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Ensco: Petrobras cancels rig charter for alleged graft

In a filing with the Securities and Exchange Commission Tuesday, UK-based Ensco plc said its customer Petrobras has cancelled the contract for a drillship because of alleged payments to Petrobras employees.

The allegations relate to the drillship DS-5 that Ensco acquired when it bought Pride International Inc. in 2011.

Petrobras is Brazil’s state-owned oil and gas giant. It’s under investigation in Brazil, Switzerland, and the United States for a massive bribery and kickback scandal.

“The alleged irregularities purportedly involved a former third-party marketing consultant of Pride to provide services in connection with the DS-5 drilling services contract,” Ensco said Tuesday.

Esco said it has conducted regular compliance reviews related to its business with Petrobras, including a special review by independent counsel in June 2015.

“To date, the Company has found no evidence that Pride, the Company or any current or former employees were aware of or involved in any wrongdoing,” Ensco said Tuesday.

Petrobras told Ensco the DS-5 drilling services contract is void as of January 4.

Ensco said,

Without specifying any supporting facts or conduct, Petrobras’ notice alleges that Pride had knowledge that the shipbuilder of DS-5 made improper payments to the former third-party marketing consultant who then shared the improper payments with former employees of Petrobras and that Pride may have assisted in or facilitated these improper payments.

Ensco said it hasn’t been contacted by Brazil authorities.

It denied the allegations:

Contrary to Petrobras’ assertion, the Company has found no evidence that any current or former employee of Pride or Ensco was involved in any wrongdoing, had knowledge of any wrongdoing, or authorized the former third-party marketing consultant to engage in any wrongdoing on behalf of Pride or Ensco with respect to the shipbuilding contract for DS-5.

Ensco said it intends to “assert its legal rights under the drilling services contract.”

In 2010, Houston-based Pride International and a French subsidiary were charged with FCPA-related offenses for bribing government officials in Venezuela, India, and Mexico.

The bribes were paid to extend drilling contracts for three oil rigs operating offshore in Venezuela, to secure a favorable decision in a customs dispute for a rig imported into India, and to avoid customs duties and penalties for a rig operating in Mexico.

Pride International entered into a three-year deferred prosecution agreement with the DOJ in November 2010. 

The French subsidiary, Pride Forasol, paid a $32.6 million criminal penalty. Pride International also agreed to disgorge $23.5 million to the SEC.

The settlement was part of the historic seven-party enforcement action growing out of a U.S. investigation of Swiss logistics firm Panalpina.

Ensco plc completed its $7.3 billion acquisition of Pride in May 2011. It agreed to be bound by the terms of Pride’s deferred prosecution agreement.

In late 2012, the DOJ ended Pride’s DPA a year early to reward the company for its enhanced compliance efforts.

Ensco trades on the NYSE under the symbol ESV.

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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