$25 million civil penalty imposed
No findings of corrupt intent or bribery
Remedial efforts to enhance compliance program and full cooperation by the company acknowledged
After a lengthy investigation by the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) relating to potential breaches of anti-corruption laws which began in 2009, global resources company BHP Billiton announced this week that the matter had been resolved.
The investigation by the US regulators primarily related to the company’s minerals exploration and development efforts and its hospitality program in connection with its sponsorship of the 2008 Beijing Olympic Games. BHP Billiton cooperated fully with the SEC and DOJ since the investigation began and has since developed a world class anti-corruption compliance program.
The SEC imposed a civil penalty of US$25 million (which is relatively low in comparison to the penalties imposed in the top 10 enforcement actions for breaches of US anti-corruption laws ranging from US$185 million to US$800 million). Interestingly, the SEC made no findings of corrupt intent or bribery by BHP Billiton. The DOJ completed its criminal investigation without taking any action.
The SEC noted that the settlement ‘reflects BHP Billiton’s remedial efforts and cooperation with the SEC’s investigation’. The company is required to report to the SEC on the operation of its compliance program for a 12 month period.
The SEC found that BHP Billiton failed to devise and maintain sufficient internal controls over its hospitality program in connection with its sponsorship of the Beijing Olympics, where the company invited 176 government officials and employees of state-owned enterprises to attend the Games. Sponsored guests mainly from Africa and Asia were provided with hospitality packages that included event tickets, luxury hotel accommodation, and tours.
The SEC stated in its cease-and-desist order released earlier this week that, ‘as a result of its failure to design and maintain sufficient internal controls over the Olympic global hospitality program, BHP Billiton invited a number of government officials who were involved with, or in a position to influence, pending negotiations, efforts by BHP Billiton to obtain access rights, or other pending matters’.
The company stated publically that while it made efforts at the time to address the risks relating to inviting government officials to the Olympics, the controls it relied on were insufficient to satisfy the internal accounting controls requirements of the US anti-corruption laws.
Mining and resources companies, particularly those operating in high risk countries, should ensure that they have adequate procedures in place to manage the corruption risk associated with giving gifts, meals and entertainment to government officials, especially where the official is in position to influence pending negotiations or decisions regarding the grant of mining and petroleum licences.
If anything of value is given or offered to government officials, it should be appropriate in the circumstances, having regard to whether any other things of value have been given to the government official in the previous six months, whether it is of an appropriate value and nature considering the government official’s position and whether it serves only a legitimate business purpose.
Since the commencement of the US investigation, BHP Billiton has undertaken the following significant remedial action, which was important in demonstrating its strong culture of compliance and its commitment to operating to the highest standards:
- creating an independent compliance function that reports to the head of the legal function and the Risk and Audit Committee of the board
- enhancing its policies and procedures regarding hospitality, gift giving, use of third party agents and business partners and other high-risk areas
- enhancing its financial and auditing controls
- conducting extensive employee training globally on anti-corruption issues, and
- overhauling its processes for conducting internal investigations of potential violations of anti-corruption laws.