Exhibit 99.2
UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
UNITED STATES OF AMERICA :
: Criminal No. H-07-129
v. :
: 18 U.S.C. §§ 371 and 2,
BAKER HUGHES SERVICES : 15 U.S.C. §§ 78dd-2 and 78m(b),
INTERNATIONAL, INC., :
:
Defendant :
:
INFORMATION
THE UNITED STATES ATTORNEY CHARGES:
COUNT ONE
(Conspiracy)
At all times relevant to this Information:
Introduction
The Foreign Corrupt Practices Act
1. The Foreign Corrupt Practices Act of 1977 (hereinafter, the "FCPA"), as
amended, 15 U.S.C. §§ 78dd-1, et seq., prohibited certain classes of persons and
entities from making payments to foreign government officials to obtain or
retain business. Specifically, the FCPA prohibited any domestic concern from
making use of the mails or any means or instrumentality of interstate commerce
corruptly in furtherance of an offer, payment, promise to pay, or authorization
of the payment of money or anything of value to any person, while knowing that
all or a portion of such money or thing of value will be offered, given, or
promised, directly or indirectly, to a
foreign government official for the purpose of obtaining or retaining business
for, or directing business to, any person or securing any improper advantage. 15
U.S.C. § 78dd-2(a)(3). Furthermore, the FCPA required certain corporations to
make and keep books, records and accounts which accurately and fairly reflect
transactions and dispositions of the company's assets and prohibited the knowing
falsification of such books, records or accounts. 15 U.S.C. §§ 78m(b)(2)(A) and
(b)(5).
Baker Hughes Incorporated
2. Baker Hughes Incorporated ("Baker Hughes"), headquartered in Houston,
Texas, was a corporation organized under the laws of the State of Delaware, with
its principal offices in Houston, Texas. Baker Hughes was a global provider of
comprehensive oil-field services and products which it provided through several
subsidiaries and operating divisions.
3. Baker Hughes issued and maintained a class of publicly-traded securities
registered pursuant to Section 12(b) of the Securities Exchange Act of 1934 (15
U.S.C. § 781) and was required to file periodic reports with the United States
Securities and Exchange Commission under Section 13 of the Securities Exchange
Act (15 U.S.C. § 78m). Accordingly, Baker Hughes was an "issuer" within the
meaning of the FCPA, 15 U.S.C. § 78dd-1(a). By virtue of its status as an issuer
within the meaning of the FCPA, Baker Hughes was required to make and keep
books, records and accounts which, in reasonable detail, accurately and fairly
reflected the transactions and disposition of assets of Baker Hughes. Baker
Hughes
also had an obligation to ensure that its wholly-owned subsidiary, BHSI,
maintained accurate books and records.
Baker Hughes Services International, Inc.
4. From in or about 1993 to the present, Baker Hughes maintained a
wholly-owned subsidiary under the name of Baker Hughes Services International,
Inc. ("BHSI"), which was organized under the laws of the State of Delaware and
which conducted business in the Republic of Kazakhstan, the Southern District of
Texas and elsewhere. Accordingly, BHSI was a "domestic concern" within the
meaning of the FCPA, 15 U.S.C. § 78dd-2(h)(1)(B). During the relevant period,
defendant BHSI was engaged in the business of providing comprehensive oil-field
services and products in the Republic of Kazakhstan and elsewhere, maintained an
office in Almaty, Kazakhstan.
5. Defendant BHSI regularly sought approval for management decisions from
Baker Hughes and its officers and personnel in management offices in Houston,
Texas. BHSI maintained a bank account at Chase Bank of Texas, N.A., in Houston,
Texas. For internal accounting purposes, BHSI regularly sent invoices to various
Baker Hughes operating divisions requesting them to remit funds directly to
BHSI's account at Chase Bank in Houston. In these and other ways, defendant BHSI
operated within the territorial jurisdiction of the United States.
The Karachaganak Project in Kazakhstan
6. Karachaganak was a giant gas and oil field located in northwestern
Kazakhstan. Beginning in or about 1997, the Government of Kazakhstan and the
national state-owned oil company, Kazakhoil, entered into a Final Production
Sharing Agreement with a consortium of four international oil companies known as
the Karachaganak Integrated Organization ("KIO"), for the development and
operation of the oil production facilities in Karachaganak.
7. The four international oil companies formed the Karachaganak Petroleum
Operating Company, B.V. ("KPO"), a company organized and registered under the
laws of The Netherlands, which maintained its principal offices in the Republic
of Kazakhstan. KPO was responsible for developing and operating the Karachaganak
field on behalf of all partners in the KIO joint venture. KPO solicited bids
from outside vendors for comprehensive oil-field drilling services and products,
including project management, oil drilling and engineering support.
