Chevron Corporation resolved violations under the U.N. Oil-For-Food Program by entering into a non-prosecution agreement with the U.S. Department of Justice and separate agreements with the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”) and the Securities and Exchange Commission. The SEC’s charges against Chevron included violations of the U.S. Foreign Corrupt Practices Act under the books and records and internal controls provisions (Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934). Chevron will pay a civil penalty of $3,000,000, disgorge $25 million, and pay OFAC a penalty of $2,000,000 for violating the sanctions against the former government of Iraq.
The case revealed an enormous breakdown of Chevron’s compliance program. According to the SEC’s complaint, despite a January 2001 company-wide policy prohibiting the payment of surcharges in connection with the purchase of Iraqi oil, Chevron’s traders included $20 million in illegal surcharges to Iraq for the purchase of 78 million barrels of crude oil under 36 contracts.
“Among other things,” the SEC said, “the policy required traders to obtain prior written approval for all proposed Iraqi oil purchases, and charged management with reviewing each proposed Iraqi oil deal. Chevron’s traders did not follow the company-wide policy and Chevron’s management was unsuccessful in ensuring its compliance. Despite being required to consider the identity, experience and reputation of a third party seller prior to approving a proposed Iraqi oil purchase, Chevron’s management relied on its trader’s representations. . . . At least one trader responsible for a large portion of Chevron’s purchases from Iraq factored the cost of the surcharge payments into price negotiations with third parties. One third party seller, whose company on occasion sold oil to Chevron, stated that the trader he dealt with at Chevron and the trader’s bosses always knew about the illegal surcharge demands by Iraq. . . . Chevron failed to devise and maintain a system of internal accounting controls to detect and prevent such illicit payments. Chevron’s accounting for its Oil for Food transactions failed properly to record the true nature of the company’s payments to third parties.”
Other Oil-For-Food prosecutions have been resolved against El Paso Corporation and Oscar Wyatt, Jr., Textron, York International and Ingersoll-Rand Co., Ltd.
Chevron Corporation trades on the New York Stock Exchange under the symbol CVX.
View the SEC’s Litigation Release No. 20363 / November 14, 2007 Here.
View the SEC’s Complaint Here.
View the DOJ’s November 8, 2007 Non-Prosecution Agreement Here.
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