Bribery in the Energy Market – More than Bags of Cash

At the mention of corruption in oil and gas, it’s easy to first think of scandals such as the billion-dollar securities settlement from Brazil’s state-owned oil company Petrobras, but truth is, following the industry downturn, energy service companies remain eager to jump at new opportunities in international markets.

With increased competition for these emerging opportunities and business developers looking to distinguish themselves, company employees may look at this as a time to get a little extra for themselves. This can create an environment ripe for bribery, according to Kelly Thorman, who spoke Feb. 27 at a Women’s Energy Network (WEN) luncheon in Houston.

Thorman, who serves as managing counsel for global compliance at Parker Drilling, shared information about the Foreign Corrupt Practices Act (FCPA). The FCPA was enacted in 1977 and made it “unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business.”

Energy has more specific compliance programs than some other industries, Thorman said.

Bribery can take several shapes and forms. Just offering to pay a bribe is a crime, even if you don’t have the money.

There’s third-party corruption in which it’s not something a company’s employee did; rather the company paid someone else to do it for them.

“Ninety percent or more of these cases have to do with third parties,” said Thorman. “That’s why organizations have to do due diligence on third parties. This isn’t ‘get it done at all costs;’ it’s get it done within the law.’”

A growing number of cases involve mergers and acquisitions (currently about 19 percent).

“Sometimes you can buy a problem from someone else when acquiring a company,” she said.

Since the FCPA’s inception, companies have paid $10.7 billion due to FCPA matters.

But bribery isn’t all about bags of cash.

“In HR, for example, it could be offering a job or internship to a relative of a decision-maker at a national oil company. That’s a bribe,” Thorman said.

Some ladies sitting at my table shared that they’re not allowed to take their supermajor clients out for lunch. Thank-you gifts can’t exceed $50, either.

One attendee asked Thorman if she knows of any instances in which a contract was so big, that a company wanted it at any cost – essentially, they said ‘to hell with the fees and fines. It’s worth the risk.’

“Absolutely. Some people just take the risk,” said Thorman. “What happens is a mid- to senior-level salesperson may be under pressure to just ‘get it done.’ It becomes ‘what if I just do this one little thing? I’ll just send this official on a little trip.’ And the next contract is big so it’s back to ‘get it done.’ And the salesperson thinks they can send the official’s whole family on a bigger trip. And then it escalates over time.”

Thorman said more often, it’s an individual who decides they are going to take the risk.

“They think they’re smarter than anybody else and nobody’s ever going to be able to figure out that they did it or how they did it.”

It’s key that companies equip their HR departments with the authority to do their jobs, Thurman said.

“They have to be able to say to the general manager, ‘I can’t do that. I’m not going to hire this person without going through the proper channels and procedures.’”

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