When UK national, Jonathan Taylor (45) looked left from his terrace, he took in Italy in the far distance. In front of him, the deep blue waters of the Mediterranean stretched out to the horizon and far below him was the billionaire’s playground of Monte Carlo. You could imagine worse places to live than the French mountain village of La Turbie. At the beginning of 2012, Taylor, his wife and three children enjoyed the good life. He was working at the Dutch multinational SBM Offshore, and earning a good salary His career was going well. Since his arrival in 2003, he had risen to become the company’s number two in-house lawyer. His title: head of legal affairs for the sales and marketing department.
SBM, originally from Schiedam in Holland, had in 1971 relocated to the Principality of Monaco where it is the biggest employer after the casino with around 1,200 people out of a global workforce of 10,000. It is the market leader in the sale and lease of so-called Floating Production Storage and Offloading units, (FPSOs), the floating platforms which extract, process and store oil and gas at sea.
SBM is also a member of the elite AEX 25, the largest companies listed on the Amsterdam stock exchange. In 2013, it booked a turnover of 4.2 billion euros and a profit of 82 million euros and has a market capitalisation of over two billion euros.
Taylor drew up the contracts for the billion-dollar deals which SBM won all over the world. He regularly flew to Brazil, the most important country in SBM’s portfolio.
What Taylor and most of his colleagues didn’t know was that the management board secretly added appendices to those contracts, and these additional clauses committed the company to pay huge sums in commissions to third party agents.
An extraordinary informant
Three years later, it is January 2015. On a dark dreary day somewhere in the UK, Jonathan Taylor is ready to tell his story for the first time. In his bag he has piles of documents, and on his computer conversations with former colleagues which he secretly recorded while he was at SBM. Taylor, athletically built and with a genial manner, has made up his mind. He wants to talk to the media because in his opinion his former employer threatens to get away with a bribery scandal on a world scale. “The business model of SBM was simple. We got the orders by paying bribes.”
From the beginning of 2012, Taylor was involved in the internal investigation into the fraud in SBM. He left the company five months later because he refused to be part of what he calls “the cover-up”. Taylor would later become an important informant of the Dutch Public Prosecutor (OM) in the case and has also cooperated with the authorities in Brazil where the investigation is still on-going. He originally thought he had found an ally in the Dutch OM. But on 12 November last year, he learnt second-hand through the media that the OM and SBM had come to an out-of-court settlement for $240 million, the biggest in Dutch corporate history.
Taylor was dismayed.
“I had expected in a first-world country such as Holland that justice would prevail. But commercial interests apparently trumped the search for truth.
The OM knew about the size and severity of the corruption and it has allowed SBM to keep denying the corruption in Brazil. The OM is protecting SBM and is thereby complicit in not revealing price sensitive information.”
These days, SBM likes to present itself as “a white swan in the pitch dark pond of the offshore business”. So said SBM Management Board member Sietze Hepkema in Dutch newspaper NRC Handelsblad on 13 December last year. Hepkema, a former lawyer, was appointed specially to tackle the corruption at SBM. In the interview, he said he was prepared pursue legal remedies against corrupt former SBM managers because it would be “unfair if there were any lingering doubts after all the efforts the company has made to be clean.”
From Taylor’s documents and recordings, however, it is clear that in the past three years the same Hepkema and his fellow directors have carried out a policy of “containment” — in other words, they have withheld key information from the market and the authorities. The company’s leadership were already fully aware at the beginning of 2012 exactly how widespread and how systematic the corruption was. Furthermore, the company has gone through hoops to keep the disclosure to a minimum.
Says Taylor: “The shareholders have been tricked, the competition has been put offside in an improper manner and the authorities have been incompletely informed for a very long time. With the settlement, SBM doesn’t even have to go to in front of a judge to explain itself and that is very hard to swallow.”
The containment strategy bought the company time to arrange financing of new projects and secure large new orders, says Taylor.
In their reaction to 15 questions of Vrij Nederland, SBM “strongly denied” the accusations that it had pursued a policy of containment or misled the markets. Also the company labelled “incorrect” the suggestion that it had decided early on to stop the investigation into Brazil. SBM claims that a “former employee” — by which it presumably means Taylor — tried to blackmail the company and says it has started proceedings against him. SBM does not consider itself “in a position to give detailed answers” because it has started this action — no further explanation given — against Taylor.
