Total S.A: Intermediaries, Official Influence, and Iranian Contracts

In the Total S.A FCPA case, the France-based oil and gas company agreed to pay $153 million in civil disgorgement to resolve the Securities and Exchange Commission’s allegations over payments for Iranian oil and gas development contracts. The agency’s May 29, 2013 order described payments to intermediaries selected by an Iranian government official who could influence the state oil company’s decisions. The Foreign Corrupt Practices Act case turns on a connection an insider may recognize: what the company paid for, and whose decision the payment could change.

The Official Behind the Intermediaries

The SEC’s order alleged that Total paid approximately $60 million to intermediaries between September 1995 and November 2004 to obtain development rights in the Sirri A and E fields and the South Pars field. The official headed subsidiaries of the National Iranian Oil Company and also advised a senior government official. The alleged exchange put a competitor selling its ability to develop a field up against a company buying help from inside government.

The Sirri arrangement connected the consulting paperwork to government decisions in international business. According to the SEC order, Total met the official before signing the development contract and agreed to hire his designated intermediary to help obtain the National Iranian Oil Company’s signature. Total International Ltd., a Bermuda-registered subsidiary, entered the consulting agreement on July 10, 1995. Total signed the development contract three days later.

The SEC alleged that the umbrella consulting agreement promised economic and marketing research and support services but left payment terms to separate consulting service requests. The first request led to a $500,000 transfer from a New York bank account to a Swiss account on the same day the consulting agreement was signed. Further payments followed from Swiss accounts at the official’s direction. For an employee reviewing the engagement, the service request and bank transfer could explain the expense more clearly than the umbrella agreement’s description.

The SEC described a similar exchange when Total sought rights in South Pars. Total agreed to pay an intermediary designated by the same official for influence over the National Iranian Oil Company’s approval. The consulting interests were assigned to a company established in the British Virgin Islands, and Total later obtained a 40% interest in developing phases two and three of the gas field. The SEC alleged that payments to the replacement intermediary continued for seven years to obtain and retain the South Pars business.

The SEC also traced a change in the timing of the consulting payments as the South Pars negotiations developed. A letter agreement accelerated approximately $10 million under the first service request, and a later request documented a payment connected to the Sirri fields. Those amendments gave the payment schedule its detail. For someone handling the contract file, they could explain when the company committed to pay and how an existing consulting relationship carried into negotiations for another project.

Changing the payee did not erase the connection to the official in the SEC’s account. The assignment agreement linked the replacement company to the earlier consulting arrangements, while the development contract identified the government business being pursued. An insider who handled that change may know why the recipient changed and whether the work changed with it.

What the Intermediary Actually Did

The SEC alleged that Total recorded the payments as business development expenses and treated the agreements as legitimate consulting arrangements. Its order described inadequate review of the documents and concealment of the arrangements’ true nature and participants. We see the problem in that label: business development says almost nothing about whose influence the company was buying.

An intermediary’s actual work is central to understanding what a fee purchased. In Total’s case, the SEC tied the consulting requests, assignment and transfers to the official’s help securing development rights. Someone who negotiated the services or approved a request may know whether the explanation in the file matched the purpose discussed inside the company.

That is why third-party due diligence matters after the vendor has been approved. Screening identifies people and relationships. Transaction records show services, decisions and money. We want to understand how those fit together, particularly when the commercial reason for a payment changes as a contract moves forward.

The fee’s terms matter alongside the description of the work. Compensation tied to the volume of business can connect an intermediary’s income to the company’s purchases, while a payment approval identifies who agreed to that expense. In its guilty plea and accompanying statement of facts, Gunvor admitted that intermediaries used fake consulting invoices to conceal bribes for Petroecuador business.

Where an Insider Can Connect the Deal

The evidence connecting a payment to an official decision often sits across commercial, finance and compliance functions. An insider’s contribution can be explaining why documents that appear unrelated belong to the same deal. That knowledge gives an approval or an invoice meaning beyond the words printed on it.

A project employee may understand what an intermediary was expected to accomplish in negotiations. Someone responsible for accounts may know which entity invoiced, who approved it and where the payment went. A compliance or audit employee may know what questions were raised and how management answered them.

We put that business knowledge alongside the engagement terms, evidence of performance and payment records. The point is to connect the reason offered for the expense with the business advantage being pursued. In Total’s case, the Securities and Exchange Commission’s allegation makes the official’s influence over development contracts the connection to examine.

The distinction between the contracting entity and the ultimate beneficiary is especially useful. An invoice identifies the party asking to be paid. Ownership and transfer records can explain who controlled or received the money. Reading those alongside the negotiation history brings the payment back to the decision it was meant to affect.

The Company’s Resolution and the Whistleblower’s Claim

The Securities and Exchange Commission recorded that Total agreed to settle SEC and criminal charges. For an insider who recognizes a similar payment arrangement, we assess the potential foreign-bribery whistleblower claim and bring in the foreign bribery whistleblower counsel the matter needs.

Foreign-bribery whistleblower programs and False Claims Act cases address different conduct, and we work through the applicable program with you. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. Your knowledge of who authorized a payment, what the intermediary did and which official decision mattered gives that conversation its substance.

You Know What the Intermediary Was Buying

If you handled an energy contract, an intermediary’s payments or the approvals behind them, you may know why the business really paid. We build your strongest foreign bribery whistleblower case with you, bringing in foreign bribery whistleblower lawyers who understand the energy business and guiding you through the case. Speak with our whistleblower experts about what the intermediary was buying.