8. Although it was not a member of the consortium, Kazakhoil wielded
considerable influence as Kazakhstan's national oil company and, in effect, the
ultimate award of a contract by KPO to any particular bidder depended upon the
approval of Kazakhoil officials. Kazakhoil was controlled by officials of the
Government of Kazakhstan and, as such, constituted an "instrumentality" of a
foreign government, and its officers and employees were "foreign officials,"
within the meaning of the FCPA, 15 U.S.C. § 78dd-2(h)(2)(A).
The Baker Hughes Bid for Karachaganak
9. In or about February 2000, Baker Hughes submitted a consolidated bid
to KPO for various categories of work on the Karachaganak oil-field drilling
project. The bid was submitted for work to be performed by Baker Hughes
operating divisions Baker Atlas, Baker Oil Tools and INTEQ, and was coordinated
and submitted by Baker Hughes Enterprise Services & Technology Group ("BEST").
BEST was a team of Baker Hughes business development and enterprise account
managers responsible for coordinating, structuring and marketing Baker Hughes
oilfield services for significant contracts across its various operating
divisions, and was not itself a business unit.
Kazakhoil Directs BHSI to Retain an Agent
10. In or about early September 2000, Baker Hughes managers and executives
received unofficial notification that their bid was successful and that Baker
Hughes would win the Karachaganak tender. Nevertheless, in or about
mid-September 2000, a Kazakhoil official demanded that, in order for Baker
Hughes to win the Karachaganak contract, BHSI should pay Consulting Firm A, an
agent located on the Isle of Man, a commission equal to 3.0% of the revenue
earned by Baker Hughes on the Karachaganak contract.
11. Although Consulting Firm A had performed no services to assist Baker
Hughes or BHSI in preparing and submitting their bid for Karachaganak, BHSI
sought and obtained approval from executives of operating divisions Baker Atlas,
Baker Oil Tools, and INTEQ, to retain and pay a commission to Consulting Firm A
of 2.0% of the revenue earned by each operating division on the Karachaganak
project.
12. On or about September 24, 2000, BHSI agreed to retain Consulting Firm A
and to pay it a 2.0% commission based upon revenue earned by Baker Hughes on the
Karachaganak contract and 3.0% of revenue for all future services it would
perform in Kazakhstan.
Baker Hughes Wins the Karachaganak Contract
13. In or about early October 2000, officials of KPO notified BHSI and Baker
Hughes that the Baker Hughes tender was successful and the Karachaganak contract
was awarded to Baker Hughes. The Integrated Services Contract between KPO and
BHSI became effective on or about October 23, 2000. Thereafter, Baker Hughes and
operating divisions Baker Atlas, Baker Oil Tools, and INTEQ, through Baker
Hughes's subsidiary BHSI, performed services pursuant to the contract with KPO.
Baker Hughes Divisions and BHSI Pay Commissions
14. On approximately a monthly basis, from in or about May 2001, and
continuing through at least November 2003, BHSI notified the three Baker Hughes
operating divisions of the amount of commission charges each division owed based
upon calculating 2.0% of that division's revenue for the month. BHSI sent an
invoice to each operating division requesting it to send its commission payment
to the BHSI bank account at Chase Bank in Houston, Texas.
15. From in or about May 2001, and continuing through at least November 2003,
defendant BHSI and Baker Hughes made commission payments to Consulting Firm A
totaling $4,100,162.70, which represented 2.0% of the revenue earned by Baker
Hughes and its sub-contractors on the Karachaganak project. Each commission
payment was wire- transferred from the BHSI bank account at Chase Bank in
Houston to an account of Consulting Firm A at Barclay's Bank in London, United
Kingdom.
The Co-Conspirators
16. Baker Hughes, which is named as a co-conspirator but not as a defendant
herein, was the corporate parent of defendant BHSI, and maintained various
operating divisions, including three known as Baker Atlas, Baker Oil Tools and
INTEQ. Each of the three operating divisions performed certain oil-field
services pursuant to the Karachaganak contract awarded to Baker Hughes by KPO.
17. At all relevant times, BHSI Employee A (hereinafter, "Employee A"), who
is named as a co-conspirator but not as a defendant herein, was employed as
Country Manager and Business Development Manager of defendant BHSI. Employee A
also served as a Business Development Manager for BEST and as the Team Leader
for the Karachaganak tender. Employee A's duties included, among other things,
the coordination of the various Baker Hughes operating divisions regarding the
Baker Hughes bid on the Karachaganak project. As such, Employee A was an
employee of a "domestic concern" within the meaning of the FCPA, 15 U.S.C. §
78dd-2(a).
