Frank’s International N.V: The Contract Came After the Payments

In the Frank’s International N.V FCPA case, the company agreed to a $3 million civil penalty and to give up $4,176,858 in gains to resolve SEC allegations of bribery through an Angolan sales agent. The SEC described a backdated agency agreement created after the money had gone out, followed by invoices and accounting entries that told different stories about what the agent was doing. If you handled those approvals or knew the agent’s actual work, this is the gap you may recognize.

Frank’s supplied tubular services, fabrication and well construction and intervention services to the oil and gas industry. The Netherlands company became publicly traded on the New York Stock Exchange in August 2013. The SEC’s April 26, 2023 order says Frank’s International was renamed Expro Group Holdings N.V. after its October 2021 merger.

The Oil Company Hired Frank’s, but Sonangol Could Block It

Frank’s sought work on deepwater wells in Angola’s offshore oil blocks, where Sonangol controlled access to the business. The state-owned oil company awarded exploration and production concessions to international oil companies. Those companies hired Frank’s, but the SEC said they would not hire vendors Sonangol disfavored.

The company signing the service contract and the official deciding whether the supplier could get it occupied different places in the transaction. An invoice to an international oil company could still depend on a decision inside Angola’s state-owned enterprise.

According to the SEC, Frank’s learned in September 2007 that Sonangol was blocking a customer from using its tubular services. A senior Sonangol executive relayed a proposed solution: Frank’s could establish a consulting company and pay it five percent of the contract’s value for the benefit of senior officials. Frank’s instead hired a sales agent.

The SEC’s account describes a business confronting a demand for access to its own customers. We see the distortion clearly: the drilling work depended on engineering, while the proposed payment depended on who controlled permission to sell it.

An Agent Without the Technical Background

The SEC alleged that Frank’s retained the Angolan agent without due diligence or a contract in November 2007. According to the order, he lacked the technical background to advocate for Frank’s before Sonangol and did not attend technical meetings. What he had were personal relationships with a senior Sonangol official and other employees there.

The order says regional employees understood the high probability that the agent would use their payments to bribe officials. After the company hired him, its meetings with Sonangol changed from short, unproductive encounters to successful gatherings. The alleged value of the relationship was access to the people controlling the contracts.

An email from the regional vice president put that value plainly. Discussing payment timing for the customer contract Sonangol had blocked, he wrote:

The first commission went out in January 2008, and the SEC said Frank’s continued using the agent throughout that year without a contract or diligence review. Near year-end, the chief financial officer and chief accounting officer asked about the commissions. Regional executives approved an agreement backdated to January 1, 2008, supporting approximately $688,000 already paid. The SEC said Frank’s retained its threatened contracts and obtained two new ones after paying those commissions.

The official relationship also surfaced in a discussion about using Angolan businesses and workers on Sonangol projects. According to the order, an oil-company customer relayed Sonangol’s concerns about Frank’s commitment to that local participation. In response, a regional executive told a colleague that the Sonangol official was on the agent’s payroll. The customer’s message and the executive’s reply connected the demand made outside the company to the relationship described inside it.

That is the revealing part of the agent approval process here. In the SEC’s account, the request for supporting documents produced a contract covering payments already made. The paperwork supplied an explanation after the spending decision. Backwards, and convenient.

Marketing on the Invoice, Meals in the Ledger

According to the SEC, the agent’s invoices and Frank’s accounting entries gave different descriptions of the same payments. The SEC said Frank’s began paying under a second agency agreement in January 2011, with commissions promised on particular projects. The invoices instead referred generally to “various marketing expenses paid on behalf of Frank’s International.”

Frank’s recorded the payments as entertainment and meals, according to the order. Yet the SEC traced part of the money onward to the Sonangol official. In January 2011, Frank’s paid the agent $60,000, and the agent paid the official $54,000 two months later.

