The Department of Justice confirmed last week that Houston, Texas-based Parker Drilling Company has reached an $11.6 million settlement for violating the Foreign Corrupt Practices Act anti-bribery provisions. The company's swift actions, however, also earned it a deferred prosecution agreement.

On April 16, Parker Drilling entered into a DPA with the Justice Department in the U.S. District Court for the Eastern District of Virginia. The investigation stemmed from the Justice Department's Panalpina-related investigations, which previously yielded criminal resolutions with Panalpina and five oil and gas service companies and subsidiaries, resulting in more than $156 million in criminal penalties. 

According to court documents, in 2001 and 2002, Panalpina World Transport (Nigeria) Limited, working on Parker Drilling's behalf, avoided certain costs associated with complying with Nigeria's customs laws by fraudulently claiming that Parker Drilling's rigs had been exported and then re-imported into Nigeria.

In late 2002, Nigeria formed a government commission, the Temporary Import (TI) Panel, to examine whether Nigeria's Customs Service had collected certain duties and tariffs that Nigeria was due. In December 2002, the TI Panel commenced proceedings against Parker Drilling.  The TI Panel later determined that Parker Drilling had violated Nigeria's customs laws and assessed a $3.8 million fine against Parker Drilling.

Rather than pay the assessed fine, however, Parker Drilling contracted indirectly with an intermediary agent to resolve its customs issues. From January to May 2004, Parker Drilling transferred $1.25 million to the agent, who reported spending a portion of the money on various things including entertaining government officials. 

Emails in which the agent requested additional money from Parker Drilling referenced the agent's interactions with Nigeria's Ministry of Finance, State Security Service, and a delegation from the president's office.  Two senior executives within Parker Drilling at the time reviewed and approved the agent's invoices, knowing that the invoices arbitrarily attributed portions of the money that Parker Drilling transferred to the agent to various fees and expenses.  The agent succeeded in reducing Parker Drilling's TI Panel fines from $3.8 million to just $750,000. 

Inside the DPA

Under the terms of the DPA, the Justice Department agreed to defer prosecution of Parker Drilling for three years.  Parker Drilling agreed, among other things, to implement an enhanced compliance program and internal controls capable of preventing and detecting FCPA violations, to report periodically to the department concerning Parker Drilling's compliance efforts, and to cooperate with the department in ongoing investigations. 

If Parker Drilling abides by the terms of the DPA, the Justice Department will dismiss the criminal information when the term of the agreement expires. 

In entering into the DPA with Parker Drilling, the Justice Department said it took into account a number of considerations. Among these considerations, Parker Drilling:

Conducted an extensive, multi-year investigation into the charged conduct;

Engaged in widespread remediation, including ending its business relationships with officers, employees, or agents primarily responsible for the corrupt payments,

Enhanced scrutiny of high-risk third-party agents and transactions, increasing training and testing requirements, and instituting heightened review of proposals and other transactional documents for all the company's contracts;

Significantly enhanced its compliance program and internal controls; and

Agreed to continue to cooperate with the department in any ongoing investigation of the conduct.

Parker Drilling also reached a related civil settlement with the Securities and Exchange Commission, charging Parker Drilling with violating the FCPA's anti-bribery, books and records, and internal controls provisions. As part of that settlement, Parker Drilling agreed to pay $3 million in disgorgement and $1 million in prejudgment interest relating to those violations.