Vantage Drilling International agreed to disgorge $5 million to the SEC Monday to settle FCPA internal accounting controls offenses related to drilling services contracts with Petrobras.
The SEC settled the case with an internal administrative order (pdf) and didn’t go to court. The SEC didn’t charge Vantage Drilling with books and records offenses.
The company previously said it received a declination from the DOJ in August 2017.
A predecessor of Houston-based Vantage Drilling International, Vantage Drilling Company, failed to devise a system of internal accounting controls with regard to Vantage’s transactions with a former outside director who was the largest shareholder in Vantage and its only supplier of drilling assets, the SEC said.
The unnamed director is described in the order as a “Taiwanese shipping magnate.”
The SEC order said Vantage’s director agreed to pay a total of $31 million from his personal funds to two intermediaries.
Because of the internal control failures, Vantage provided funds and reimbursements to the director who used the money to pay bribes to officials at Petrobras in connection with a 8-year, $1.8 billion drilling services contract.
The company also failed to properly implement internal accounting controls related to its use of third-party marketing agents.
Vantage had an ineffective anti-corruption compliance program when the violations occurred and didn’t conduct any due diligence on the director before “relying on him as its sole source of drilling equipment and appointing him to its board of directors,” the SEC said.
In July, Vantage won a $622 million arbitration ruling against Petrobras.
Petrobras said it terminated a drilling services contract “due to material operational failures by Vantage,” claiming the Houston company paid bribes through middlemen.
In September, Petrobras reached a $1.78 billion FCPA resolution with the DOJ and SEC for bribing politicians and political parties in Brazil.
It entered into a non-prosecution agreement (pdf) with the DOJ that included a criminal penalty of $853.2 million. The SEC ordered Petrobras to disgorge $933.5 million (disgorgement of $711 million and $222.5 million in prejudgment interest).
In 2015, Vantage’s agent in Brazil entered into a collaboration agreement with the Brazilian Federal Public Prosecutor’s Office. The agent admitted to being part of Vantage’s Brazil bribery plot and was convicted of corruption and money laundering.
The SEC said Monday it didn’t impose financial penalties beyond the disgorgement because of Vantage’s current financial condition.
The company went into bankruptcy after Petrobras terminated the drilling services contract. Vantage Drilling International emerged from bankruptcy in early 2016.
[Editor’s note: A prior version of this post inadvertently stated that Vantage settled books and records charges as well.]
Harry Cassin is the managing editor of the FCPA Blog.