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Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
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Richard L. Cassin
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Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Shruti J. Shah
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Russell A. Stamets
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Richard Bistrong
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Eric Carlson
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Bill Steinman
Contributing Editor

Hyperdynamics: Another FCPA investigation could sink the company

A Houston-based independent oil company that resolved FCPA offenses in 2015 said last week that another FCPA investigation, if it were to happen, could sink the company.

In 2015, the SEC penalized Hyperdynamics Corporation just $75,000 for books and records and internal controls offenses. And the DOJ declined to bring an enforcement action.

But Hyperdynamics spent close to $13 million on legal fees for the FCPA investigation.

And there was collateral damage. Hyperdynamics’ funding partner in Guinea, Tullow Oil, declared force majeure in March of 2014 “based on the mere existence of the [DOJ and SEC] investigations . . . .”

Tullow withdrew its force majeure declaration in May of 2014 but didn’t resume petroleum operations, “citing the existence of the FCPA investigations and the Ebola outbreak in Guinea as the reason.”

Now Hyperdynamics has less than $1 million in cash and no oil and gas production.

Its main asset is a concession in offshore Guinea. The company has been exploring there since 2002 but hasn’t made any discoveries.

Despite the 2015 FCPA resolution, Hyperdynamics still faces huge compliance challenges.

Guinea, in West Africa, is the problem.

In last week’s disclosure, Hyperdynamics said the Republic of Guinea  . . .

. . . is a high-risk jurisdiction for corruption that could impair our ability to do business in the future or result in significant fines or penalties.

Guinea is “largely a cash-based society and that creates additional internal control and related risks,” Hyperdynamics said.

That’s not all.

The legal and judicial system in Guinea is relatively undeveloped and subject to frequent changes . . . .

So for Hyperdynamics, here’s the bottom line:

We have been subject to investigations by the Department of Justice and Securities and Exchange Commission under the [FCPA] into how we obtained or retained the original Concession and spent approximately $12.8 million in legal fees in working with the U.S. Government.

Those matters were resolved in 2015, but should the DOJ, the SEC, or the Republic of Guinea open additional investigations regarding prior or current activities in the Republic Guinea or elsewhere, we do not have the financial ability to bear the cost of additional investigations and are unable to predict whether we will be able to raise the funds to properly defend the Company.

The company said it is looking for ways to raise more money.

Hyperdynamics Corporation made the disclosures in a Form S-1/A filed with the SEC on May 18, 2017.

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Richard L. Cassin is the publisher and editor of the FCPA Blog.

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