The Securities and Exchange Commission has charged France-based oil and gas company Total S.A. with violating the Foreign Corrupt Practices Act (FCPA) by paying $60 million in bribes to intermediaries of an Iranian government official who then exercised his influence to help the company obtain valuable contracts to develop significant oil and gas fields in Iran.
The SEC alleges that Total made more than $150 million in profits through the bribery scheme and attempted to cover up the true nature of the illegal payments by entering into sham consulting agreements with intermediaries of the Iranian official and mischaracterizing the bribes in its books and records as legitimate business development expenses related to the consulting agreements. The SEC alleges that Total had inadequate systems to properly review the consulting agreements and lacked sufficient internal controls to comply with federal laws prohibiting bribery.
Total agreed to pay more than $398 million to settle the SECs charges and a parallel criminal matter announced May 29, 2013 by the U.S. Department of Justice.
Total used illicit payments to win business in Iran, and reaped substantial financial benefits as a result, said Andrew M. Calamari, Director of the SECs New York Regional Office. Total must now pay back all of its profits from the companys corrupt conduct and additionally pay criminal penalties on top of that.
According to the SECs order instituting settled administrative proceedings, Total negotiated a development contract in 1995 with the National Iranian Oil Company (NIOC) for the countrys Sirri A and E oil and gas fields. Prior to executing the contract, Total held a meeting with the Iranian official and agreed to enter into a purported consulting agreement with an intermediary he designated. They agreed that Total would make payments to the intermediary under the guise of a consulting agreement when the real purpose was to induce the Iranian official to use his influence to help obtain NIOCs approval of the development agreement. After the contract was executed, Total corruptly made the bribery payments that resulted in NIOC allowing Total to develop the Sirri A and E oil and gas fields and make more than $150 million in profits, according to the SEC.
The SECs order requires Total to pay disgorgement of $153 million in illicit profits and retain an independent compliance consultant to review and report on Totals compliance with the FCPA. Total also must cease and desist from committing or causing any violations of Section 30A, Section 13(b)(2)(A), and Section 13(b)(2)(B) of the Securities Exchange Act of 1934.
In the parallel criminal proceedings, Total agreed to pay a $245.2 million penalty as part of a deferred prosecution agreement. Charges also were recommended by the prosecutor of Paris (François Molins, Procureur de la République) of the Tribunal de Grande Instance de Paris for violations of French laws.
In a May 29, 2013 press release, Total S.A confirmed that it had reached final agreements with the United States Department of Justice and United States Securities and Exchange Commission putting an end to an investigation initiated in 2003 concerning petroleum contracts awarded in Iran in the 1990s, in which Total S.A agreed to pay a total amount of $398.2 million to the U.S. government. The DOJ considered and acknowledged Totals cooperation and disclosure over the course of several years.
These settlements, the outcome of which are customary in the United States, allow us to put an end to this investigation, said Totals CFO, Patrick de La Chevardière, We look forward to continuing our work and in demonstrating our strong commitment to ensuring ethical and legal compliance with the laws around the world.
The French investigation that started in 2006 has reached the stage of resolution. Total reaffirms that it has not committed any offense under applicable French law.