Mired in Corruption – Kellogg, Brown and Root in Nigeria

Case Analysis: Mired in Corruption – Kellogg, Brown and Root in Nigeria

Question 1: Could the alleged payment of bribes to Nigerian government officials by Jeffrey Tesler be considered “facilitating payments” or “speed money” under the terms of Foreign Corrupt Practices Act?

Answer: The alleged payment of bribes to Nigerian government officials by Jeffrey Tesler is a qualified act under Foreign Corrupt Practices Act (FCPA) as it is illegal for American companies to bribe foreign officials and it is illegal for third-parties to bribe foreign public officials. Jeffrey Tesler actions of transferring of 2.5M to Dan Etete’s account (under its false name) and payment to Wojciech Chodan for bribery payment to General Abacha are qualified as speed money. Also, the company did not authorize and recognize those payments as part of their books, thus;

“The FCPA also requires issuers to maintain accurate books and records and have a system of internal controls sufficient to, among other things, provide reasonable assurances that transactions are executed and assets are accessed and accounted for in accordance with management's authorization.”

Question 2: Irrespective of the legality of any payments that may have been made by Tesler, do you think is was reasonable for KBR to hire him as an intermediary?

Answer: Irrespective of legality of payments made by Tesler, it is not reasonable for KBR to hire him as intermediary with an initial cost of services of $60 million and eventually become $132.3 million which is a way too expensive for company’s expense. KBR may have assigned someone from the company to deal legally with Nigerian officials for the contract negotiations.

Question 3: Given the known corruption of the Abacha government in Nigeria, should Kellogg and its successor, KBR have had a policy in place to deal with bribery and corruption? What might that policy have looked like?

Answer: Yes, there should be policy in place within the company in dealing with bribery and corruption. The policy should focus on exerting all efforts first to deal in a legal manner but in the case of no alternative solution such payments should be documented and recorded in the company’s books. It would also provide penalties for employees or third parties representing the company who deals with bribery and corruption. Thus, I would recommend the same policy of Dow Corning;

“Dow Corning employees will not authorize or give payments or gifts to government employees or their beneficiaries