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Exxonmobile kazakhstan bribery scandal { April 22 2003 } Original Source Link: (May no longer be active)
http://www.quicken.com/investments/news_center/story/?story=NewsStory/dowJones/20030422/ON200304222348001492.var&column=P0DFPhttp://www.quicken.com/investments/news_center/story/?story=NewsStory/dowJones/20030422/ON200304222348001492.var&column=P0DFP
Probe Targets Exxon Mobil's Role in Payment to Kazakhstan
Tuesday, April 22, 2003 11:48 PM ET
ALMATY, Kazakhstan -- A U.S. inquiry into oil deals in this Caspian Sea republic has turned into the largest investigation of possible bribery abroad since the U.S. started prosecuting such cases a quarter century ago, experts told The Wall Street Journal.
The U.S. is investigating whether Exxon Mobil Corp. (XOM, news) participated in a scheme to route $78 million in payments from U.S. and European oil companies to the Swiss bank accounts of Kazakhstan's president and others.
A retired senior executive of the former Mobil Oil Corp. and a New York businessman have been indicted in federal court in Manhattan in the three-year investigation. Experts say it is far from inevitable that Exxon Mobil itself will be indicted under the 1977 U.S. Foreign Corrupt Practices Act, which bars U.S. companies from bribing foreign officials to obtain a deal. But, they say, the company will have to persuade prosecutors that its indicted former executive was a renegade, and that it did everything it could within reason to comply with the antibribery law.
"The questions that prosecutors will be asking are, `What did Mobil know, when did it know it and what did it do about it?'" says Timothy Dickinson, a Washington lawyer who advises companies on complying with the Foreign Corrupt Practices Act.
Prosecutions under the act are rare -- just four dozen cases have been filed - - because they usually require cooperation from the foreign country where the alleged violation occurred, experts say. In the Kazakhstan case, however, Switzerland tipped off the U.S. Justice Department to what it considered suspect bank transactions, then provided documents that were used in the indictments, say people familiar with the matter. In all, U.S. prosecutors obtained records for about 30 accounts in four Swiss banks, according to court records.
The two previous biggest cases under the act involved General Electric Co., which in 1992 paid $69 million in penalties after an employee bribed a former Israeli general, and Lockheed Martin Corp., which in 1995 paid a $24.8 million fine after an executive bribed an Egyptian politician. But in terms of the stature of the individuals cited, the size of the companies and the sums at issue -- the president of a country, four major U.S. oil companies and almost $ 80 million -- the Kazakhstan matter is the most far-reaching U.S. bribery investigation ever, experts say.
James H. Giffen, chairman of a New York merchant bank called Mercator Corp., was indicted April 2 for allegedly directing the bribery scheme. Mr. Giffen negotiated some of Kazakhstan's biggest oil deals of the 1990s as a special adviser to the country's president, Nursultan Nazarbayev.
A second indictment accuses J. Bryan Williams, a retired Mobil senior vice president, of failing to pay taxes on an alleged $2 million kickback from Mr. Giffen for his role in Mobil's 1996 purchase of a 25% stake in Kazakhstan's Tengiz oil field. On April 4, a federal prosecutor said in court that Exxon Mobil itself is a subject of the U.S. investigation.
Messrs. Giffen and Williams pleaded not guilty. Mr. Giffen's lawyer, William Schwartz, declined to comment. David Scherlter, Mr. Williams's lawyer, didn't respond to a phone call or an e-mail.
Exxon Mobil said Mobil's business activities in Kazakhstan were conducted legally and ethically. "Exxon Mobil has no knowledge of any illegal payments made to Kazakh officials by any current or former Mobil employees. We also have no knowledge of any illegal payments received by any current or former Mobil employees," said a spokesman for the Irving, Texas, company.
None of the three other U.S. oil companies involved in some of the deals are said to be under investigation. They are Amoco Co., Phillips Petroleum Co., and Texaco Corp. Amoco now belongs to BP PLC, Phillips is part of ConocoPhillips Co. and Texaco is part of ChevronTexaco Corp.
A ConocoPhillips spokesman said the company "has determined that the company has complied fully with all U.S. legal and ethical requirements" in its dealings in Kazakhstan. A BP spokesman said: "We are not aware of any allegations suggesting that we have done anything wrong or illegal." A ChevronTexaco spokesman said: "All payments made by Texaco were properly made to the government of Kazakhstan . . . in conformance with applicable U.S. and local laws. These payments were made pursuant to the final production-sharing agreement for the Karachaganak project."
Wall Street Journal Staff Reporters Steve LeVine, Bhushan Bahree, Susan Warren and Gary Fields contributed to this article.
Dow Jones Newswires
04-22-03 2348ET
Copyright 2003 Dow Jones & Company, Inc. All Rights Reserved.
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