Halliburton Bribes Revealed

Halliburton Uncovers Talk of Bribes

Review of Nigerian Project
Finds Payments Discussed
To Help Win Huge Contract

By RUSSELL GOLD
Staff Reporter of THE WALL STREET JOURNAL
September 2, 2004; Page A3

Halliburton Co. said an internal investigation has uncovered documents indicating officials of a consortium it now leads discussed bribing public officials in Nigeria in order to secure a multibillion-dollar contract there.

The investigation centers on the construction of a gargantuan natural-gas liquefaction plant on the Nigerian coast, beginning in January 1996 and continuing today. A consortium led by a company later acquired by Halliburton won the lucrative contract, which will be valued at a total of $8.1 billion when the project is completed.

In the past 10 days, Halliburton says, its lawyers discovered notes written between 1993 and 1998 that suggest consortium executives discussed bribes to Nigerian officials to win their support and ensure that the consortium won the contract. Halliburton says it has turned over the evidence to investigators in the U.S., France and Nigeria, who already had been investigating the consortium. Halliburton declined to reveal the names and positions of the people who discussed the bribery scheme.

This latest disclosure by the Houston oilfield-services company comes amid questions as to whether the consortium created a $140 million slush fund that was funneled through a British lawyer named Jeffrey Tesler, who was a consultant to the consortium. Mr. Tesler is under investigation by a French magistrate, though he hasn’t been charged with any crime. Mr. Tesler declined to comment on his role and, through his lawyer, has denied any wrongdoing.

Halliburton said it is unclear from the newest documents whether money actually was distributed either to local leaders or high-ranking government officials. At the time the notes were written, Nigeria was ruled by the military dictator Sani Abacha, whose regime was marked by centralized control and human-right abuses.

The documents, described as contemporaneous notes of conversations and meetings, indicate “people may at the time have been planning or contemplating the necessity of money for the purpose of making bribes. There is no way to read these materials and not be concerned about that,” says James Doty, an attorney with Baker Botts LLP, an outside law firm brought in by Halliburton this year to examine the matter.

The notes end in 1998, shortly after Halliburton acquired Dresser Industries Inc., which led the consortium through its M.W. Kellogg Co. unit. The consortium, called TSKJ, also includes France’s Technip SA, the Snamprogetti unit of Italy’s ENI SpA, andJGC Corp. of Japan.

The merger was overseen by Halliburton’s then-chief executive, Dick Cheney, now the nation’s vice president. There is no indication that Mr. Cheney knew of the improper activity, according to company officials.

Technip spokeswoman Laurence Bricq declined to comment on the notes, saying the French company couldn’t discuss any matter that was under French judicial investigation. “We have nothing to say on the matter,” a Snamprogetti spokeswoman said. Calls to JGC’s U.S. offices weren’t returned.

Mr. Doty described the documents as “very disturbing” and said they were turned over to the U.S. Justice Department to assist in the criminal probe. Halliburton said it didn’t fire anyone as a result of finding the documents, because the executives already have left the company. In June, it fired Albert J. “Jack” Stanley, the chairman of its Kellogg Brown & Root unit, for taking a questionable $5 million payment from Mr. Tesler. Mr. Stanley resigned as a full-time executive last December, but retained an office at the company and agreed to remain as chairman until a successor was found. Mr. Stanley’s attorney declined to comment.

At the same time, it fired William Chaudan, a former KBR consultant involved in the project, for taking a $1 million payment. Attempts to locate Mr. Chaudan have been unsuccessful. Halliburton now says the former employees might have received larger payments than initially suspected.

The latest documents were found in an office credenza during a sweep by Baker Botts employees of Halliburton and TSKJ offices. Halliburton’s lawyers said they have conducted an extensive investigation in three countries: the U.S., the United Kingdom and Portugal, where TSKJ was incorporated in the tax-free island of Madeira. They said they have interviewed more than 50 current and former employees and even took the step of locking Mr. Stanley out of his office after they got the first indication he received improper payments from Mr. Tesler.

Halliburton said it wants to take all necessary steps to weed out unethical and potentially illegal behavior among employees. The voluntary disclosure of documents also could help the company curry favor with U.S. investigators. The Securities and Exchange Commission and Justice Department both encourage extensive cooperation and are more lenient with companies that provide crucial information voluntarily. Halliburton’s Kellogg Brown & Root unit faces unrelated scrutiny from U.S. officials over its multibillion-dollar contracts to provide logistics support to military troops in Iraq and repair that nation’s oil infrastructure.

The documents also sketch out a scenario in which Halliburton isn’t intimately involved. The discussions of bribing Nigerian officials took place before Halliburton acquired Kellogg. Still, Halliburton isn’t off the hook. TSKJ hired Mr. Tesler as its agent in 1995, paying him $60 million, according to his consulting contract. It also renewed his contract in 1999 and 2001, paying him another $80 million, after Halliburton acquired Kellogg and took over project management.

Halliburton said Mr. Tesler was required to sign documents stating that he wouldn’t use any of his consulting fees to bribe government officials. He also was vetted by company lawyers to ensure he understood the requirements of the Foreign Corrupt Practices Act, a U.S. law prohibiting bribery of government officials.

Mr. Tesler was hired, say the company lawyers, because he had demonstrated in the past that he had a network of contacts in Nigeria who could provide intelligence about what was going on in the country. Consortium executives also believed he had contacts with local leaders that were necessary to ensure labor peace and prevent civil unrest. Such disturbances could delay the project and trigger significant penalty clauses that would eat up the consortium’s profit margin.

Still, Halliburton now acknowledges that its ability to keep tabs on Mr. Tesler was compromised because it believes Mr. Tesler was funneling improper payments to Mr. Stanley, who was head of the unit running the consortium and was effectively his supervisor.

Halliburton also has been unable to determine what Mr. Tesler did with his fees. The lion’s share still is sitting in a Swiss bank account, according to Mr. Tesler’s lawyer.

Mr. Doty, the Halliburton attorney, said there still are many unknown details, but pledged to continue pushing the investigation forward. Halliburton said the consortium has officially severed its ties with Mr. Tesler and no longer receives any services from him and is considering bringing a court case to recover all money it paid to him during the past nine years.