UK High Court orders company to pay $11.2 million for procuerment fraud

The UK High Court has ordered M.W. Kellogg Ltd (MWKL) to pay more than AUD$11.2 million following a Serious Fraud Office (SFO) investigation into bribery by its parent company.

The penalty reflects sums the UK company expected to receive as a result of the criminal activity of third parties. MWKL took no part itself in the acts that generated the funds.

MWKL’s parent company Kellogg, Brown & Root (KBR) bribed Nigerian government officials over a 10-year period to obtain construction contracts worth more than $5.9 billion. The contracts were awarded to a consortium of four companies, including KBR.

The activity occurred between 1994-2004 in exchange for contracts on a liquefied natural gas project in Nigeria. The UK’s SFO said three of the four contracts awarded were obtained through the payment of bribes or promises to pay them.

The SFO said in a statement: “MWKL reported concerns to the SFO and co-operated with the investigation. The SFO, working with the US Department of Justice (DoJ), decided to remove the funds, which will become due to the company as a result of the contracts. This reflects the finding that MWKL was used by the parent company and was not a willing participant in the corruption.”

Bribery by MWKL's parent company resulted in the High Court ruling this week, which ordered MWKL to pay $11,265,232. This is the equivalent of share dividends it would have received from profits created by the contracts.

In February 2009, KBR settled matters with the US DoJ and a civil settlement with the Securities and Exchange Commissionin relation to the bribes.

At the time, the DoJ’s acting assistant attorney general Rita Glavin said: “This bribery scheme involved both senior foreign government officials and KBR corporate executives.”

KBR has paid more than $400 million in fines. KBR has agreed to transform MWKL’s internal audit and control measures to ensure its compliance systems meet UK law.

Responding to the High Court ruling, KBR CEO William Utt, said: “This settlement was expected and closes out an unfortunate part of KBR’s past. We have since moved forward, conducting our business with transparency, accountability and discipline in our continued efforts of being the global contractor of choice.”

Read more here.