Taylor, on the other hand, states categorically that he has never received any notification of legal action initiated by SBM or anyone else.
“This is how they are trying to smear me.”
Around lunchtime on Tuesday, 31 January 2012, the storm breaks and the heavens open. An American lawyer calls on behalf of his client Noble Energy, a business partner of SBM. He has seen a laptop with incriminating information about bribes that SBM has paid in Equatorial Guinea, a small oil-rich state in West Africa, apparently to win a contract.
The toxic emails were from a former SBM sales and marketing director Hanny Tagher to a Noble Energy employee who had also received money. Tagher worked for over 25 years for SBM and after retiring in 2007, set up shop as a commercial go-between. In this new role, he negotiated between SBM, and government officials and employees. That was not an unusual construction, says Taylor. At least four other former directors and heads of departments preceded Tagher. From the emails, it became clear that Tagher had promised to pay $7.35m to Gabriel Obiang, Minister of Industry and Mining and son of dictator Teodor Obiang. Smaller amounts were destined for key figures in GE Petroleum and Noble Energy.
Sometimes payments were made in kind. In Equatorial Guinea, this included three BMW X5s and a yet-to-be-built apartment.
On the eighth floor of SBM’s offices in Monaco, panic ensued.
“It was absolute chaos,” says Taylor. “People were running around like headless chickens. There was no organization, no plan.”
Head of Legal Affairs, Jay Printz asked Taylor to help him find out what exactly was going on. Bruno Chabas who had been appointed CEO a month earlier appeared “completely overwhelmed,” says Taylor, even though he had been Chief Operating Officer (COO) in the eight months previous to that and as COO had been involved in running the company.
Chabas, who remains to this day SBM’s CEO, suggested Printz and Taylor take a look in the safe in his office. In this, he had found a pile of papers which he now gave to Printz and Taylor for further research.
Taylor: “Those documents contained a treasure trove of information.”
From the documents in the safe, they discovered that behind the unknown names of companies on secret side agreements, there were people they knew very well. It became clear, for example, that Hanny Tagher was the man behind a company called Moswen, based in the British Virgin Islands to which SBM had transferred tens of millions of dollars.
“Even though I had known Tagher quite well, I had no idea he had remained active for the company,” says Taylor.
But only a very small group of people inside the company knew about the bribes.
The internal investigators almost immediately discovered that in Angola, numerous payments had been made to employees of state-owned oil company Sonangol. Printz and Taylor also found notes on the side agreements on which former CEO Tony Mace himself had scribbled how the commissions should be divided.
“That for us was thé proof that the corruption was initiated at the very highest level and that the former top man in the company was involved,” says Taylor.
Hanny Tagher was summoned to Monaco for a long conversation at which Bruno Chabas and Taylor were present. The conversation was recorded. Tagher almost casually admitted paying bribes all over Africa, Asia and the Middle East for years. Says Taylor: “Bribery was so normal it was like brushing your teeth or drinking a glass of water.”
The division of the commissions was always the same, according to Tagher: 20 percent for him, 80 percent for the people who awarded the business.
By now, SBM CEO Bruno Chabas was thoroughly alarmed. He set up a formal internal investigation team led by Jay Printz to which Taylor was also assigned. Forensic accountants from PwC and external lawyers from De Brauw Blackstone Westbroek and US law firm Paul Hastings LLP were also hired.
The name given to the probe was ironic, to put it mildly: Project Pandora.
Brazil jumps out
It soon turned out that between 2005 and 2011, about $275 million had been paid in commissions to agents to secure contracts in Brazil, Angola and Equatorial Guinea, but also Iraq, Malaysia and Italy, as becomes clear from the internal investigation’s Payments to Agents Report dated 17 April 2012.
Of the total, 207 million dollar was awarded immediate “red flag” status, i.e suspect.
Brazil immediately stood out. SBM earns 60 percent of its revenues from the country and has current contracts there worth no less than 25 billion euros. In the period investigated, at least $139 million in commissions was paid to an agent called Julio Faerman. This 77-year-old businessman is a highly mysterious character. In the only known picture of him, he poses in a Venetian carnival mask.
