SBM Offshore

SBM Offshore N.V.

Company type	Naamloze vennootschap
Traded as	Euronext: SBMO
Industry	Petroleum industry
Founded	1965
Headquarters	Schiedam, Netherlands
Key people	Bruno Chabas (CEO), Heinz Rothermund (Chairman of the supervisory board)
Products	FSO and FPSO units, tension leg platforms, other offshore facilities
Revenue	US $3.157 billion (2011)
Operating income	US $(340.6) million (2011)
Net income	US $(440.6) million (2011)
Total assets	US $5.290 billion (end 2011)
Total equity	US $1.349 billion (end 2011)
Number of employees	6,220 (end 2011)
Website	www.sbmoffshore.com

SBM Offshore N.V. (IHC Caland N.V. prior to July 2005) is a Dutch-based global group of companies selling systems and services to the offshore oil and gas industry. Its constituent companies started their offshore activities in the early 1950s and SBM subsequently became a pioneer in single point mooring (SPM) systems. The firm leases and operates Floating Production Storage and Offloading vessels, and is involved in the design and engineering, the construction, the installation, the operation and the life extension of floating production solutions for the offshore Oils and Gas industry. It is a main board listed company on the Euronext Amsterdam stock exchange and has been a member of the AEX index since 2003.

Operations

Former Employee (“FE”) v. SBM OFFSHORE GROUP (“SBM”)

BACKGROUND

- One of the biggest worldwide corporate bribery and corruption scandals in recent history, with more than US$250,000,000 of bribes and other malpractices spanning many years. The ongoing Wal-Mart investigation into alleged improper payments of more than US$24,000,000 pales in comparison.

- From February 2012 to 6 June 2012 FE, Solicitor, Legal Director for Sales and Marketing and a Director of SBM (UK) Limited, was intimately involved in SBM’s internal investigation into SBM’s wrongdoing and saw at first hand the approach taken by SBM.

- It soon became clear to FE that this approach, referred to by SBM’s Chief Governance and Compliance Officer Siezte HEPKEMA (“SH”) as “containment”, was nothing less than a cover-up of major and crucially important elements of SBM’s criminal activities. Despite protesting against this approach to the Chief Executive Officer Bruno CHABAS (“BC”) and CGCO SH, he was told very clearly, in particular by SH, to participate in this “containment” (ie. cover-up) in the way SBM wanted, under threat of “coming to the end of the road”. Faced with such duress, FE had absolutely no choice but to leave SBM.

KEY POINTS OF EVIDENCE

Showing: (I) Scale of SBM’s criminal activity; and

(II) “Containment” / Non-Disclosure / Cover-up of the criminal activity (which in itself is criminal).

(A) DOCUMENTS

NB: “Payments to Agents” Task Force document of 17th April 2012 prepared by SBM Internal Audit providing “overall picture” of payments to agents 2005 – 2011.

1. EQUATORIAL GUINEA (“EG”) (Main agent through whom bribes were paid: Moswen Resources S.A. (“Moswen”) – BVI company controlled by Hanny TAGHER (“HT”))

1.1 Sales Consultancy Agreement between (1) SBM Inc. SA, Switzerland its affiliates [eg. SBM Atlantia Inc. U.S.A.], subsidiaries and successors and (2) Moswen.

1.2 30 Addenda to the Sales Consultancy Agreement including especially Addendum no. 8: express reference to payments of:

- US$7,350,000 to “Gabriel” (ie. Gabriel Obaing, second son of the EG President and Minister of Industry, Energy and Mines); - US$500,000 to “Vicente” (ie. Iltono D. Vicente Abeso Mbung, Director of Hydrocarbons at GEPetrol, EG); - US$250,000 to “Francisco” (ie. Francisco Ndong Abyong, Deputy General Manager at Noble Energy, EG); - US$250,000 to “Bonifacio” (ie. Bonifacio Monsug Nsue, Director of GEPetrol, London); and - US$250,000 to “Lucas” (the right-hand man of “Gabriel”).

The reference to these payments in Addendum 8 was made in handwritten notes by none other than SBM’s former Chief Executive Officer Tony Mace, demonstrating that the corruption penetrated to the very highest echelons of the company!

Payments to Gabriel were arranged through HT’s contact, Alan Soulsby in London – cf. Recording of HT Interview 27 March 2012 (see below).

1.3 Schedule of Payments to Moswen 2008 – 2011 (prepared by SBM Internal Audit) showing (inter alia) payment dates, amounts and currency. Note that payments in US$ would have transited through the US banking system.

