KBR, Halliburton reach agreement in bribery case

The government's top contractor in Iraq, KBR, Inc., has pleaded guilty to bribing high-level officials in the Nigerian government during a decade-long scheme to win more than $6 billion in overseas construction contracts, federal authorities announced on Wednesday.

KBR and its former parent company, Halliburton, agreed to pay the government a combined $579 million in fines to settle the criminal and civil charges, the most ever paid by a U.S. firm in a foreign corruption case.

"Today's guilty plea by KBR ends one chapter in the department's long-running investigation of corruption in the award of $6 billion in construction contracts in Nigeria," said Rita Glavin, acting assistant attorney general in the Justice Department's criminal division. "This bribery scheme involved both senior foreign government officials and KBR corporate executives who took actions to insulate themselves from the reach of U.S. law enforcement."

KBR was part of a joint venture of four companies -- the other three firms involved were not identified -- that was awarded four contracts between 1995 and 2004 to build liquefied natural gas facilities on Bonny Island, Nigeria, on Africa's West Coast.

During that time, federal officials said the joint venture paid top officials in the Nigerian government, including members of the Nigerian National Petroleum Corporation, more than $182 million in bribes.

At crucial junctures before the contract awards, KBR's then-CEO Albert "Jack" Stanley and others met with members of the Nigerian government to negotiate bribe amounts, federal prosecutors said. KBR then helped set up a pair of sham contracts with agents who were charged with funneling the money to the Nigerian officials, court papers revealed.

The joint venture ultimately paid $132 million to a consulting company incorporated in the United Kingdom. More than $50 million was paid to a second agent, a global trading company headquartered in Tokyo.

Stanley pleaded guilty in September 2008 to conspiring to violate federal anti-corruptions laws, as well as mail and wire fraud. He faces seven years in prison and a restitution payment of $10.8 million when he is sentenced on May 6, 2009.

CEO William Utt said the agreement closes "both a regrettable and unfortunate chapter in KBR's rich and storied history." He added that the settlement was "very difficult but necessary."

The Justice agreement calls for KBR to pay a $402 million criminal fine related to the bribery case. In a related settlement, KBR and Halliburton jointly agreed to disgorge $177 million in "ill-gotten profits" to the Securities and Exchange Commission.

SEC charged the firms KBR and Halliburton with violating the 1977 Foreign Corrupt Practices Act's anti-bribery provisions and with abuses related to the companies' books, records and internal controls.

Halliburton, which owned KBR before it spun off on its own in 2007, will pay all but $20 million of the penalty.

"Any company that seeks to put greed ahead of the law by making illegal payments to win business should beware that we are working vigorously across borders to detect and punish such illicit conduct," said SEC Chairman Mary Schapiro.

In addition to the fines, KBR has agreed to hire an independent corporate monitor, which will ensure for the next three years that the company complies with anti-corruption laws and internal accounting controls.