WM Kellogg to admit to Nigerian bribes

By Chris Sleight25 February 2010

UK-based contractor WM Kellogg is poised to admit to its part in the bribery scandal surrounding construction of the Bonny Island liquefied natural gas (LNG) terminal in Nigeria. The revelation came in regulatory filings made by the WM Kellogg's former majority owner, Halliburton.

Halliburton has already paid US$ 559 million in fines in an out of court settlement reached with the US Department of Justice (DoJ) and Securities and Exchange Commission (SEC) relating to bribes paid by its former subsidiary KBR. KBR was part of the TSKJ consortium that is believed to have paid some US$ 170 million in bribes to secure work on the LNG project between 1994 and 2004.

WM Kellogg is a joint venture that is 55% owned by KBR and 45% owned by JGC, another partner in the TSKJ consortium. It is under investigation by the UK's Serious Fraud Office (SFO) as it is believed it was the conduit for many of the bribes paid in Nigeria. It is thought the money was channelled through London, UK to help KBR protect itself from prosecution in the US.

WM Kellogg is reported to be in plea negations with the SFO, and the SFO is said to be looking on this self-reporting with a lenient view. It remains to be seen whether the SFO will pursue any criminal or civil prosecution against WM Kellogg.

Although KBR is now separate from its former parent company Halliburton, it was Halliburton that paid KBR's fines, as it was a wholly owned subsidiary at the time the bribes were made. This liability was agreed as part of a 'master separation agreement' when Halliburton spun-off KBR in November 2006.

This agreement should also indemnify WM Kellogg, as it covers KBR and any corporate entity that it has more than a 50% interest in. In other words, any fines levied against WM Kellogg would have to be paid by Halliburton.

Earlier this month Technip, another partner in the TSKJ consortium, made a US$ 328 million provision in its accounts for fines it expected to pay to the SEC and DoJ for its part in the bribery scandal.

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