Stolen info SBM Offshore about alleged $ 250 million fraud (2)

I wrote before about this case: an angry former employee who allegedly blackmailed SBM Offshore and published a list of potential problem cases in the on-going bribery investigations.

Today, finally, SBM published their findings:

• The Company paid approximately US$200 million in commissions to agents during that period of which the majority relate to three countries: US$18.8 million to Equatorial Guinea, US$22.7 million to Angola and US$139.1 million to Brazil;
• In respect of Angola and Equatorial Guinea there is some evidence that payments may have been made directly or indirectly to government officials;
• In respect of Brazil there were certain red flags but the investigation did not find any credible evidence that the Company or the Company’s agent made improper payments to government officials (including state company employees). Rather, the agent provided substantial and legitimate services in a market which is by far the largest for the Company;

Other Countries
At the outset of the investigation, the Company froze all payments to agents and conducted a review and due diligence on sales agents in all other countries. As a result of that review the Company decided to discontinue certain agents. Also, the Company decided to no longer use agents in countries where it has a presence. The investigation team also specifically looked at other countries covered by the agreements with the agent used in Equatorial Guinea and Angola but in its evidence-based approach did not perform a further detailed investigation into these countries.


In the list of the angry ex-employee three Malaysian companies were mentioned: MISC, Barnado and Delcom. SBM Offshore apparently has not found anything wrong with these business relations. SBM Offshore has now a presence in Malaysia (Kuala Lumpur), and will thus not use agents anymore.

Stolen info SBM Offshore about alleged $ 250 million fraud (2)

KiniBiz picked up on the story on SBM Offshore and MISC (most likely after having read the story on this blog, although no source was mentioned) in their article:

"MISC named in global O&G bribery scandal"

KiniBiz asked for comments from MISC, which they could not give on time for that article.

However, today MISC has answered, in KiniBiz's article:

"Petronas’ MISC denies knowledge of bribery"

"At this point in time, we do not have any further information on the matter other than allegations that were made in Wikipedia and media releases made by SBM Offshore pertaining to the matter on Feb 7 and 10, 2014,” said the Petronas subsidiary in response to KiniBiz queries.


We have to wait for further information from SBM Offshore's side. Things have been going pretty slow there, the first allegations about possible bribery where reported in 2012.

From Reuters:

"It later disclosed it might have violated anti-corruption laws and could be subject to criminal investigation for alleged payments of bribes to officials in African countries. SBM Offshore has also said the investigation centres around potentially improper sales practices in two countries in Africa, and in one other country outside Africa, but said it was not possible to give more information or an estimate of the potential outcome."

This is the kind of language normally used when it looks like bribery did indeed happen. But what changed since last Friday is that the scale might be (much) bigger than initially feared, and that (some of) the management were aware of the bribery.

The COO was dismissed in 2013, in a rather "mysterious" announcement not mentioning the reason, but declaring that it was "not related to the operational performance of the projects in hand". The internet allegations did mention many times a person with the initials "JPL", which are the same as those of the COO.

Analysts now count on a possible very large fine for SBM Offshore, in the tune of RM 1 Billion to RM 2 Billion. Those amounts are peanuts for companies like JP Morgan, but not for SBM Offshore, who might want to use a rights issue to strengthen their balance sheet. Not sure though if the shareholders are too happy to draw their chequebook to pay for fines.

Stolen info SBM Offshore about alleged $ 250 million fraud

The share price of SBM Offshore, a Dutch company involved in the service industry for oil & gas, was hit hard last Friday on fresh allegations about corruption. The possible size makes it one of the largest recent cases of bribery.

The Dutch magazine Quote had published new information regarding this matter on its website.

The reader can use Google translate on the text, I have tried to translate a few paragraphs:


Stolen info SBM Offshore about $ 250 million fraud and involvement top executives

On the internet circulates a very detailed document that gives information about large scale alleged bribes by Schiedam (Netherlands) based Billion Euro company SBM Offshore, a supplier to the oil and gas industry. SBM confirms to Quote that this information comes from within the company. "It was stolen by a former employee who wanted to blackmail us."

A former employee of SBM has a large amount of information about possible fraud cases by employees of SBM Offshore on the Internet, which contains bribery of officials in Angola, Equatorial Guinea (both located in West Africa), Brazil, Malaysia, Iraq, Kazakhstan and Italy. Also, excerpts from transcripts of recordings published showing that (members of) the Board of Directors and (members of) the Board of Trustees for many years are aware of the malpractices. The top of the company would deliberately try to conceal these cases. In total, between 2005 and 2011, $ 250 million is spent on bribes.

The spokesman of SBM lets Quote know that this information actually comes from the internal investigation that runs inside the company. "This information has been obtained illegally by an angry former employee who tried to extort SBM. We are engaged in legal action against this person. This information is placed out of context. As the investigations of the American and Dutch judiciary are still running, with which we are fully cooperating, we can not further give any information."

 The text can be found in the following Wikipedia article, an old revision dated October 18, 2013.

The link to Malaysia can be found in the following paragraph:


"4.1 MALAYSIA - Payments to Barnado Limited and Delcom Limited totalling approximately US$10,000,000, paid on (ie. by way of bribes) to “MISC” for the Kikeh FPSO (leased to US oil company Murphy)."


If these allegations by the formed employee are indeed true or not, I guess we have to wait until the investigations by the relevant authorities are finished.

More information about this project can be found here:

FLOATING PRODUCTION STORAGE AND OFFLOADING (FPSO)

"The Kikeh field is located 120km northwest of the island of Labuan, offshore Sabah, East Malaysia in water depths of around 1,300m. Murphy Sabah Oil Company operates Kikeh on behalf of partner Petronas Carigali.

The FPSO Kikeh will be located in 1,350m of water. It will be owned by MDFT Labaun and operated by MDPX Sdn Bhd, two joint ventures between SBM and Misc Berhad. The converted tanker was built in 1974 It has an overall length of 337m a breadth of 54.6m and a deadweight of 273,000t. It has a storage capacity of two million barrels."