Keppel Offshore & Marine: Consulting Fees That Bought the Customer

The Keppel Offshore & Marine FCPA case exposed approximately $55 million in bribes hidden in consultant commissions to win Brazilian business, according to the company’s admissions described in the Justice Department’s criminal case announcement. The Justice Department’s announcement put the companies’ profits from corruptly obtained Brazilian business at more than $350 million.

The money benefited officials at Brazil’s state-owned oil company Petrobras and the country’s then-governing political party. For someone who knew the consultant’s work, approved the commission or handled the transfer, the gap between the contract’s description and the payment’s purpose was the story.

Keppel Offshore & Marine operated shipyards and repaired and upgraded shipping vessels from its base in Singapore. Its wholly owned U.S. subsidiary, Keppel Offshore & Marine USA, was also part of the foreign bribery case under the Foreign Corrupt Practices Act. The Justice Department announced the corporate resolutions on December 22, 2017, alongside coordinated action in Brazil and Singapore.

The Consultant Payment Behind the Brazilian Contracts

The Justice Department’s criminal case announcement described Keppel’s admitted scheme running from at least 2001 through at least 2014 to win 13 contracts with Petrobras and another Brazilian entity. Keppel paid outsized commissions to an intermediary under agreements presented as legitimate consulting arrangements. The intermediary then made payments for the benefit of Brazilian officials and the political party.

The commission bought influence over the customer’s decisions, and the resulting contracts generated the return. We see the absurdity in calling that consulting: the customer’s officials were being paid to choose the supplier.

The work performed, the commission approval and the people who ultimately benefit explain what the company is actually buying through sham consulting arrangements. For a shipyard or marine-services employee, those are familiar business questions. Who wanted this intermediary involved, what could the intermediary do, and why did the proposed compensation make sense for that work? The person responsible for the engagement may understand a mismatch that remains invisible to someone looking only at the payment description.

The Bank Transfer Was Another Part of the Disguise

In its account of the criminal case, the Justice Department said the companies passed funds through shell companies and used the global financial system, including U.S. banks, to disguise the source and disbursement of the bribes. The consulting agreement explained the payment leaving Keppel. The transfer route helped hide where it went next.

That makes the connection between the contract and the ultimate beneficiary central to understanding this scheme. A consultant’s invoice, the named account holder and the official benefiting from the payment can describe different parts of the same transaction. We connect those parts to the customer decision the company wanted.

Finance and commercial staff see different parts of that connection. Finance sees approvals, accounting entries and transfer records. The commercial team knows the consultant’s actual work and the pending customer decision. Bringing those views together explains why a payment that looked routine inside one department carried a different purpose across the business.

What the Customer’s Procurement Records Can Show

In its separate September 2018 order against Petrobras, the Securities and Exchange Commission found that executives supplied inside information, manipulated bidding and approved contracts outside procurement rules. Those findings offer a comparison of buyer-side evidence, not findings about Keppel’s contracts. For a Keppel insider, the relevant question is how a consultant’s payment connected to the customer’s power to change the sale: tender terms and approval authority can help explain the decision the supplier wanted.

A Commission Can Reveal the Consultant’s Real Assignment

Alstom supplies a concrete parallel in project commissions. Its criminal plea’s statement of facts described a commission falling from 3% to 1% when part of the assignment moved to another consultant. The admitted arrangement showed how a commission could allocate money for an intermediary’s official contacts.

The change in compensation matters because it connects the fee to the job the intermediary was expected to perform. In the Justice Department’s account of Keppel’s criminal admissions, the outsized commissions concealed onward payments to officials and a political party. In both accounts, understanding the intermediary’s actual assignment gives the payment its meaning.

The Parent Agreement and the Subsidiary Plea

The Singapore parent, Keppel Offshore & Marine, entered a deferred prosecution agreement in the criminal case, while Keppel Offshore & Marine USA pleaded guilty to conspiring to violate the Foreign Corrupt Practices Act’s ban on bribing foreign officials. The investigation also reached inside the legal department: the Justice Department announced that a former senior member had pleaded guilty in a separate criminal case.

The FBI’s International Corruption Squad in Houston investigated, with assistance from Brazilian and Singaporean authorities. For someone who saw the payments inside the business, the approvals, questions and management responses help explain how the scheme operated.

What an Insider Can Add to the Payment Records

The most useful whistleblower evidence connects the decision, the payment and the explanation recorded for it. The admissions described in the Justice Department’s criminal case announcement make that connection concrete: a consulting agreement supported a commission, the intermediary passed money onward, and officials or political recipients benefited in a scheme to win contracts. Different employees can recognize different parts of that sequence.

We examine the engagement, invoices, transfers and customer decisions with the person who understands what they meant. Your knowledge of the consultant’s actual work connects the promised services to the payment and the decision the company wanted. Internal questions and management responses can also show what the company knew when it continued paying.

The gap between a company’s accounts and what insiders know also matters in accounting research. The 2019 working paper Do Corporate Whistleblower Laws Deter Accounting Fraud?, hosted by MIT Sloan, studied companies exposed to state False Claims Acts through state pension-fund investments and found a lower estimated likelihood of accounting fraud. In a smaller subset, it found little evidence of increased internal-audit spending, hours or staffing. The study suggests that the prospect of an insider speaking up can change behavior beyond what an audit budget shows.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. Foreign bribery information falls under separate whistleblower programs. We work through the program that fits your information with you, whether you know about sham commissions, hidden beneficiaries or false accounts.

You Know What the Commission Was Buying

If you know why a consultant was hired, who approved the commission or whose decision the payment bought, speak with our whistleblower experts. We work beside you to turn that knowledge into a foreign bribery case and bring in FCPA whistleblower lawyers who understand intermediary payments and state-owned customers. We put your understanding of the business to work building your strongest foreign bribery whistleblower case.