Tuesday Platform

June 9, 2009

Halliburton Saga: Which will prevail, moral legalism or real politik?

By John Moyibi Amoda
THE Halliburton case against them has been concluded. They have pleaded guilty; they have admitted to the violation of the Foreign Corrupt Practices Act (FCPA) and have agreed to pay a combined fine of $579 million to settle criminal and civil charges brought by both the US Securities and Exchange Commission (SEC) and the US Department of Justice for violations of the Foreign Corrupt Practices Act.

The strategic question to be asked is did their deliberate breaking of FCPA make business sense? Will they behave differently if the prospects of the next business were as attractive as those of the NLNG? They violated the FCPA to build Africa’s first NLNG plant in Bonny, Rivers State at a price of $6 billion they also obtained Trains 1, 2, 3, 4, 5 and 6.

The value of the Contract for Train 3 on March 12, 1999 was $12 billion. The value of Trains 4 and 5 contracts was $3.6 billion.

In the midst of prosecutions against the Halliburton group a unit of that group KBR obtained the contract to build the “top sides of the FPSO for Agbami Deep Offshore field, owned by NNPC, Chevron, Petrobas and Statoil – and the same KBR formed a Joint Venture with Snamprogetti and JGC, that is, with all three companies that were members of the TSKJ consortium to win $1.7 billion EPC contract to build the Escravos Gas Liquid Project owned by the NNPC and Chevron –

Texaco (See Next Exclusive on Halliburton Scandal – Sunday 29, March 2009).
In terms of business strategy, the cost to the companies including the bribes and legal penalties totalling less than $800 million, is cheap and is no discentive, given the size of the contracts involved.

Like Julius Berger, the technical engineering maintenance demands of installed plants and infrastructural supports will continue to make Halliburton and their associates relevant to the NNPC and the Oil Companies. From this perspective, Halliburton could well again afford the risk of violating the FCPA given the prize to be won.

It would be noted that the violations of the FCPA were before the global economic crises. If the returns to shareholders blinds them to the strategy of management of their firms in the time of relative plenty, will the reality of massive loss of investment value not make them more eager to follow any strategy that can recover past losses, especially when coupled with the prospects of greater profits in the global emerging markets economy?

This perspective on the Halliburton saga should not be ignored. The reality is that Nigeria is export, import and technology dependent on the economies that are organised by the Halliburtons of the G8 countries. This makes Nigeria’s market for the services of the Halliburton’s of the world a seller’s market.

It is the competition between the Halliburton’s of the industrial economies that determine their decision on how contracts are to be won. And the Halliburton saga in Nigeria’s NLNG contract award process shows them to be most effective, for they carried home all the prizes that were to be won. And when we say Halliburton we must keep in mind we are dealing with a multi-national consortium of: -a French engineering company, Technip;-an Italian engineering company, Snamprogetti;

-a Japanese engineering and construction company, JGC;

-and an American firm formerly known as Kellog, Brown and Root, now known as KBR of the Halliburton Group.

Only similar conglomeration among the industrialised economies can give the TSKJ Joint Venture a cost reduction competition favorable to a technologically dependent client, such as the NLNG and NNPC.

If we need to build Africa’s first NLNG plant we must shop in a market where we are both knowledge dependent in terms of appraisals of contractors and in terms of negotiation of contracts that will not only deliver the immediate turn-key projects but also reduce our knowledge dependency both on maintenance and operation contingencies.

Thus, we see that decisions on competitor’s modus operandi will not be made by Nigeria when it is in need of technical engineering projects but by parties bidding for contracts in Nigeria. Whether competitions for contracts will be mediated by anti-corruption laws of the contractors’ governments or whether such competition will be conducted on terms of Darwinian rules are not decisions that the Nigerian government can determine or influence. In the TSKJ Joint Venture it was their policy to bribe in order to ensure that they will obtain all the contracts.

It was the zero sum rules of engagement that determine the scope of the TSKJ bribery scheme. The decision that nothing should be left to chance drove the corollary decisions to bribe all the officials that would be involved from conception of need to the award of contracts and the timely payment of contract prices.

It should be also understood that the elaborate scheme of setting up three companies registered in Madeira, Portugal, to establish two consulting companies.

Tri-Star Investment Ltd and Marubeni Inc with a mandate to “bribe” Nigerian decision makers of the executive branch of government, NNPC and NLNG officials and other political leaders “according to a sealed indictment filed at the U.S District Court in Houston, Texas” (See March 29 Sunday NEXT) was invented as a means to outwit their home governmnts’ bank monitors and their national regulatory authorities. The scheme was not invented to defeat Nigeria’s EFCC but to avoid detection by the contractors’ legal authorities.

Business practices of global multinational like all operations are profit-driven and the considerations are both guided by efficiency and effectiveness criteria. And in the case of Nigeria, TSKJ was maximally effective and efficient; effective for it cornered all the contracts; efficient it paid pittance in bribes to obtain huge contracts.

In yet another sense it was both effective and efficient. Having the entire decision makers on their payroll assured TSKJ’s participation in the decision on the content of contracts. The crafting and execution of contract could be collaboratively decided by both clients and contractors.

It is in the sense of policy efficiency that is highlighted in the above remarks for TSKJ gave much less to obtain the contracts – it obtained the decision makers and influenced the decision-making in all of its aspects. Halliburton in Iraq does not have to behave like Halliburton in Nigeria.