Faerman, who has apparently now fled Brazil and is resident in London, was SBM’s man in Brazil for years. In his younger days, he had worked at state-owned oil giant Petrobras, the biggest company in the southern hemisphere, and appears to have maintained excellent inside contacts.
Taylor: “He monopolized the relationship with the company. Without him, we couldn’t do anything there.”
Critical of Faerman
But then, Faerman also had a very special position within SBM. He had the key to the offices in Monaco, and SBM paid his first class air travel as well as the internet and satellite bills of his business premises in Rio de Janeiro. Just like Tagher, the Brazilian received payments through shady companies in the British Virgin Islands often via banks in Switzerland and often without invoices being issued.
But Faerman’s importance was clearly demonstrated by the fact that he was allowed to pocket one third of the commissions.
CEO Chabas was internally very critical of Faerman. “We’ve been tricked. He’s been part of the culture of the company. He’s worked for the company for 20 or 35 years [sic] and made a fortune and in fact was the one running the company.”
Later, Chabas would call him “the smelliest of the smelliest”.
It was not only the documents that provided evidence that Faerman had played a murky role in securing orders.
Ex-sales director Tagher, who had been responsible for bribes in Africa and elsewhere, honestly recounted in the internal interview that Faerman used the commissions “to pay employees of Petrobras”. During another internal meeting with Chabas present, the suspicion took hold that bribes had gone not just people inside Petrobras but also to Brazilian politicians.
A week after the initial phonecall concerning Equatorial Guinea, Jonathan Taylor noticed that his next-door neighbour on the eighth floor, Jean Philippe Laurès, had dumped a dozen bin bags outside the door of his office. The Frenchman was the company’s Chief Operating Officer and prior to that had been a regional director in Angola.
“I walked in and found Jean Philippe at his shredder,” says Taylor. “I couldn’t believe my eyes. One of the directors was destroying evidence! Jay Printz almost became hysterical. Chabas decided to secure the bin liners and we put them in my office.”
Then the Pandora’s box opened further.
Correspondence about the bribes, it was found, went through private email addresses in easy-to-decipher secret language. One example: “60 percent of the goods… have to be delivered fast… to avoid further problems”.
In one of the emails, it literally says that it involves information “that is not given away for free”.
The bags also contained confidential information and internal Petrobras reports including minutes of board meetings and secret information about upcoming public tenders for projects. Those documents Faerman had obtained from confidants from within Petrobras.
The revelations about the long-standing corruption put relationships between colleagues on edge.
Bruno Chabas and Printz got into a heated argument on 24 March 2012 from a which a recording has been preserved. Printz accused Chabas of foot-dragging: “We have a fundamental problem, and during the process, you are only working against me,” was the Canadian’s angry accusation. “In the investigation into Angola, you said ‘don’t dig too deep’ but I have this knowledge and so do you. We have to clean things up.”
Printz deeply resented the fact that Chabas and certain Supervisory Board members were shielding Laurès. “I was told to stop gunning for Laurès.”
The two men were agreed on one thing, at least.
Printz concluded that the company had a “massive, massive corruption issue”. Chabas responded: “Yes, I agree.”
Printz: “We still have a company full of people who got business with corruption.”
Chabas: “Yes, and basically led by people who accepted this. Tony Mace [SBM’s CEO pre-Chabas] was more naïve than anything else. Didier Keller [CEO pre-Mace] was the one who set this up from the onset.”
Two days later, Chabas told Taylor the reason why Laurès was staying: “He is the only one with direct contacts with Sonangol in Angola.”
Chabas was in two minds, it seems. He had authorised the investigation but now the can of worms he had opened threatened to engulf the whole company.
On 3 April 2012, during a meeting, he said: “What will further investigation bring us? We have most of the facts. Why dig deeper?”
For Printz, Chabas’ apparent new strategy was unacceptable. He determined to leave the company and threatened to take “the next step” if he did not receive an exit settlement.
For Chabas, this was reason to sound the alarm.
And so, for Thursday 5 April 2012, the last working day before the Easter weekend, Chabas called an emergency meeting of the Supervisory Board to be held in a hotel at Amsterdam’s Schipol Airport. From all over the world, members of the supervisory board, management, lawyers and accountants were flown in.