18. Consulting Firm A, which is named as a co-conspirator but not as a
defendant herein, was incorporated and registered as a private limited liability
company in the Isle of Man where it maintained its principal place of business.
Consulting Firm A maintained a business office in London, United Kingdom, and a
bank account in the name of Consulting Firm A at Barclay's Bank in London,
United Kingdom. Generally, Consulting Firm A provided unspecified administrative
and consulting services and acted as an agent for companies doing business in
the Republic of Kazakhstan and elsewhere. Understanding that Consulting Firm A
was acting at the direction of Kazakhoil officials, defendant BHSI retained
Consulting Firm A to represent the interests of Baker Hughes regarding its
Karachaganak bid.
19. Agent A, who is named as a co-conspirator but not as a defendant herein,
was a director of Consulting Firm A, and acted as the representative of
Consulting Firm A and as the agent for Baker Hughes and BHSI regarding Baker
Hughes's bid for Karachaganak. Agent A informed Employee A that a Kazakhoil
official demanded that BHSI pay a commission to Consulting Firm A in order for
BHSI to obtain the Karachaganak contract. Agent A is a citizen of the United
Kingdom.
The Conspiracy and its Objects
20. From in or about September 2000, through in or about November 2003, in
the Southern District of Texas, and elsewhere, defendant BHSI did knowingly and
willfully conspire and agree with Baker Hughes, Employee A, Consulting Firm A,
Agent A, and others, known and unknown, to commit the following offenses against
the United States:
Object No. 1 - Foreign Corrupt Practices Act
(a) to make use of the mails and any means and instrumentalities of
interstate commerce corruptly in furtherance of an offer, payment, promise to
pay, and authorization of the payment of any money, and an offer, gift, promise
to give, and authorization of the giving of anything of value to foreign
officials for purposes of (i) influencing acts and decisions of such foreign
officials in their official capacity; (ii) inducing such foreign officials to do
and omit to do acts in violation of the lawful duty of such officials;
(iii) securing an improper advantage; and (iv) inducing such foreign officials
to use their influence with foreign governments and instrumentalities thereof to
affect and influence any acts and decisions of such governments and
instrumentalities in order to assist BHSI and Baker Hughes in obtaining and
retaining business for and with, and directing business to, BHSI and Baker
Hughes, contrary to Title 15, United States Code, § 78dd-2(a); and
Object No. 2 - False Books and Records
(b) to knowingly falsify and cause to be falsified books, records, and
accounts which, in reasonable detail, accurately and fairly reflected the
transactions and dispositions of the assets of Baker Hughes, an issuer within
the meaning of the FCPA, contrary to Title 15, United States Code, §§
78m(b)(2)(A), 78m(b)(5) and 78ff(a) .
Purpose of the Conspiracy
21. The primary purpose of the conspiracy was to make corrupt payments to
Kazakh government officials for the purpose of influencing their official
decisions and to secure an improper advantage for defendant BHSI and Baker
Hughes in obtaining and retaining business from KPO in connection with the
Karachaganak project and future business in Kazakhstan.
Manner and Means of the Conspiracy
22. The manner and means by which defendant BHSI and its co-conspirators
accomplished the objects of the conspiracy, included, but were not limited to
the following:
a. It was part of the conspiracy that from in or about May 2001, through in
or about November 2003, defendant BHSI and Baker Hughes, through Employee A and
others, authorized, made and caused to be made, 27 commission payments to
Consulting Firm A totaling $4,100,162.70, representing 2.0% of the revenue
earned by Baker Hughes and its sub-contractors on the Karachaganak project, to a
bank account in the name of Consulting Firm A at Barclay's Bank in London,
United Kingdom.
b. It was a further part of the conspiracy that defendant BHSI and its
co-conspirators knew and intended that the commissions paid to Consulting Firm A
would be transferred in whole or in part to officials of Kazakhoil, who were
foreign officials as defined in Paragraph 8 above, in order to secure an
improper advantage for Baker Hughes by influencing their decision to award the
Karachaganak contract to Baker Hughes.
c. It was a further part of the conspiracy that defendant BHSI and Baker
Hughes failed to properly account for the purported commission payments to
Consulting Firm A, and failed to describe accurately the transactions in their
books and records. Instead, defendant BHSI and Baker Hughes improperly
characterized the payments made as legitimate payments for, among other things,
"commissions," "fees," or "legal services."
d. It was a further part of the conspiracy that between in or about
October 2000 and November 2003, Baker Hughes realized profits of approximately
$19.9 million from the Karachaganak project.
