Keppel O&M’s involvement in Brazil’s massive corruption scandal

Keppel Offshore & Marine (O&M), a Singaporean government-linked company, was found to be involved in a corruption probe under Operation Car Wash in Brazil.

The company is a subsidiary of Keppel Corporation which is largely owned by Temasek. Keppel has reportedly paid US$55 million in bribes, between 2001 to 2014, to secure contracts with Brazillian state-owned oil giant Petrobras.

The bribery scandal was said to be Brazil’s massive corruption scandal, which involved politicians and bring down Brazil’s President Dilma Rousseff. The case had also led to mass protests in 2015.

It was called “Operation Car Wash” as it was first uncovered at a car wash.

In 2014, Brazilian police began investigating money-laundering at car washes and petrol stations by small-time criminals. They discovered that the small-time money launderers were actually working on behalf of Paulo Roberto Costa, Petrobras’ director of refining and supply.

This was also linked to a company named Sete Brazil, which was established in the early 2010s as a drilling contractor that would lease rigs to Petrobras.

Between 2011 to 2016, Sete Brazil won contracts with Petrobras worth US$89 billion for 28 ultra-deepwater drilling rigs.

Baird Maritime reported that Sete awarded contracts at five Brazillian shipyards worth US$22 billion, of which two were Singaporean-owned. Keppel O&M had six newbuild rigs contracts, and SembMarine had seven, with each yard worth over US$5 billion.

Keppel O&M’s involvement in the bribery scandal

When the bribery case uncovered by the police, former Petrobras executive Pedro Jose Barusco gave testimony to Brazil’s federal police in exchange for leniency and alleged Zwi Skornicki for money laundering.

Mr Skornicki is Keppel’s former third-party agent in Brazil, who had established a consultancy called Eagle do Brasil in the early 1990s. The Straits Times reported that he was first engaged by Keppel Fels – Keppel Corp’s subsidiary – to work as its agent.

He was arrested by the Brazillian authorities in February 2016.

In July 2016, Mr Skornicki told a judge that five leading executives, including Keppel O&M chief executive officer Chow Yew Yuen, had authorized him to bribe public officials in exchange for Petrobras contracts, as reported by Bloomberg.

Keppel had “strongly” denied the allegations then, stressing that none of the executives and CEO Chow ever authorized any bribes.

But two months later the company admitted that “certain transactions” associated with Mr Skornicki “may be suspicious” and notified the authorities in the relevant jurisdictions.

Subsequently, in December 2017, Keppel agreed to pay fines amounting to US$422.2 million as part of a global resolution with the authorities in the United States (US), Brazil and Singapore.

Citing admissions and court documents, the US Department of Justice (DOJ) revealed on 22 December 2018 that between 2001 and 2014, Keppel O&M “conspired to violate the Foreign Corrupt Practices Act (FCPA) by paying approximately US$55 million in bribes to officials at the Brazilian state-owned oil company Petrobras and to the then governing political party in Brazil, in order to win 13 contracts with Petrobras and another Brazilian entity.”

US court documents also revealed that between 2001 and 2011, Keppel O&M executives created and executed agreements on behalf of the company with consulting firms controlled by a consultant.

The document did not mention the name of the consultant, but it is believed to be Mr Skornicki.

According to the paper, the agreements were intended to facilitate bribe payments to obtain business from Petrobras, and Sete Brasil and conceal their purpose.

It added that Keppel effectuated the bribes by making payments to bank accounts in the US and elsewhere in the names of shell companies controlled by the consultant, who then transferred money from those bank accounts in the US to bank accounts outside the US-controlled by or for the benefit of Brazilian and party officials under the guise of these consulting agreements.

In one of the examples of the agreements made under the bribe, Sete Brasil had contracted five companies to commission the construction of a fleet of ultra-deepwater rigs for which Petrobras would be the end-user between 2011 and 2012.

The court paper stated that Keppel executives and executive of its unit in Brazil authorised the consultant during several phone calls to pay 1 per cent of the contract value as bribes in response to a demand from a Brazilian official.

Accordingly, the consultant paid about US$14.4 million in bribes to the Brazilian official and other related parties.

US court documents also revealed that Jeffery Chow, a former lawyer at Keppel Corp’s oil rig building business, had pleaded guilty to conspiring to violate the FCPA during a plea hearing in New York on 29 August 2017.

Mr Chow said that he drafted contracts with a Keppel agent in Brazil who he realized was being overpaid by millions of dollars so he could bribe Brazillian officials.

Keppel O&M earned a total of US$351.8 million through the bribery scheme.

Keppel O&M settles oil-rig claims with Sete Brasil

In October 2019, The Straits Times reported that Keppel will take control of four uncompleted oil drilling rigs and is in discussions to complete the building of two remaining rigs.

It had received US$1.3 billion in progress payments from Sete Brasil for the six rig orders, which had a total contract value of about US$4.9 billion, before payments stopped in November 2014. Keppel stopped work on the rigs in late 2015.

CPIB declined to comment on Keppel O&M bribery probe

Meanwhile, Keppel stated on 23 December last year that it has successfully complied with its obligations under the US Deferred Prosecution Agreement (DPA) entered into with the US Department of Justice in December 2017 and the DPA has accordingly concluded.

As part of the fines payable under the global resolution, about US$52.8 million (S$70.5 million) was payable to the Corrupt Practices Investigation Bureau  (CPIB) in Singapore within three years from the date of a conditional warning.

The discussions with the specified Brazilian authorities remain ongoing, and CPIB has agreed to extend this three-year period for a further 12 months until 22 December 2021, it added.

On Wednesday (27 January), CPIB noted that it cannot comment or provide updates on Keppel O&M’s bribery probe because it needs to “protect the integrity” of these confidential investigations, as reported by CNA.

It also declined to comment in order to “avoid prejudicing any prosecutorial decision that might follow”.

CPIB’s statement were made in response to a letter written by Sattar Bawany on 20 January, published in TODAY’s Voices section, which called for the Government to provide updates on the status of investigations into the bribery case.

 

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