1.4 Numerous E-mails implicating, for example, SBM’s Chief Operating Officer Jean-Philippe LAURES (“JPL”) and Chief Technical Officer Mike Wyllie (“MW”), including: - Feb. 2010 David Snell (US. National from SBM’s Houston office) to JPL re “who is currently looking after Mr. G…” and HT’s response copied to JPL and MW. - Sept. 2010 e-mails between JPL and HT re ensuring that Bonifacio’s son Nilo is accepted into university in South Africa.

NB: Aseng FPSO contracts negotiated from SBM’s Houston office. Client was US oil company Noble Energy.

2. ANGOLA (Main agent to whom bribes were paid: Mardrill Inc. (“Mardrill”) – Panama company controlled by 3 Sonangol executives: Mesrs. Sumbe, Benge and Dos Santos)

2.1 Agency Agreement 15 March 1997 between SBM Production Contractors Inc. and Mardrill.

2.2 “Schedule of Joint Venture Fees” dated 19 May 2003 with handwritten notes dated 13 December 2007 by Didier Keller (ex-CEO of SBM) setting out the day rates (ie. bribes) payable in respect of the 5 Angolan FPSOs, two of which (Kuito and Sanha) were leased to the US company Chevron and the other three to the US company Exxon (Mondo, Saxi and Xikomba). The lease and operating contracts were negotiated in varying degrees by SBM’s Houston office.

2.3 Schedule of payments 2005 – 2011 showing payment dates, amounts and currency, prepared by SBM Internal Audit.

2.4 Numerous E-mails implicating, for example, JPL who was a director of Sonasing Mondo Limited and Sonasing Saxi Batuque Limited but claimed in two e-mails of 22 March 2012 that he was firstly “not aware”, and then “not aware of the details” regarding Mardrill, despite being responsible for “PERM” which had supposedly carried out due diligence on Mardill the results of which were described as “Resolved Issues” in the PERM Quarterly Report for Q4 2011.

2.5 Admission of BC (recording 26 March 2012) that JPL was the only one “with access to Sonangol”.

2.6 Fax dated 26 November 2001 from Mr. Benge, Sonangol USA Company to Didier Keller, on Sonangol USA Company headed paper, sent from Houston, providing the Bank Details for payments to Mardrill. These included a New York correspondent bank.

3. BRAZIL (Main agent through whom bribes were paid was Julio FAERMAN (“JF”) and his Group of Companies)

3.1 Services Agreement Commercial Representation between SBM Inc.and JF’s company Oildrive Consultoria EM Energia Petroleo dated 2 June 2006 and its amendments.

3.2 Amendment to an Agreement of 2 July 1999 dated 7 Febrauary 2007 with Faercom Energia Ltd. confirming a “commission” of 3% signed by HT for SBM Inc. Cf. HT Interview 27 March 2012 in which HT confirmed that the 3% was split as to 1% for JF and 2% for Petrobras officials.

3.3 “Payments to Agents” Task Force document of 17th April 2012 prepared by SBM Internal Audit showing (inter alia) payments of US$139,216,000 to the JF Group of Companies: Faercom, Bienfaire, Oildrive, Jandell, Journey Advisors and Hades Production Inc., including payments made by SBM’s Houston office. Cf. HT Interview 27 March 2012 in which HT confirmed that these payments (ie. money allocated for bribes) were paid on to Petrobras officials.

3.4 Numerous E-mails implicating, for example, JPL, BC and MW, including: - 9 April 2011 JPL asking HT when “work” (ie. bribes) will need to be done in Brazil - 18 and 21 April 2011 from JPL to (inter alia) BC and MW attaching confidential Petrobras Minutes (not information which is provided free of charge) and referring to a future meeting with Petrobras engineering chief Figueiredo to extend a lease “without going via an open bid”.

4. OTHER COUNTRIES OUTSIDE AFRICA – per SBM Internal Audit Spreadsheets

4.1 MALAYSIA - Payments to Barnado Limited and Delcom Limited totalling approximately US$10,000,000, paid on (ie. by way of bribes) to “MISC” for the Kikeh FPSO (leased to US oil company Murphy).

4.2 ITALY and KAZAKHSTAN - Payments to Petromed, Overland Engineering Co . Ltd. and Unaoil totalling approximately US$8,400,000, paid on (ie. by way of bribes) to AGIP and the Kazakhstan National Oil Co. for the Kashagan Barges sale contract.