Overt Acts
23. In furtherance of the conspiracy and to accomplish its unlawful objects,
the following overt acts, among others, were committed in the Southern District
of Texas, and elsewhere:
a. On or about September 17, 2000, Employee A sent an e-mail
informing his supervisor that Kazakhoil officials were demanding that Baker
Hughes retain an agent in order to receive approval for the Karachaganak project
and stated, among other things, that ". . . Kazakhoil approached me through an
agent in London stating that to get Kazakhoil approval a 3% commission is
required. This as you know I refused and said that it is utterly outrageous to
wait until a contractor is chosen and start demanding amounts that have been
suggested." Further, Employee A suggested that Baker Hughes should make a
counter-offer to retain the agent only for future business which ". . . keeps us
clear of any critcism (sic) for this KIO contract." Further, Employee A stated,
". . . unless we do something we are not going to get the Kazakhoil support . .
." and ". . .we are in the driving seat but if one our (sic) competitors comes
in with a pot of gold, it is not going to be our contract."
b. On or about September 19, 2000, Employee A sent an e-mail to Agent A, a
director of Consulting Firm A, in London, stating that Employee A had the "green
light" from his corporate superiors to proceed with the agency agreement as
proposed.
c. On or about September 24, 2000, Employee A sent an e-mail to his
supervisor and others informing them that Kazakhoil had rejected the Baker
Hughes counter-offer to hire an agent only for future business in Kazakhstan,
and stated "unless we pay a commission relative to the KIO contract we can say
goodbye to this and future business."
d. On or about September 24, 2000, Employee A sent an e-mail to
Agent A of Consulting Firm A and attached a side-letter agreement retaining
Consulting Firm A as an agent for BHSI. In the e-mail, Employee A stated, "You
will note the consideration has been greatly increased and trust this will
receive the recognition it deserves in the necessary corners of Kazakhstan in
confirming their support to Baker Hughes." The side-letter, dated September 1,
2000, stated that Consulting Firm A had been retained by Baker Hughes "... in
recognition of the said work and assistance given by [Consulting Firm A] towards
Baker Hughes in pursuit of the Karachaganak contract . . ." and that Baker
Hughes had decided to reward Consulting Firm A by payment of consideration equal
to 2.0% of the contract revenues.
e. On or about September 25 and September 26, 2000, Employee A and his
supervisor began to canvass officers of Baker Hughes operating divisions Baker
Atlas, Baker Oil Tools and INTEQ, requesting their agreement for each of them to
pay their share of the agency commission.
f. On or about September 26, 2000, Employee A received an e-mail from his
supervisor directing Employee A not to sign any agency agreement until they had
discussed several remaining issues.
g. On or about September 27, 2000, Employee A received an e-mail from his
supervisor informing him that the operating divisions had approved the plan to
pay a 2.0% to 3.0% commission to Consulting Firm A for the Karachaganak
contract.
h. On or about September 27, 2000, Employee A signed a "Sales Representation
Agreement" on behalf of BHSI with Consulting Firm A, which was backdated to
September 1, 2000.
i. On approximately a monthly basis, from in or about May 2001, through in or
about November 2003, BHSI notified the three Baker Hughes operating divisions of
the amount of commission charges each division owed based upon calculating 2.0%
of that division's revenue for the month. BHSI sent an invoice to each operating
division requesting it to send its commission payment to the BHSI bank account
at Chase Bank in Houston, Texas.
j. On approximately a monthly basis, from in or about May 2001, through in
or about November 2003, each of the three Baker Hughes operating divisions wire
transferred its commission payment requested in the BHSI invoice to the BHSI
bank account maintained at Chase Bank in Houston, Texas.