The order describes further payments to the official during 2011 and 2012, while Frank’s obtained four new contracts during the second agency agreement. A later agreement generated invoices for representation fees and entries describing commissions. The SEC alleged that regional employees kept authorizing payments despite knowing the high probability that the funds would be used corruptly.

For a finance employee, the books and records problem is concrete. A project commission, a marketing reimbursement and a meal expense describe different reasons for spending money. Comparing the agreement, invoice and ledger reveals how the explanation changed before anyone reaches the onward payment.

The SEC alleged bribery, false books and inadequate accounting controls under the Foreign Corrupt Practices Act. Its bribery allegation concerned benefits intended to influence officials and win or retain business. Its accounting allegations concerned the descriptions in the books and inadequate controls over retaining and paying agents who dealt with officials. The insider who knows why a payment was approved can supply context that the expense category leaves out.

The Relationship Continued After the Stock Listing

The SEC said Frank’s continued paying the agent after becoming a public company. After the stock listing, the SEC said, the agent diverted funds to offshore accounts belonging to companies whose ultimate ownership could not be traced. Frank’s obtained five new Angolan contracts during that period.

Approval also reached Houston. The SEC described Houston employees reviewing and approving the agent contracts, and the Houston-based general counsel drafting and approving new agreements in 2014. According to the order, the agreements continued to describe sales commissions while the nature of the agent’s work remained unchanged.

The alleged benefits also extended beyond commissions. The SEC said a regional vice president approved travel and entertainment for the Sonangol official and his companion, including airfare, lodging, dining and sightseeing. To obtain a visa, the official was falsely presented as a Frank’s Angola sales employee. A person handling travel or personnel descriptions could therefore see another part of the same relationship.

A Paid Service Nobody Could Show

The SEC described a similar gap between a service description and the work behind it in Fresenius Medical Care’s Angolan business. In its separate administrative order, the SEC described payments to a distributor owned by a military official’s sons. One passage shows what the storage label concealed:

The 2022 Journal of Forensic and Investigative Accounting paper Fresenius Medical Care: A Case Study on the FCPA adds the internal response: an audit flagged the storage relationship, but senior management continued payments. Its broader conclusion describes employees and managers circumventing controls despite flagged transactions and company policies.

We look at whether the money stopped, whether the promised service appeared, or whether another document supplied a new explanation. The person who saw that response knows more than the final contract alone reveals.

What the SEC Settlement Required

The gains Frank’s had to give up matched the minimum net profits the SEC attributed to the relevant contracts after the stock listing. The order directed payment to the SEC for transfer to the U.S. Treasury.

The SEC described approximately $5.5 million received by the agent’s businesses between 2008 and 2014, with a portion going to the official. The civil penalty was smaller than the amount the SEC said went through the agent’s businesses.

Frank’s had disclosed an internal investigation of its West African subsidiaries in its June 13, 2016 company filing, saying it had informed the SEC and the Justice Department. In accepting the settlement, the SEC credited self-reporting, cooperation and remedial action.

What an Insider Can Connect

An oil-services insider may know who blocked a contract, why an agent was brought in, or why finance needed an agreement after payments had begun. Someone elsewhere in the company may know the invoice description, the expense account or the travel request. We connect those views through evidence of the business decision, payment and record used to explain it.

Technical staff can explain whether the agent participated in the work attributed to him. Sales and finance staff can connect commission approvals to customer contracts and the questions raised inside the company.

The SEC whistleblower program can pay eligible whistleblowers 10% to 30% of money collected in qualifying actions. A whistleblower case under the separate False Claims Act can pay 15% to 30% of what the government recovers. Our whistleblower experts work with you to identify which program fits the conduct and information you know.

You Know Why the Agent Was Paid

If you know why a sales agent got paid before the agreement existed, talk with our whistleblower experts about what happened inside the business. We build the case with you around the approvals, customer decisions and payment records, and bring in FCPA whistleblower lawyers who understand intermediary payments and false accounting. We stay beside you as your knowledge of the business becomes the evidence behind the case.