The two situations are different although the corporate goal is still the same, that is to pursue its profit making through strategies that deliver the most profit at the least cost. In Iraq it is to be expected that Halliburton’s Iraq business will be mediated by the war and diplomatic policies of the US Government. In Nigeria, Halliburton sought to frustrate the United States Government the monitoring of its business strategies and decisions in pursuit of Nigeria contracts.

What are the lessons to be learnt by the Nigerian public from this affair? First, lesson is that the Halliburton behavior in Nigeria accords with the rules of profit making; it was not a scandal – for neither the United States or the Nigerian governments were scandalized.

The Joint Venture of TSKJ set up a machinery to frustrate their respective national legal authorities in a joint-venture modus operandi.

It was their decision not to involve US citizens in delivery of bribes. The intent was to deceive their legal authorities by adopting the process, structures and terms of sub-contracting regimes within their home countries. It was in Nigeria that parties involved were in the know that for their decisions to award the contracts to TSKJ moneys will be offered according to their place in he hierarchy of decision makers – the authorizing officials getting the most and the technical officials getting the least; this is an ironic reversal in the determination of values – an engineering consortium TSKJ deciding that the policy people in Nigeria should receive more than their Nigerian technical counterparts.

The second lesson to be learnt is the nature of the scheme – the scheme’s objective is to secure the NLNG Contracts. To secure these contracts, that is, the means by which these contracts were to be secured, was the policy to bribe the relevant decision makers. This choice of means was determined by TSKJ. The budget for the scheme was decided by TSKJ. Access to decision makers was a given.

The scheme was called a “cultural committee and it embraced the sales and senior personnel officers of the 4 Joint Venture Companies as well as agents of Marubeni put together to “consider how to implement, but hide the scheme to pay bribes to Nigerian officials.

“Once a plan of how to distribute the bribes and a scheme to evade the U.S bank monitors were resolved the “cultural committee” gave the chief executives of Tri-Star and Marubeni the green light to initiate contacts with Nigeria’s decision makers and Nigerian corporate mediators.

In mega technical projects like the NLNG, the geography of corruption is patently global. The EFFC is structurally limited just as the Nigerian Governments and its technical agents are similarly limited. The limitation is economic. Nigeria’s role in the global economic is that of a dependent sector – this limitation structures the response of EFFC. It should not be assumed that national interest in fighting corruption is the same globally.

Not only is corruption a legal term, situations are important in shaping national responses to corruption outside of their shores and within their shores. The Foreign Corrupt Practices Act addresses issues important to the American State, government and society; it is not enacted to govern Nigeria’s decision-making in Nigeria. Halliburton was fined; its corruptly acquired gains through the NLNG contracts were not confiscated and returned to Nigeria.

The third lesson to be learnt by Nigeria’s decision makers is that monetary transactions, both legal and corrupt are implemented through banks.

This is why Citibank was featured in the Halliburton Saga. Sums, indeed, as large as $10,000 are documented. Transaction flows are monitored and analyzed especially as a counter-terror and drug trafficking regime. There is no way of hiding destination of funds once the source is identified.

The only secure bribe is that sanctioned by reason of state such as the bribes that Sun Tzu speaks about in the following:
“It is essential to seek out enemy agents who have come to conduct espionage against you and bribe them to serve you. Give them instructions and care for them. Thus double agents are recruited and used” (Business Day, Wednesday 08 April 2009, p22).

The fourth lesson to be learnt from the Halliburton Episode is that the bribe giver also chooses to be the “diary” of the bribe-taking. The details reported were recorded by a participant observer. Why the records? Certainly not to aid the US and Nigerian prosecutorial authorities.

Why then? As a blackmail for the future. The giver of bribes, also as it were, takes the finger print of the bribe taker for future use. Mr Chodan was the chronicler of the Halliburton giving and taking of settlements.

Again it is to be seen that in NLNG contract process the bribe is an advertisement of the role of the bribe taker in the archives of the bribe giver. There exist therefore dossiers of bribe giving and bribe taking. Only reason of state guides the application of freedom of information laws in the matters of disclosure of such information. Truly the bribe giving and bribe taking emperors are naked, on both sides of the Atlantic.

There is a lesson to be learnt by the Nigeria’s Ministry of Justice. It is clear that the Process of the NLNG Contract Drafting, Award and Execution could be said to be “invidiously” collaborative. There is therefore room for intervention for review of contracts and adjustments in a process opened to the influence of the contracts.

Finally the Halliburton Matter defines the limits of EFFC as presently constituted and chartered. It is not yet capable of investigating Government who is its author. It is designed to deal with crimes.

Halliburton hired Decision Makers – to influence their decision. Halliburton Matter is the matter for the ruling junta, military or electoral. One of the Czars of Russia received a security report about corruption among the officials. The irate Monarch commanded the execution of all guilty of corruption.

His wise counselor who briefed the Czar told the Czar why such a command could not be carried out! Why? “Because, your Majesty, if we execute all corrupt officials, you will have no official left to run your offices. That is why!” Halliburton kind of hijack of decision making process can only be addressed as a political challenge, not a legal one. This is the present reality.

It is not in Halliburton’s nor in America’s interest to destabilize the governing process in Nigeria. Realpolitik will triumph over moral legalism in this Halliburton Matter. We will be glad to be proven wrong.