k. On or about the dates set forth below, the following payments were made
via wire transfer from a BHSI bank account at Chase Bank in Houston, Texas, to a
bank account maintained by Consulting Firm A at Barclay's Bank, in London,
United Kingdom:
Commission Payments to
Consulting Firm A
Date Amount in USD
May 24, 2001 $ 32,540.00
June 20, 2001 $ 97,116.00
August 1, 2001 $ 117,336.00
August 22, 2001 $ 108,680.00
October 26, 2001 $ 278,999.00
December 6, 2001 $ 323,399.00
December 13, 2001 $ 34,123.00
January 16, 2002 $ 147,211.02
February 21, 2002 $ 125,367.00
April 5, 2002 $ 281,741.00
May 15, 2002 $ 170,950.00
June 25, 2002 $ 143,107.00
August 1, 2002 $ 380,682.47
September 27, 2002 $ 400,488.58
November 27, 2002 $ 139,819.00
December 31, 2002 $ 118,843.00
January 29, 2003 $ 122,146.93
February 25, 2003 $ 121,810.62
March 3, 2003 $ 123,737.08
April 8, 2003 $ 111,760.42
May 8, 2003 $ 96,535.78
May 27, 2003 $ 126,761.96
July 1, 2003 $ 103,600.98
July 30, 2003 $ 111,362.50
September 16, 2003 $ 105,170.33
October 28, 2003 $ 83,052.94
November 25, 2003 $ 93,821.11
Total $ 4,100,162.70
All in violation of Title 18, United States Code, Section 371.
COUNT TWO
(Foreign Corrupt Practices Act)
24. Paragraphs 1 through 19 and 21 through 23 of Count One are realleged and
incorporated as if fully set forth herein.
25. From in or about September 2000, through in or about November 2003, in
the Southern District of Texas, and elsewhere, defendant BHSI, a "domestic
concern" within the meaning of the FCPA, 15 U.S.C. § 78dd-2(h)(1)(B), used any
means and instrumentalities of interstate commerce, corruptly in furtherance of
an offer, payment, promise to pay and authorization of the payment of any money,
and an offer, gift, promise to give, and authorization of the giving of anything
of value to a person, while knowing that all or a portion of such money or thing
of value would be offered, given, or promised, directly or indirectly, to
foreign officials for purposes of: (i) influencing the acts and decisions of
such foreign officials in their official capacity; (ii) inducing said foreign
officials to do acts in violation of their lawful duty; (iii) securing an
improper advantage; and (iv) inducing such foreign officials to use their
influence with a foreign government and instrumentality thereof to affect or
influence an act and decision of such government and instrumentality in order to
assist defendant BHSI in obtaining and retaining business for and with, and
directing business to, any person; to wit, in order to secure the award of an
oil-field services contract at the Karachaganak oil fields in the Republic of
Kazakhstan, to secure an improper advantage for defendant BHSI and Baker Hughes
in connection with that
contract, and to obtain future business in Kazakhstan, defendant BHSI made
payments and caused payments to be made, totaling approximately $4.1 million,
from its bank account in Houston, Texas, to the bank account of Consulting Firm
A in London, United Kingdom.
All in violation of Title 15, United States Code, Section 78dd-2(a)(3).
COUNT THREE
(Aiding and Abetting Books and Records Violation)
26. Paragraphs 1 through 19 and 21 through 23 of Count One are realleged and
incorporated as if fully set forth herein.
27. From in or about May 2001, through in or about November 2003, defendant
BHSI and Baker Hughes failed to account properly for the commission payments to
Consulting Firm A and failed to describe accurately the transactions in their
books and records. Instead, the payments were improperly characterized on Baker
Hughes's books and records as legitimate payments for, among other things,
"commissions," "fees," and "legal services."
28. From in or about May 2001, through in or about November 2003, in the
Southern District of Texas, and elsewhere, defendant BHSI knowingly and
willfully aided, abetted and assisted in the falsification of books, records,
and accounts which, in reasonable detail, accurately and fairly reflected the
transactions and dispositions of the assets of Baker Hughes, to wit: defendant
BHSI aided, abetted and assisted Baker Hughes in inaccurately reflecting in its
books and records the payments to Consulting
Firm A totaling $4,100,162.70 as, among other things, "commissions," "fees," and
"legal services," when in fact these payments were bribes, paid through an
intermediary, all or part of which defendant BHSI understood and intended would
be transferred to Kazakh government officials.
All in violation of Title 15, United States Code, Sections 78m(b)(2)(A),
78m(b)(5) and 78ff(a), and Title 18, United States Code, Section 2.
DONALD J. DeGABRIELLE, JR.
United States Attorney
By: /s/ James R. Buchanan
JAMES R. BUCHANAN
Assistant United States Attorney
United States Attorney's Office
Southern District of Texas
P. O. Box 61129
Houston, Texas 77208-1129
STEVEN A. TYRRELL
Chief, Fraud Section
Criminal Division
United States Department of Justice
By: /s/ Mark F. Mendelsohn
MARK F. MENDELSOHN
Deputy Chief, Fraud Section
By: /s/ John A. Michelich
JOHN A. MICHELICH
Senior Trial Attorney
Fraud Section, Criminal Division
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