Singapore GLC Keppel O&M pays US$422m fine to settle corruption probe

It had initially refuted allegations of wrongdoing.

Chan Cheow Pong | December 23, 2017, 02:36 PM

Singapore's reputation as one of the least corrupt countries in the world has taken a hit.

Given its success in eradicating corruption over the years, it's extremely rare to hear cases of large-scale corrupt practices committed by Singaporeans or Singapore companies spanning a long period of time.

Hence, the news of government-linked company (GLC) Keppel Corporation's offshore and marine unit reaching a global resolution with criminal authorities in the United States, Brazil and Singapore in relation to corrupt payments made by a former agent in Brazil for more than a decade, came as a huge shock to the system.

Global Resolution: Summary

The US Department of Justice (DOJ) announced in a press release on Dec. 22 that Keppel Offshore & Marine Ltd. (KOM) and its wholly-owned U.S. subsidiary, Keppel Offshore & Marine USA Inc. (KOM USA) have agreed to pay a combined total penalty of more than US$422 million "to resolve charges with authorities in the United States, Brazil and Singapore arising out of a decade-long scheme" to pay millions of dollars in bribes to officials in Brazil.

The US$422.2 million (S$567.3 million) in fines will be allocated among the three countries:

  • United States: To pay about US$105.6 million to the US, including a US$4.7 million criminal fine by Keppel O&M USA.
  • Brazil: To receive US$211.1 million or 50 percent.
  • Singapore: To get up to US$105.6 million or 25 percent.

As part of the resolution, Keppel O&M was also issued a conditional warning by the Corrupt Practices Investigation Bureau (CPIB) in Singapore.


Unprecedented case

separate joint statement by Attorney-General’s Chambers (AGC) and the CPIB said that between 2001 and 2014, KOM made corrupt payments to officials of Brazilian state-run oil company, Petroleo Brasileiro S.A. (Petrobras), and other parties, in order to win contracts with Petrobras and/ or its related companies.

"KOM concealed these corrupt payments by paying commissions to an intermediary, under the guise of legitimate consulting agreements, who then made payments for the benefit of officials of Petrobras and other parties."

According to The Straits Times, the resolution, involving three jurisdictions across the world, is unprecedented for a Singapore company.

It came more than one year after the conglomerate revealed that "certain transactions" associated with the company's former agent in Brazil "may be suspicious" following internal investigations.

It had initially refuted allegations of wrongdoing.

Five Singaporeans involved

Citing court documents, Channel News Asia (CNA) reported that five unnamed Singaporeans were among the executives involved:

  • KOM Executive 1: A senior executive of Keppel O&M between 2002 and 2014.
  • KOM Executive 2: A senior executive of a Keppel O&M Singapore-based subsidiary between 1989 and 2009, and a Keppel O&M senior executive between 2013 and 2017.
  • KOM Executive 3: A US permanent resident up until 2013, was a senior executive of Keppel O&M USA between 2002 and 2011, and a Keppel O&M senior executive between 2011 and 2017.
  • KOM Executive 4: A Keppel O&M executive between 2002 and 2017, and a Keppel O&M USA executive from 2011 to 2017, while
  • KOM Sub Executive: A senior executive of a wholly owned, Brazil-based subsidiary of Keppel O&M between 2000 and 2007.

Zwi Skornicki, the former third-party commercial representative for Keppel in Brazil who is also embroiled in the case, had named five top Keppel managers in court last August that he was authorised to bribe public officials in exchange for contracts for state-controlled oil company Petrobras.

A Keppel O&M spokesperson told CNA that the Singaporeans are no longer under its employment.

The AGC and CPIB joint statement said that investigations in respect of the individuals involved are ongoing.

Stuck in the doldrums

KOM is one of the world's largest offshore and marine groups with a strong network of 20 yards worldwide.

It is part of Keppel Corp, a conglomerate consisting several affiliated businesses that specialises in offshore & marine, property, infrastructure and asset management businesses.

Temasek Holdings is the largest shareholder in Keppel Corp, owning 20.43 percent as at Aug. 15, 2017.

According to UOB Kay Hian, it is still stuck in the doldrums after a 95 percent year-on-year drop in operating profits to S$2.6m in Q3, despite completing its right-sizing efforts as the business continues to suffer from low work volume.

Perils of internationalisation

When it comes to competing globally, many Singaporeans have gotten used to the narrative of how being part of Singapore Inc. and the set of unique qualities -- among which honesty and trustworthiness are two often cited ones -- can give us an edge.

The KOM case has shown how a reputable and supposedly well-managed business has fallen short of the high standards expected of Singapore companies.

Questions must also be asked about how come the shenanigans were allowed to go on for so long before they were detected.

But perhaps, most importantly, the case should serve to drive home the lesson for Singapore businesses as they embark on their internationalisation efforts: Working with local partners and adapting to different business culture are keys to success, but it should not be done through the means of illegal and unethical corrupt practices.

Top image by ROSLAN RAHMAN/AFP/Getty Images