In recent days, anti-corruption investigators in Nigeria have told reporters that they plan to bring charges against former Vice President Dick Cheney in connection with a $180 million bribery scheme undertaken by Cheney’s former company, Halliburton. This case has already been litigated in U.S. courts. Halliburton, which Cheney left in 2000, has admitted to wrongdoing and paid nearly $600 million in civil penalties. As a result, a significant fact pattern has already been established.
According to charging documents from the Securities and Exchange Commission in 2009, Halliburton’s leadership, both at the time that Cheney was Chairman and CEO and after he left the company, “failed to devise adequate internal controls relating to foreign sales agents and the FCPA [Foreign Corrupt Practices Act], and failed to maintain and enforce those controls that it had.” No evidence has been presented in U.S. courts that shows Cheney signed off on the bribes, or knew they were occurring.
Here is the back story, according to SEC documents:
Back in 1991, a company called Kellogg created a joint partnership to pursue natural gas work in Nigeria. From the beginning, Kellogg officials and the other partners “believed it was necessary to pay bribes to Nigerian government officials” to get contracts, according to the SEC. They concocted a system to pay these bribes using two off-shore agents, one in England and one in Japan. The agents were sometimes referred to as “cultural advisors.”
In September 1998, Halliburton, then run by Cheney, acquired Dresser Industries, the parent company of Kellogg. In February of 1999, following a change of government in Nigeria, joint venture officials, now employed by Halliburton, traveled to Nigeria to arrange a round of bribes. After some negotiations, the former Kellogg officials, now working for Halliburton, agreed to pay $32.5 million in bribes to Nigerian officials. Days later, the joint venture was awarded a contract valued at $1.2 billion. The bribe was paid between March of 1999 and May of 2003 through the English agents bank accounts in Switzerland and Monoco.
So should Halliburton’s leadership have known that his company was promising and paying huge bribes to Nigerian officials? The SEC concluded that the answer to this question was yes. Here it is helpful to quote at length from the SEC complaint. KBR is shorthand for the Halliburton subsidiary that took over the Kellogg operation.
Halliburton exercised control and supervision over its business units, including, after its acquisition of Dresser, KBR. During the relevant period, KBR’s board of directors consisted solely of senior Halliburton officials. Halliburton senior officers hired and replaced KBR’s senior officials, determined salaries and set performance goals. After its acquisition of Dresser, Halliburton consolidated KBR’s financial statements into its own, and all of KBR’s profits flowed directly to Halliburton and were reported to investors as Halliburton’s profits. [Former KBR CEO Jack] Stanley discussed the Nigeria LNG project with Halliburton’s senior officials, who were aware of the joint venture’s use of the UK Agent on the Nigeria LNG project. Stanley and others did not tell the Halliburton officials that the UK Agent would use the money to pay bribes. Stanley received approval from Halliburton to proceed with the  Train Three project.
But there was other evidence, according to the SEC, that Halliburton had not done due diligence to make sure that the UK Agent’s payments, made through a Gibraltar shell company, were legitimate.
The KBR and Halliburton attorneys who conducted the due diligence investigation in 1998 learned that the shares of the Gibraltar shell company were held by entities called “Tower Nominees Ltd.” and “T&T Nominees, Ltd.” The attorneys never learned the identity of the beneficial owner[s] of the shares. The attorneys did learn that the only active official of the Gibraltar shell company was the solicitor based in the United Kingdom. The attorneys did not seek to determine how the UK Agent would or could carry out his duties under the consulting contract from the United Kingdom, or how he was carrying out his duties under the existing $60 million contract for Trains One and Two. In addition, the attorneys did not check all of the references provided by the UK Agent, some of which were in fact false. A now-retired Senior Halliburton legal officer reviewed the due diligence conducted by the Halliburton attorneys and knew that the investigation had failed to learn significant information. Nevertheless, Halliburton approved the use of the UK Agent.
At best, Cheney oversaw a company that had lax oversight to protect against tens of millions of shareholder money being used to pay bribes. At worst, it is possible that the company leadership, with or without Cheney’s consent, chose to look the other way.