4.3 IRAQ - Payments to Unaoil of approximately US$2,500,000 for the CALM Buoy Sale Contracts (cf. e-mail correspondence G. O’Nion and F. Blanchelande 25 January 2010).

5. OTHER MALPRACTICE

5.1 Tender-rigging and bribes for confidential information/industrial espionage

5.2 World Cup 2010 Tickets for Sonangol USA Inc. officials

5.3 Monaco Grand Prix 2010 excessive hospitality packages

5.4 Help in getting Bonifacio’s son Nilo into university in South Africa (cf. above)

(B) KEY RECORDINGS

1. 23 March 2012 –Tim Dickinson (“TD”), Jennifer Riddle, both of Paul Hastings LLC (“PH”), FE and Zoe Taylor-Jones

- TD on the JPL destruction of evidence (“binning” incident – cf. below) which could be the “noose that hangs the guy”, how this constitutes obstruction of justice (ie. criminal) and how surprised that management has not already taken disciplinary measures against JPL. - TD on the vital importance of early remedial action “in-house”. - TD requesting FE: “anything else that you come across please let us know ‘cos that’s obviously very helpful…especially…Angola and Brazil”.

2. 24 March 2012 – BC, FE, Jay Printz

- BC: “There is no need to go through thousands of studies. I saw [the contents of the CEO’s safe] and felt sick seeing how rotten the company is. I’m trying to survive. I recognize that the commercial staff is rotten to the core. When I look at JF he is the smelliest of the smelliest. You cannot exclude that Brazil payments have funded political parties.”

3. 26 March 2012 –BC, FE, Thierry Gagliani (“TG”), Bernard Verwilghen (“BV”) and Jérome Lemercier

- BC on the need for disclosure of Brazil bribes for the Anchieta US Bond Financing as otherwise SBM would be “misleading the market” BUT NO disclosure, nor even a reference to “possible” or potential” improper payments in Brazil in the Offering Memorandum. - BC on the JF/Brazil payments: “We have not asked them [PH] to go there [Brazil] yet. We need to clarify this point. I did not give the go-ahead with Brazil!” - FE protesting at the approach and the lack of action against JPL, the explanation for which from BC was that JPL was the only one “with access to Sonangol”!!

4. 27 March 2102 – HT, BV, FE and BC

- HT: the bribe of $7.35m to Gabriel was a “ridiculous” amount! - Confirmation that payments to JF were paid on to Petrobras officials, normally 1% for him and 2% for them. - BV: “as long as there is no evidence of money movements in bank accounts there is no hard proof”!!

5. 3 April 2012 – Preparation for Supervisory Board Meeting to be held on 5 April 2012

- TD explanation of the concept of “conscious disregard”. - BC: “What else are we going to discover from the PH investigation? We have most of the facts – why do we need to dig deeper? What else are we going to discover further to the HT interview plus what we have discovered internally, plus the fact that we have the Internal Audit, what are we going to discover?”!!! BV: “What is the point?” In other words, all material information was already known in April 2012 (but not disclosed) – and yet the “investigation” is still ongoing almost 18 months later!!

6. 5 April 2012 – Supervisory Board (“SB”) Meeting

- Further reference to the JPL “binning” incident/destruction of evidence (of which the whole SB was therefore aware as from this date) - BC explanations of the payments made, where from and to whom and the companies associated with those payments - Addendum 8 of the Moswen Sales Consultancy Agreement was shown to the SB - SB member comment: “Most of what we saw on the [presentation] is illegal”! - Significantly, there was a clear acknowledgement from the SB that “we cannot contain this and should not even attempt to contain it…we cannot and we should not try to contain it” – it is therefore staggering and almost beyond belief that the official policy adopted by SBM’s Board of Management, including in particular its CGCO SH (who was present at the SB meeting), should be one of “containment”, namely the exact opposite of what the SB advised!! And FE was being pressed against his will to participate in this containment!!

7. 7 May 2012 – SH and FE

- Discussion re the contents of the CEO’s safe. - SH: “Park Brazil”!! - SH: “limit damage looking backwards and to change our practices going forward. I don’t need to have every stone unturned in respect of the past and go about the world setting the record straight” – this from the company’s CGCO!!!

