20 January 2018
A | A

Criminal law, procedure & sentencing feed-image    International law & trade feed-image

Keppel O&M bribery scandal: Elaborate scheme used to disguise bribes, says US attorney

Straits Times
24 Dec 2017
Jacqueline Woo

Resolution ends US, Brazil and S'pore investigation into firm over bribes for contracts in Brazil

At least six former employees of Keppel Offshore & Marine (Keppel O&M) have been implicated in a Brazilian graft scandal, including some from the firm's United States and Brazil operations.

US court documents showed that between 2001 and 2011, Keppel O&M and Keppel O&M US executives created and executed agreements on behalf of the company with consulting firms controlled by a consultant.

The consultant was not named, but is believed to be Mr Zwi Skornicki, a former agent of Keppel in Brazil and the man central to the unfolding of the scandal.

The agreements were intended to facilitate bribe payments to obtain business from Brazilian state-owned oil giant, Petrobras, and Sete Brasil and conceal their purpose, the court papers stated.

Under the guise of these consulting agreements, Keppel O&M effectuated the bribes by making payments to bank accounts in the US and elsewhere in the names of shell companies controlled by the consultant, who then transferred money from those bank accounts in the US to bank accounts outside the US controlled by or for the benefit of Brazilian and party officials, according to the court papers.

For example, between 2011 and 2012, Sete Brasil had contracted five companies to commission the construction of a fleet of ultra deepwater rigs for which Petrobras would be the end user.

Keppel O&M executives as well as an executive of a Keppel O&M unit in Brazil authorised the consultant during several phone calls to pay 1 per cent of the contract value as bribes in response to a demand from a Brazilian official, the court papers stated. Accordingly, the consultant paid about US$14.4 million (S$19.3 million) in bribes to the Brazilian official and other related parties.

Bribery allegations involving Keppel O&M first surfaced in the Brazilian media in 2015, which led Keppel to carry out its own investigations.

Mr Skornicki was arrested last February and charged with criminal conspiracy and money laundering, according to Brazilian media reports.

He was arrested after Mr Pedro Jose Barusco, a former Petrobras executive, gave testimony to Brazil's federal police in exchange for leniency, and made the allegations against him. Mr Barusco made similar allegations against Mr Guilherme Esteves de Jesus, an agent of Jurong Aracruz shipyard owned by Sembcorp Marine's Jurong Shipyard, who was arrested by the Brazilian authorities in March 2015.

In its latest statement yesterday, Keppel said it was unable to comment on the agreed statements of facts or on the identities of the other individual employees involved, citing legal reasons. The group has separated with all the executives defined as "relevant individuals" in the statements of facts, while Keppel O&M's relationship with Mr Skornicki was terminated last year.

According to an earlier report by Bloomberg, Mr Skornicki told a judge in July last year that five leading executives had authorised him to bribe public officials in exchange for contract wins.

Keppel strongly denied the allegations then, and said none of the executives authorised any bribes.

But in October last year, Keppel announced that further internal investigations revealed suspicious transactions associated with Mr Skornicki, and notified the authorities in the relevant jurisdictions.

The US Department of Justice said yesterday that in addition to the fines imposed and agreements, a guilty plea by a former senior member of Keppel O&M's legal department was also unsealed. The individual, who was not named, is awaiting sentencing.

Acting US Attorney Bridget Rohde of the Eastern District of New York said the resolutions are the result of a multinational effort to investigate and prosecute a corruption scheme that resulted in Keppel O&M and its US unit paying more than US$50 million in bribes to Brazilian officials, and earning over US$350 million from business corruptly obtained in Brazil.

"In an attempt to conceal their crimes, the defendants used the global financial system - including the United States banking system - to disguise the source and disbursement of the bribe payments by passing funds through a series of shell companies," she said.

The unfolding corruption scandal in Brazil that has engulfed Singapore's biggest rig-builders, including Keppel O&M, has been closely tied to the country's state-owned oil giant Petrobras. Its directors are alleged to have colluded with politicians to redirect money out of contracts for personal use or to fund political campaigns. The scandal has indirectly led to the impeachment of Brazil's first female president Dilma Rousseff, whose Workers' Party had appointed its candidates and those of its coalition partners to key Petrobras positions.

Meanwhile, contractors such as construction groups and foreign companies have been implicated in the sweeping probe, with a large number of them said to have paid bribes to politicians and Petrobras executives in exchange for contracts.

The fallout from the Petrobras corruption scandal was made worse by the oil price crash. Sete Brasil had commissioned a large fleet of rigs for Petrobras' use - with both Keppel and SembMarine as contractors - but faced difficulties securing long-term financing and making payments amid the oil price collapse. It filed for bankruptcy protection last year.

Keppel stopped work on Sete Brasil's rigs in late 2015, with provisions of $230 million set aside for the project. The case is possibly the biggest graft scandal in corporate Singapore history.

In scale, it is larger than a similar earlier case involving ST Marine.

Seven former ST Marine executives were convicted in Singapore for their part in the scandal that broke in 2014. Court documents showed that at least $24.9 million in bribes - falsely claimed as entertainment expenses - were paid in 2000 and 2011. The corrupt payments were made in return for ship repair contracts.


In an attempt to conceal their crimes, the defendants used the global financial system... to disguise the source and disbursement of the bribe payments by passing funds through a series of shell companies.


Source: Straits Times © Singapore Press Holdings Ltd. Permission required for reproduction.