More han ten hours around the table
Also present was Sietze Hepkema, senior partner of the Amsterdam offices of international law firm Allen & Overy, who was about to be appointed to clean up SBM’s house.
In Printz’ absence, Taylor stepped in to present the findings of the Pandora team. He secretly recorded the tumultuous meeting on his iPhone.
“I felt at that moment that things were going in a direction I felt unhappy with and I wanted to cover myself in case I was later accused of being an accomplice to a cover-up scandal”, says Taylor on his decision to make this and other recordings.
The Englishman told those present in detail about the corruption in Equatorial Guinea, Angola and Brazil but also about possible issues in nine other countries, including Greece, India, Nigeria and Vietnam.
“This meeting was for me thé chance, thé opportunity to recount how serious the situation was. It was a marathon session: including pre-meetings, we spent over ten hours together around the table.”
As the meeting progressed, those present became more and more excited when they learnt of everything that was going on. “By the end of the meeting, you could have cut the air with a knife,” says Taylor.
Illustrative of the atmosphere was a remark by De Brauw Blackstone Westbroek lawyer Marnix Sommsen who said he wasn’t going to make a Powerpoint presentation: “we want to produce as little paper as possible [because] it might be discoverable at a later stage.”
The big question was how much the information should be made public. As representatives of a listed company, were they not obliged to report price sensitive information?
One of the directors, UK national Francis Gugen, chairman of Fraudscreen, a London-based company whose mission, it says, “is to make it more difficult for people to gain financially by lying” said that if SBM were a London-listed company, the results of the investigation would unequivocally be made public that same night: “without disclosing this stuff, we are opening up an enormous exposure”.
French national, Tom Ehret agreed: “we already know that (a) the problem is large in numbers and (b) it’s deep, it’s pervasive, systemic, endemic, and basically do we still have a business model in this company apart from bribing people, so that to me is price sensitive.”
Ehret would later add: “We cannot contain this and we shouldn’t even attempt to contain it.”
Gugen again: “There should be no cover-up. I think we will lose control if we don’t make this public as soon as possible.”
Lawyers Sommsen and Tim Dickinson of US law firm Paul Hastings, however, advised caution. Sommsen: “Yes, there is a prohibition on bribes from a Dutch perspective… [but] that said, it is not enforced at all.”
It was also unnecessary to alert the AFM because the cases of corruption were not price sensitive, according to Sommsen. And the investigation had not been concluded. The lawyer said that the Pandora results at that moment were “not yet serious enough”.
SB directors Ehret and Gugen who were pleading for quick public announcement lost the argument after discussion and the line Sommsen/Dickinson advised was agreed: the SB decided to inform the Dutch and US authorities but as minimally as possible.
“We have a company to run”
And so on Tuesday 10 April, SBM announced the appointment of Sietze Hepkema to the Management Board. Only lower down, however, was the real news, packaged in a masterfully evasive manner, namely that the company had “recently become aware of certain sales practices involving third parties and which may have been improper.” Exactly as the lawyers advised, they did not waste words on specific countries or about individual agents and former employees or the immense sums that had been paid.The next day, Printz wrote his draft resignation letter, a copy of which he gave to Taylor. Because SBM “has been using corruption as an ingrained part of its business model for the last three decades,” Printz wrote, he did not expect that the company “will remediate its widespread corruption practices”. He found he could not stay with a company which according to him was capable of committing the same crimes in future.
Chabas and the Board chose the obvious route. Printz received half a million euros in exchange for his silence.
From day one, Hepkema made his mark on how the investigation would henceforth be conducted.
Firstly he changed the name from Pandora to the more anonymous ‘Fred’. A week later, Taylor who had taken over from Printz, handed the internal investigation’s findings to Hepkema.
And then things went quiet.
Taylor was no longer asked to participate in meetings. “Hepkema completely took charge of the investigation.”
Also during the AGM on 16 May 2012, the strategy was made public.
To questions from the VEB (Dutch Shareholders’ Association), Chabas replied that certain sales practices might have “improper but not illegal” without revealing the severity and size of the corruption.
Taylor and Hepkema met each other for the last time on 29 May 2012.
