Pasha shipbuilder hit with $422 million fine in bribery case
by Michael Hansen, Hawaii Shippers Council, December 26, 2017
The U.S. Department of Justice (DOJ) issued on December 22, 2017, a press release, “Keppel Offshore & Marine Ltd. and U.S. Based Subsidiary Agree to Pay $422 Million in Global Penalties to Resolve Foreign Bribery Case,” announcing a settlement in the case involving bribery payments in Brazil. The U.S. indictment was brought under the Foreign Corrupt Practices Act of 1977 (FCPA).
Keppel Offshore & Marine Limited (KOM) is a wholly-owned subsidiary of the large privately-held Singapore-based conglomerate Keppel Corporation Limited (2016 revenues U.S $ 4.8 billion). KOM operates the Corporation’s marine businesses primarily the design, construction and repair of vessels, with 20 shipyards in nine countries, and specializing in offshore oil rigs. One of those yards is Keppel AmFELS LLC, located in Brownsville, Texas.
Pasha Hawaii Transport Line LLC signed on August 23, 2017, an agreement with Keppel AmFELS LLC, to construct two 2,525 TEU (Twenty-foot Equivalent Unit) containerships in Brownsville for the Hawaii trade for a total cost of more than U.S. $400 million. There are continuing doubts among those financial analysts who follow the maritime industry as to whether Pasha has obtained financing to trigger the newbuild ship agreement.
Key excerpts from the Department of Justice:
Keppel Offshore & Marine Ltd. (KOM), a Singapore-based company that operates shipyards and repairs and upgrades shipping vessels, and its wholly owned U.S. subsidiary, Keppel Offshore & Marine USA Inc. (KOM USA), have agreed to pay a combined total penalty of more than $422 million to resolve charges with authorities in the United States, Brazil and Singapore arising out of a decade-long scheme to pay millions of dollars in bribes to officials in Brazil.
“The resolutions with KOM and its U.S. subsidiary are the result of a multinational effort to investigate and prosecute a corruption scheme that resulted in the payment by the defendant companies of over $50 million in bribes to Brazilian officials and in profits for the defendant companies of over $350 million from business corruptly obtained in Brazil,” said Acting U.S. Attorney Rohde.
KOM entered into a deferred prosecution agreement with the Department in connection with a criminal information filed today in the Eastern District of New York charging the company with conspiracy to violate the anti-bribery provisions of the FCPA. The case is assigned to U.S. District Judge Kiyo A. Matsumoto. In addition, KOM USA pleaded guilty and was sentenced by Judge Matsumoto on a one-count criminal information charging the company with conspiracy to violate the anti-bribery provisions of the FCPA. Pursuant to its agreement with the Department, KOM will pay a total criminal fine of $422,216,980, with a criminal penalty due to the United States of $105,554,245, including a $4,725,000 criminal fine paid by KOM USA.
In related proceedings, the company settled with the Ministério Público Federal (MPF) in Brazil and the Attorney General’s Chambers (AGC) in Singapore. The United States will credit the amount the company pays to Brazil and Singapore under their respective agreements, with Brazil receiving $211,108,490, equal to 50 percent of the total criminal penalty, and Singapore receiving up to $105,554,245, equal to 25 percent of the total criminal penalty.
Keppel Corporation issued on December 23, 2017, confirming the settlements and placing the blame on a former business agent in Brazil and former KOM executives.
Key excerpts from Keppel Corporation:
Keppel Corporation Limited (Keppel Corporation or Keppel) today confirmed that KOM has reached a global resolution with criminal authorities in the United States, Brazil and Singapore in relation to corrupt payments made by KOM's former agent in Brazil, Mr Zwi Skornicki.
These agreements relate to corrupt payments made by Mr Skornicki in relation to several KOM projects in Brazil, which were made with knowledge or approval of former KOM executives. As announced in October 2016, Keppel undertook a thorough internal investigation, identified certain suspicious transactions involving Mr Skornicki, and cooperated fully and extensively with the authorities to resolve the issues arising from or in connection with those transactions.