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Nigeria: Halliburton Faces US Probe for Bribes

by Michael Isikoff and Mark HosenrballNewsweek
February 4th, 2004

The Justice Department has opened up an inquiry into whether Halliburton Co. was involved in the payment of $180 million in possible kickbacks to obtain contracts to build a natural gas plant in Nigeria during a period in the late 1990's when Vice President Dick Cheney was chairman of the company, Newsweek has learned.

There is no evidence that Cheney was aware of the payments in question and an aide said today the vice president has not been contacted about the probe. Still, the inquiry by the Justice Department's fraud section-which prosecutes federal anti-bribery law violations-is likely to bring new public attention to the vice president's past at the giant oil-services firm. Halliburton has been under intense scrutiny in recent months over its handling of hundreds of millions of dollars contracts relating to the rebuilding of Iraq.

The Justice inquiry, along with a related probe by the Securities and Exchange Commission, parallels a separate investigation into the Nigerian payments that is being conducted by a French magistrate and has received widespread attention in recent months in the European press. But the Justice Department and SEC probes have not previously been reported, although they were briefly mentioned by Halliburton last week near the end of a lengthy filing with the SEC.

In the filing, the Houston-based company disclosed that the French magistrate was investigating the Nigerian payments and then added: "The U.S. Department of Justice and the SEC have asked Halliburton for a report on these matters and are reviewing the allegations in light of the US. Foreign Corrupt Practices Act. Halliburton has engaged outside counsel to investigate any allegations and is cooperating with the government's inquiries. If illegal payments were made, this matter could have a material adverse effect on our business and results of operations."

A Justice Department official confirmed to Newsweek today that prosecutors have been seeking information from Halliburton related to the Nigerian contract and that the company was cooperating. But the official said the company's reference to being asked for "a report" by Justice was "not accurate." Rather than a report, Justice has sought documents from the company-and Halliburton has been turning them over, the official said. Another Justice official described the inquiry as a review of documents supplied by Halliburton and said it was still in its early stages.

In an e-mail response to questions from Newsweekabout its disclosure, a Halliburton official, Cathy Gist, said: "Management made the decision to include these statements because of the politically charged environment in which we now operate. We are trying to keep the investment community informed of the accurate facts about the company's business." She added that that "while Halliburton has no basis to assume that any of its employeeshave ever done anything in violation of the FCPA (Foreign Corrupt Practices Act), it has undertaken an examination and intends to cooperate with officials of the U.S. government." (In a later e-mail response, Gist added: "In future SEC filings, Halliburton will include more precise language regarding the nature of this examination as well as our continued commitment to cooperate with U.S. government officials regarding this matter.")

The investigation could raise sensitive political questions for the Justice Department because-unlike Pentagon probes now underway into Halliburton's Iraq contracts-the Nigerian matter specifically involves corporate conduct during the period between 1995 and 2000 when Cheney was chairman and chief executive officer of the company.

That could raise potential conflict-of-interest questions for Attorney General John Ashcroft similar to those that recently prompted Ashcroft to recuse himself in another investigation involving the Bush White House-the probe into who leaked information that disclosed the undercover identity of the wife of former U.S. Ambassador Joseph Wilson. The Justice official declined to comment on what role Ashcroft has played in the Halliburton probe so far and whether there have been any discussions about whether he might need to recuse himself from decisions relating to it. So far, there is no evidence suggesting any involvement by Cheney in the matters under review, another Justice official said.

The Justice Department inquiry involves a trail of payments to unknown recipients that were routed through off-shore bank accounts and were allegedly handled by a longtime Halliburton lawyer in London who, according to French press reports, was also a financial advisor to Nigeria's late dictator Gen. Sani Abacha. The payments were made in connection with the construction of a giant liquefied natural gas plant on a remote island in Nigeria.

The plant, one of the largest in the world, was built by TSKJ, a consortium of four major international construction firms, including Kellogg, Brown & Root, a major Halliburton subsidiary that has been the principal recipient of the company's contracts in Iraq. Halliburton touted its role in the Nigerian project in a March, 2000 press release headlined: "Four Industry Leaders United to Execute World Class Project in Nigeria."

The question Justice is probing is how exactly Halliburton's subsidiary came to play that role. According to lengthy accounts of the probe in the French newspaper, Le Figaro, the TSKJ consortium in 1994 had created a subsidiary called LNG Services on Madeira, a Portuguese island in the Atlantic where companies are not required to pay any taxes. The French investigation was triggered, according to Le Figaro, when an official of one of the consortium's French partners, Technip, was charged two years ago with embezzlement growing out of a separate, long-running corruption case involving the French oil company Elf Aquitaine.

According to Le Figaro, George Krammer, the accused Technip official, was outraged when Technip refused to defend him and turned state's evidence. The paper reported that he told French authorities about an alleged $180 million "slush fund" that TSKJ maintained to bribe Nigerian officials relating to the natural gas plant in Nigeria. French authorities then tracked close to the same amount in "support contracts" from LNG Services-the subsidiary on the Portuguese island-to yet another obscure entity called Tri-Star, which was located on the British tax haven of Gibraltar. Tri Star, according to Le Figaro,/i>, was headed by a London lawyer named Jeffrey Tesler, who has long done work for Halliburton, and was known to have close relations with officials in Abacha's Nigerian government. Tesler did not respond to a request for comment from Newsweek.

The allegations that TSKJ may have made improper payments to Nigerian officials prompted a Paris prosecutor to open up an investigation into the case in October, 2002. The probe was among the first in France under a new international treaty banning the payment of bribes in commercial contracts-a prohibition that became part of French law in 2000. (U.S. law has banned such payments for more than 25 years.) The case in France has since been transferred to a French investigative magistrate, Reynaud van Ruymbeke-an indication that it is being taken seriously by French authorities.

One key question for Justice Department prosecutors is what knowledge, if any, Halliburton officials in the United States had of any illicit payments that might have been made in Nigeria. According to lawyers familiar with the Foreign Corrupt Practices Act cases, U.S. corporate officials are only liable for the actions of their foreign subsidiaries if it can be determined that they had a control or personal knowledge of the subsidiary's improper actions.

In this case, Halliburton would seem to have a natural defense: the conduct in question involved actions of a consortium, TSKJ, in which it was only a 25 percent owner. But a Technip official told Newsweek that the Halliburton subsidiary, Kellogg, Brown & Root, was the chief principal and decision-maker in the venture. "Halliburton is the leader of the JV (joint venture)," said Christopher Welton, chief of Technip's investor and analyst relations. Welton also said that his company recently had conducted its own internal audit of the venture's operations and found no evidence of any improper payments. Halliburton, in one of its e-mail responses to Newsweek today, referred to itself as only a 25 percent owner of the joint venture.





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