8. 29 May 2012 – SH and FE

- SH confirms the policy of “containment” (!!) and that he did NOT want FE reviewing the PH interviews [to cross-check against potentially contradictory evidence uncovered by FE]. - SH claims to have asked TD about the lack of disciplinary action against JPL and the “containment strategy” including “take Brazil out” and “that was all agreed”!! This plainly contradicts the message conveyed by TD in the 23 March 2012 recording. - SH: “Take Brazil out” as part of “containment”!! If Sietze “wants to park this” and FE does not agree “that won’t do”!! - SH: confirms that “I think we’re coming to the end of the road here”!! - SH: “I am not so naïve as to think that someone who bins all his files in a garbage bag is not morally reproachable…do you think I’m crazy? I don’t need to hear anything more than that – a guy who puts all of his files in the garbage…The very fact that someone does it in view of an investigation is already wrong! I don’t even have to know what’s in it!” - SH: “we are not here to distribute morally right and morally wrong”!! [Cf. vs. Page 116 of SBM’s Annual Report 2011: “The management will encourage all employees to protect and enhance the Company’s high ethical reputation”!!]

CHRONOLGY AND KEY POINTS FURTHER CONFIRMING THE COVER-UP/ILLEGAL AND/OR IMPROPER ACTION OF SBM AND THE DURESS THEREBY IMPOSED ON FE (ie. by placing him in an impossible situation: participate in the cover-up or leave)

NB: 25 January 2012: HT meeting with Noble compliance lawyer and Noble’s external lawyers (Wilkie Farr – “WF”) re bribes of cars and a house for EG officials, which led to an absolutely crucial telephone call from WF (Martin Weinstein) to Jay Printz on 31 January 2012. It was as a result of this telephone call that SBM’s bribery and corruption first came to light (to those not involved in the bribery and corruption).

1. 7 February 2012 - JPL Destruction of Evidence – the “binning” incident

- SBM’s COO JPL attempted to destroy approx.. 12 bin bags of evidence!!! - This is of course a very serious obstruction of justice (criminal offence), as advised many times by TD to SBM management and as acknowledged by SH (eg. recording of 29 May 2012).

2. Early February 2012 – Disclosure to FE of CEO’s safe contents by BC

- Shows that BC has kept the contents of his safe, with documents showing bribes, undisclosed (even internally) for at least a month (ie. from his appointment as CEO on 1st January 2012 until the WF telephone call of 31 January 2012)! If it were not for the WF call, it is conceivable that those documents would still be in the safe and undisclosed even internally!

NB: 23 March 2012 – TD explains very clearly the very important need for early “in-house” remedial and disciplinary action (cf. recording above).

3. 26 March 2012

BC acknowledges the need to disclose the Brazil bribes re the Anchieta Bond Financing ($500m), otherwise SBM would be “misleading the market” – BUT no mention is made in the offering memorandum! BC stresses that he did not give the go-ahead to PH with disclosure about Brazil, thus setting a trend that continues to this day. FE is already protesting at the lack of action against JPL BUT the CEO’s explanation is that he is needed because he is the only one “with access to Sonangol”!!

4. 27 March 2012

HT confirms that the payments to JF Group companies were on-paid to Petrobras officials. What is the reaction of the Group Secretary BV? Answer: “As long as there is no evidence of money movements in bank accounts there is no hard proof”!!

5. 28 March 2012 – Annual Report 2011 is published

No mention whatsoever of any improper payments, not even “possible” or “potential” ones. This is despite SBM’s subsequent assertion that the whole matter came to light as a result of a review of compliance procedures carried out in 2011!! If so, why no mention in the 2011 Annual Report? (Of course, as SBM knows, the whole matter came to light due to the WF telephone call of 31 Jan. 2012 and had nothing to do with reviewing 2011 compliance procedures!).

6. 1 April 2012 – JPL Appointed as Chairman of SBM Atlantia Inc. (USA) (he was already a Director)

Thus, as at 1 April 2012, two months after the WF telephone call, the first 4 remedial and disciplinary “in-house” measures taken by SBM and members of its Board of Management could be seen essentially as:

(i) Try to dispose of evidence; (ii) Don’t mention anything in the 2011 Annual Report or the Anchieta Bond offering (or indeed the Ilhabela loan financing); (iii) Don’t give the go ahead to PH re Brazil; (iv) Appoint the “binner”/attempted destroyer of evidence as Chairman of SBM Atlantia Inc.

7. 3 - 6 April 2012

TD explains about “conscious disregard” and BC acknowledges that “we have most of the facts”, so everything of material importance was already known. The SB also then becomes fully aware of the material facts, but still no proper disclosure was made. Instead, TD calls the U.S. Department of Justice (“DOJ”) and (despite being asked) refuses to give them an order of magnitude of the improper payments, nor did he mention any country names.

