Investigation of Halliburton Co./ TSKJ's Nigerian Business Practices: Model for Analysis of the Current Anti-Corruption Environment on Foreign Corrupt Practices Act Enforcement

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I. INTRODUCTION

The U.S. stood alone in its anti-bribery legislation from 1977, when the Foreign Corrupt Practices Act ("FCPA") (1) was initially passed, until the Organization for Economic Cooperation and Development (the "OECD") adopted the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions ("OECD Convention") in 1997, resulting in OECD signatory nations adopting implementing legislation. (2) France's adoption of implementing legislation in 2002 provided the basis for the investigation by one of its magistrates into the allegations that a Halliburton subsidiary, TSKJ, (3) had engaged in bribery activities in Nigeria. (4) What began as a French investigation (5) into allegations of improper payments by a TSKJ agent to Nigerian government officials in exchange for favorable treatment in contracts connected with the construction of a multibillion dollar natural gas liquefaction complex at Bonny Island, Nigeria has widened into an investigation by the Nigerian government (6) and FCPA investigations by the U.S. Department of Justice (7) and Securities and Exchange Commission. (8)

The issues raised by the French inquiry into Halliburton/TSKJ's alleged payments to Nigerian government officials of about $180 million in exchange for securing contractual advantages provide an excellent model for examining the influence of the current anti-corruption environment on FCPA enforcement. (9) The French are examining allegations of illicit payments to Nigerian government officials by the TSKJ joint venture in which Halliburton Company's subsidiary, Kellogg Brown & Root ("KBR"), (10) is a partner. (11) With an American corporation involved, (12) the French regulators related the information they had obtained to their U.S. compliance counterparts. (13)

This Paper will: 1) discuss the factual background of the alleged Halliburton/TSKJ misconduct and the pending investigations by various government agencies in several countries; 2) identify the relevant FCPA provisions, case law and policy; and 3) examine the anti-corruption environment which has influenced increased enforcement of the FCPA and its potential implications for the pending Halliburton/TSKJ investigation.

II. CURRENT FRENCH, DO J, SEC, AND NIGERIAN INVESTIGATIONS OF HALLIBURTON/TSKJ FOR POTENTIAL FOREIGN CORRUPT PRACTICES ACT VIOLATIONS

A. FACTUAL BACKGROUND OF ALLEGED HALLIBURTON/TSKJ BRIBERY MISCONDUCT

TSKJ, through its agent, Tri Star, is alleged to have made payments to Nigerian government officials of up to $180 million in exchange for lucrative contracts. (14) Starting in 1994, the joint venture, TSKJ, (15) entered into a series of contracts to build and expand the liquefied natural gas project for Nigeria LNG Limited (16) at Bonny Island in Rivers State. M.W. Kellogg--a twenty-five percent partner in TSKJ--was allegedly its lead company. (17) M.W. Kellogg became part of Halliburton in 1998, when Halliburton acquired its parent company, Dresser Industries. (18) After the acquisition, M. W. Kellogg's business was merged with an earlier Halliburton acquisition, Brown & Root, to become KBR, the engineering and construction unit within Halliburton. (19) Some of the M.W. Kellogg executives, who later worked for KBR, have been targeted for alleged misdeeds in the government investigations of bribery. (20)

Commencing in 1995, TSKJ entered into an agency agreement with Tri Star Investments, a firm headed by a British lawyer, Jeffrey Tesler. (21) The TSKJ joint venture allegedly engaged in its subterfuge by using Tri Star to act as an agent in making payments. (22) Reports estimate that TSKJ paid Tri Star $180 million which was remitted to Nigerian public officials through offshore accounts that allowed TSKJ to obtain contract awards for building the Bonny Island liquefied natural gas production units. (23) Some evidence has emerged in the French investigation that between 1995 and 2002, dates that "roughly coincided with contract awards for the Nigeria LNG project worth $6. …