That turned into a rather unpleasant confrontation, as the recording makes clear. Just like Printz, Taylor complained that Jean Philippe Laurès, the man of the plastic bin bags, had not been sacked or even suspended. Because of that, Taylor indicated that his position had become untenable. Furthermore, he was asked why he had been “given the assignment to limit the investigation.”
Hepkema: “No. I said ‘contain’.”
Taylor: “The time is ripe, over-ripe for some people’s ears to be cut.”
Hepkema: “And who are you to decide this?”
Taylor: “I can only advise and show documents with evidence. Then it’s up to people on a higher level.”
Hepkema sneers: “And if these people say we are being advised by two top law firms on what to do and what not to do and that those lawyers say there should be no disciplinary action until we are much further with the investigations?”
Moments later, Hepkema shows what he means by containment. Brazil had to be removed from the investigation altogether. He literally said: “Take Brazil out.”
Taylor continued to insist on swift action and pointed out to Hepkema the incriminating material from the investigation of the contents of the bin liners.
Hepkema: “That is not my priority. I am not here to crucify people… We are not here to make judgements on what is morally right or morally wrong. We have a company to run.”
In an email to US lawyers Paul Hastings, Hepkema confirmed the strategy of containment.
Every reference to Brazil and agent Faerman had to be removed. That part of the investigation had been “parked”, said Hepkema.
In response to questions from Vrij Netherland, SBM insisted that there was never a policy of containment and that Brazil was indeed investigated. For that, the company refers to press releases in 2014 and the final settlement with the OM. But in its answer, SBM refers only to the past year and fails to answer specific questions about previous years when as appears clear from documents and recordings, they did indeed decide to put Brazil in the deep freezer.
The danger of US interference
In the same email, which he copied in Taylor, Hepkema stated his desire to “end up with Dutch Public Prosecutor”. In other words, he wanted to make a deal with the Dutch rather than the American (“or any other”) authorities who could also claim jurisdiction since many of the payments to Faerman originated out of SBM’s offices in Houston, Texas.
The danger of US interference was quickly deflected. Paul Hastings lawyer Dickinson managed with his “good contacts with the American authorities” to convince them that SBM would put its house in order. He let Chabas and Hepkema know: “I downplayed the US activity of the company worldwide… I was asked by the DOJ if we had an order of magnitude of any improper payments and I said we did not, nor did I give them any of country names or any client names.”
The good contact whom Dickinson called was one Nathaniel Edmonds, an expert in the field of cross-border corruption with the US Department of Justice.
Funnily enough, in March 2013, Edmonds left the DoJ and became a partner of Paul Hastings LLP.
Taylor regarded all of this with dismay and two weeks later took his decision. “I didn’t want to be part of a company that was involved in a cover-up strategy even if it meant leaving with no job to go to.”
He resigned and received less than a year’s salary. But finding a new job proved hard. He was too expensive and too senior for many positions and finally accepted a job beneath his level of experience with the Dutch company Heerama in the Australian city of Perth. He had only just moved there when SBM proudly announced on 26 March 2013 that it had concluded two FPSO deals with Petrobras in Brazil worth over 3 billion dollar, its biggest contract ever.
On 28 March 2013, there followed a second press release. In this, SBM admitted for the first time they were investigating assumed improper payments “in certain Africa countries”. There had also been “allegations… of improper payments in countries outside Africa.” But for this, said the release, there had been “no conclusive proof”.
No word about Brazil. No word about Faerman. Taylor was furious.
“Those orders in Brazil? Would they have got them if they had informed the authorities and Petrobras in detail of what they had known at that point for over a year. By keeping back information, they have made themselves guilty of misleading the market.”
During containment phase, SBM entered a period of fast growth, not only in Brazil but elsewhere. It concluded one big contract after another, and also expanded its equity base with a successful rights issue.
Taylor had assumed when he left that SBM would eventually inform the market and the authorities fully about the problems with corruption. But that did not happen.
With the American company Walmart’s Mexican bribery scandal, company lawyers were arrested years after the event for involvement in a cover-up. “I didn’t want to be behind bars. That’s why I decided to go back to demand a higher settlement.”
“If they had decided to take a risk by keeping everything quiet, I thought I should be compensated for future damages and I demanded three million euros” (A figure calculated by his lawyers to reflect loss of earnings and future prospects.)
