if it means losing business and jobs to the Japanese, Koreans and others?

Upon searching the Internet, I found at least one report in Forbes magazine regarding Siemens in Pakistan:

"The World Bank is looking at an electrical power plant project in Pakistan concluded in the mid-1990s, which was built and later partially maintained by Siemens and financed by the World Bank.The World Bank is concerned that Siemens' costs for the project may have been overpriced.Siemens is currently engulfed in a slush-fund scandal, in which prosecutors allege that managers siphoned off hundreds of millions of euros in company money to obtain foreign contracts.Siemens' own internal investigation uncovered 420 mln euros in suspicious payments going back to 1999 which may have been made to obtain telecommunications equipment contracts in a range of foreign countries.The Bavarian State Prosecutors office has said the sum is estimated in the triple-digit millions of euros."

These reports beg the following questions: Do they represent only the tip of the iceberg of political and official corruption in the developing world? Are there more such investigations and prosecutions on the horizon? I certainly hope there are. In my view, serious action by the Western prosecutors seems to be an effective way to reduce the scourge of rampant corruption in developing nations such as Pakistan.