After SBM’s 28 March press release, Taylor wrote an email to Hepkema in which he threatened to share his knowledge with “a wider audience” if SBM did not agree to an improved leaving settlement. He also threatened if he didn’t receive a timely response that the case “would escalate”.
SBM have tried to portray Taylor on several occasions as a criminal extortionist but that is a picture that Taylor utterly refutes.
“I had always intended to go the authorities and that is what I did. I have never offered the recordings or documents for sale as [Dutch] Quote magazine asserted. I have an employment dispute with SBM who ruined my career and tried to involve me in criminal practices. For that I believe I am entitled to appropriate compensation.”
In the summer of 2013, Taylor returned to the UK with his family. On 18 October, his proposal for a improved settlement was definitively rejected. “That was an incredible blow to me.”
The same day, a document appeared on Wikipedia about the corruption case which concerned someone who described himself as a former employee of SBM and legal director of the sales and marketing division.
Taylor doesn’t deny that the document had been created by him. “I sent that document beforehand to both the Management Board and all the members of the Supervisory Board. So it could have come from anyone.”
Because the text was too long, it was automatically removed from the site by Wikipedia. But the information could still be recovered from the edit page.
The explosive material it contained remained unnoticed for months until Dutch magazine Quote wrote about it in February 2014.
In Amsterdam, the article caused consternation and SBM’s share price plummeted. In a press release the next day, SBM claimed that the document was “partial, taken out of context and to the extent factually correct, is outdated.”
Also: “The Company denies any allegations of “containment”.
In Brazil, the Wikipedia leak also caused great excitement. It appeared to suggest another big corruption scandal was about to engulf national champion Petrobras. What made the news extra spicy was that President Dilma Rousseff had been the chair of Petrobras’ Supervisory Board from 2003 to 2010, and many of the directors were political appointees from her Workers’ Party.
The scandal came at an uncomfortable moment. Rousseff was in the middle of her re-election campaign. At Petrobras, they were furious. How could SBM have started an internal investigation two years before without informing them? On 26 February, Sietze Hepkema was summoned to Brazil by the Petrobras board in Rio de Janeiro. This from internal Petrobras documents, obtained by Quote magazine. The oil-and-gas giant immediately excluded SBM from tenders on new projects and started its own internal investigation. But after a mere thirty days, it announced that nothing untoward had been discovered.
On 18 March 2014, the Dutch authorities contacted Taylor. They said they had started their own investigation and would like to talk. Taylor flew at his own expense to Holland several times and shared his information with the investigators. “They told me that the cover-up by Hepkema and his people was worse than the corruption itself. They also talked negatively of the enormous $2.5 million tax-free salary the Dutchman was earning. They seemed convinced about taking the case to court and thanked me several times for my cooperation.”
That becomes apparent from a 4 April, 2014 email in which a Dutch investigator writes that Taylor had done excellent work and that his information was helpful to the investigation.
On 2 April, SBM finally, after two years of conscientious probing, made the findings of its internal investigation public.
With the publication of the Wikipedia piece, the company could clearly no longer delay crucial information. But disclosure remained minimal.
or the first time, Equatorial Guinea and Angola were named and it was stated that “some evidence was found that possible direct or indirect payments had been made to government employees”. About Brazil they said that although “red flags” had been discovered, no “credible evidence” had been found that the company or its agents had made “improper payments to government officials”. SBM did leave open a legal opt-out by referring to possibility of new information from the OM investigation.
On 29 April Dutch investigators asked Taylor for names of employees of Petrobras that might have been recipients of bribes. “Our eyes are bad, or it might be your handwriting,” a Dutch investigator joked. “You are helping us enormously with this,” was the reaction when Taylor provided the names three days later.
“Should you have more names, that would be great.”
He presented seven names that had come up during the internal investigation in early 2012.
In the months that followed, Taylor heard little from OM except that the investigators were also engaged in conversation with SBM and its lawyers.
At SBM’s AGM on 17 April 2014, direct questions were asked about the corruption case, and again the SBM top management remained evasive. For example, in an answer to a question regarding the remarkable size of the payments that went to the Brazilian agent, Chabas said that SBM in those years only employed four people in Brazil and “was not able to offer services to Petrobras” and for that reason the agent was indispensable.
Chabas seems to have kept back information on purpose. He had known from beginning of 2012 about the British Virgin Islands accounts and the missing invoices. Besides, he had heard with his own ears Hanny Tagher state that Petrobras employees had been paid off. He had also seen email communication which openly referred to payments plus confidential Petrobras reports that were obtained by bribing an employee.
None of this he mentioned at the AGM.
Meanwhile in Brazil, the public prosecutor, the parliament and the Comptroller General’s Office (CGU) had each started their own investigation involving SBM. In August the head of the CGU, Jorge Hage, claimed in the newspaper Estadao that cooperation with the Dutch authorities was troublesome. Taylor: “I then contacted them and offered my help. They immediately called me back and came to England in early October with three people. We spoke together the whole day and I gave them the information they wanted.”
From the — mutually agreed — recordings of this conversation, it becomes clear that the Brazilians believed they had not received the kind of cooperation from their Dutch counterparts that they had expected.
“We hope that if we go public with this investigation, SBM and the OM will change their tune,” said Hamilton Cruz, one of the Brazilian investigators.
“It appears that economic reasons play a role but that is exactly what the anti-corruption convention of the OECD is meant to prevent.”
In response to this, the OM told Vrij Nederland that it does not recognize this version of events.
“The relations are good.”
Mega-settlement? Not really
On 12 November, two weeks after incumbent Rousseff won the Brazilian election by a hairbreadth, SBM and the Dutch Public Prosecutor announced their settlement. The company agreed to pay 240 million dollar, exactly the amount it had put aside four months earlier. In its press release the OM said it had found concrete proof of payments by Faerman to Brazilian government employees. The OM had irrevocably proved what SBM had been denying to that day. But to whom and how, the OM did not make public. The findings of the OM and the exact contents of the settlement were not made public. Taylor received no explanation. The OM praised SBM for the new course that it had embarked upon. Criminal proceedings might be taken against ex-employees who were involved or who had knowledge of the payments but who they were and what proceedings remained unclear. In the press release, the OM furthermore commended SBM for its cooperation during the investigation.
But is that credible?
In leaked minutes of the meeting between Hepkema and representatives of Petrobras in Rio de Janeiro in February published by Quote magazine, the flighty Dutchman bragged that he had deliberately not assisted the authorities, including the OM: “Not a single document was sent to the [US] Department of Justice and to the Dutch a limited number of documents. Concerning Brazil, only the name of the Brazilian agent and the amounts,” Hepkema had proudly boasted, naïvely assuming perhaps that what you say in Rio, stays in Rio.
The OM has told Vrij Nederland it cannot comment on meetings at which it was not present but that an old investigation can be reopened if new facts and circumstances emerge.
In the Dutch media, the settlement was variously hailed as “mega” or “monster” . But that really is not in fact the case, according to Taylor. After all, the decades-long fraud earned the company hundreds of millions of dollars, even if putting an exact figure on it is impossible. From that advantage gained, they “only have to give back $200 million and the fine is a mere $40 million.”
No admission of guilt
According to Taylor: “They got off far too lightly.”
The OM comments that it has not been possible to calculate the profits for individual projects separately from the accounts and so it had not been easy to determine “disgorgements” levels. The OM is still of the opinion that “the fine and the disgorgements are reasonable and do justice to the offences committed”.
Furthermore the OM asserts that during the investigation, “no suspicion of [SBM] misleading the market had arisen”.
The latter statement is truly remarkable since the OM had in its possession Taylor’s documents. However, the OM never passed on its information to the Amsterdam Financial Markets Authority (AFM).
$22 Million receiven
After the settlement, the share price briefly shot up, also partly because Hepkema stated that the chance that SBM would not receive further fines was high. SBM made no provisions for the ongoing investigations in Brazil.
“The relationship between Petrobras and SBM is almost inextricably important to each other. I look upon the future with great confidence,” said Hepkema on 12 November.
But a mere 24 hours later, Jorge Hage let it be known he could impose larger fines if he could prove corruption with SBM. On 14 November 2014, 18 employees of Petrobras where taken from their beds by the police, among them former director Renato Duque who was on Taylor’s list of suspects.
Duque was a good contact of Faerman. Together in April 2011, Duque came to Monaco for talks with the SBM Board after which he and faerman’s business partner apparently went on a tour of the Argentinian wineries with their wives.
On 17 November, current CEO of Petrobras, Maria Gracia Foster, issued a statement that was damning for SBM. She said that “an incredible amount of evidence had been found” that SBM had not been playing by the rules. The company remained excluded from Petrobras tenders “until the people who accepted the bribes had been identified.” She added that SBM had informed her as early as May that there had been illegal payments to Petrobras employees. That is remarkable because in press releases and in AGM, none of this was ever announced.
Even after the settlement, Hepkema maintained he “had never seen evidence for payments to Petrobras employees.”
Another senior Petrobras employee, Paulo Roberto Costa who was arrested in March told investigating officers a week after the settlement he had received $22m from SBM. Costa had previously confessed to bribing no less than 40 politicians, including a minister, state governors and members of parliament. It is as yet not known if these included persons who granted favours to SBM.
In the past few months, shares and bonds in Petrobras have collapsed. Investors have exited en masse after it first delayed its quarterly earnings and then failed to inform the market of the potential size of the scandal sparked by the revelations about SBM.
According to analysts, the investigation in Brazil will continue for years and the chance that SBM will receive an even higher fine is considerable. In the meantime, SBM will continue to be excluded from tendering.
“Thanks a lot, Jonathan”
It is now exactly three years since the fatal phonecall. SBM has been damaged but according to Hepkema, the company has cleaned up its act.
“We have embarked on a new course,” claimed Hepkema in Dutch daily NRC Handelsblad. “Really, really, out of moral considerations. We have said we want to be a transparent company and leave no stone unturned. That was an incredibly brave move.”
The OM also appears convinced that SBM have made a giant leap forward (to VN).
SBM says it has stopped using agents, including the Brazilian Faerman in 2012 but it is still unclear whether the outstanding payments to Faerman, worth an estimated $218 million, have been settled. Recommendations by PwC accountants are being implemented at SBM. The company now has a whistleblower hotline and 2,500 employees have received compliance training.
And remember, Hepkema said that SBM willing to bring former Board Directors who had been guilty of corrupt practises in front of a judge.
But that has certainly not yet been done in the case of Mr Bin-liner, Jean Philippe Laurès. He remained with SBM another 18 months after the famous incident and was appointed to a key position in the US part of the organization.
When Laurès was dismissed, shortly after the original Wikipedia posting in October 2013, no announcement was made. Only after an internal email was leaked, did the company issue an explanation-free statement that led to an immediate dip in the share price.
Jonathan Taylor has found a new working environment. He now doubts there will ever be a court case in Brazil, especially after CGU head Jorge Hage recently “retired” to be replaced by a close aide of President Dilma Rousseff.
Taylor wants to see law prevail but he also still seeks damages for the harm he has suffered. And he hopes that his name will now be cleared.
“The OM promised me that they would name me as the person who provided them with information. But that never happened. When after the settlement, I asked them about it, they said they were very sorry that they had given that impression but that they couldn’t do anything for me.”
Recently, employees of the OM rang Taylor. They thanked him for his services as “an important witness”. At his request, they were also prepared to reimburse his expenses for his trips to the Netherlands.
But that was all.
This article has been made possible with the support of the Fonds Bijzondere Journalistieke Projecten, www.fondsbjp.nl
Reaction from the Vereniging van Effectenbezitters (VEB – The Dutch Shareholders Association)
‘We follow SBM closely and in the past few years have on multiple occasions asked for clarification of possible wrongdoing within the company. The answers we received have in no way been in line with the information we have seen in this article. The Management and Supervisory boards of SBM have to come up with a very good explanation to justify their way of doing business if this information is correct. SBM management have on multiple occasions categorized the alleged corruption as practices from the past and as mere incidents, but if this article is correct, corruption was in the DNA of the company. Moreover, investors have been lied to: a deadly sin. SBM likes to present itself as a Dutch National Champion in faraway lands but the way in which the company has operated in past years does not seem to be something to be proud of. Because of the settlement with the OM, the court case has been avoided and as a result, a lot of information about the alleged corruption has been kept from the public domain. SBM is now obliged to provide real clarity to investors. The VEB will work hard to ensure that happens.’