8. 10 April 2010 – The first Press Release

Despite being fully aware of the enormity of the scandal, this press release was not a full and frank description of what was known and contained two statements which were at best misleading and at worst simply false:

(a) Reference to certain sales practices which “may” have been improper – the Board of Management and Supervisory Board KNEW full well that they WERE improper (cf. the documents and recordings above)!

(b) The statement that these sales practices were discovered as part of a review of compliance procedures in 2011 is simply not correct: they were discovered as a result of the WF telephone call of 31 January 2012! If they really were discovered as part of a review of the 2011 compliance procedures they would have been (or should have been) included in the 2011 Annual Report.

9. 17 April 2012 – “Payments to Agents” Task Force document issued by SBM Internal Audit

This confirms total payments to agents in excess of US$275,000,000 !! The approximate breakdown is:

$139,000,000 – Brazil $ 30,000,000 – EG $ 17,000,000 – Angola $ 89,000,000 – Other countries (including outside Africa) $275,000,000

That represents bribery and corruption on an absolutely MASSIVE scale, the disclosure of which FE was being asked to “contain” (ie. cover-up).

10. 11 May 2012 – TG e-mail to FE

A good example of express instructions being given to FE not to do the right thing and make a full and thorough investigation of everything, but instead to sweep things under the carpet. This e-mail from TG confirms that having discussed with Sietze, “the review of scoping interviews from PH does not seem to be appropriate at this stage”, despite TD expressly having told FE to proceed in this way.

11. 16 May 2012 – AGM 2012

Contrary to all the evidence which was already available (cf. above and in particular BC’s comments that “we have most of the facts” and the SB member’s assertion that “most of what we saw on the [presentation] is illegal”), BC nevertheless still assures shareholders at the 2012 AGM that as regards the sales practices which “may” (!) have been improper “we did not conclude that they were unlawful”!! How misleading is that, from the CEO of the company?! Moreover, shareholders were assured that Mr. Ehret and Mr. Deckers were “trying…to help Mr. Laures” – having heard barely six weeks previously at the SB meeting of 5 April 2012 how Mr. Laures had tried to destroy evidence!!

12. 29 May 2012 – SH meeting with FE

A shocking example of how FE was being forced to participate in SBM’s cover-up of criminal activity, under threat of having to leave the company. SBM’s CGCO again stresses the importance of “containment” and how he did not want FE to review the PH scoping interviews. He also acknowledges that he wanted to “take Brazil out” (which ultimately has been done), that the attempted destruction of evidence by JPL was criminal and that JPL would most likely end up in prison and asserts that “we are not here to distribute morally right and morally wrong” (contrary to the view expressed in the company’s 2011 Annual Report – cf. above). As a result of FE’s refusal to collaborate in SBM’s cover-up, SH issues the blunt threat that “we’re coming to the end of the road here”!

Faced with a metaphorical gun being placed to his head with the obligation to participate in the above approach (ie. cover-up) or to get out, FE had absolutely no realistic choice but to leave the company and negotiate the best compensation he could in a desperately difficult situation ie. DURESS.

(There was a tacit admission from BC on 31 May 2012: “I am sorry for what has happened).

These were the circumstances which led to the signature of the “Accord de Rupture Amiable” of 6 June 2012, the validity and equity of which is challenged by FE.

Subsequent events confirm that the cover-up which had begun while FE was at the company simply continued and grew, under the shield of the “ongoing investigation”:

13. 27 June 2012 – EGM – still no material disclosures!

14. 3 August 2012 – Ilhabela Loan for $1.05billion (Brazil/Petrobras) completed, with no disclosure in the offering memorandum.

15. 11 October 2012 – US Private Placement Bond for $500million to finance Anchieta (Brazil) completed, again with no disclosures.

16. 20 December 2012 – Agreement with HAL Investments BV announced – no disclosures.

17. 14 February 2013 – Annual Report 2012 published.

The previous false and misleading statements were repeated regarding sales practices which were discovered as part of the 2011 compliance review and which “may” have been improper or were “possibly” or “potentially” improper.

18. 26 March 2013 - Letters of Intent announced for Marica and Saquarema FPSOs (Brazil), followed just two days later by:

19. 28 March 2013 - Press Release referring to “alleged” payments and stating that there was “no conclusive proof” of improper payments outside Africa!!!

20. 3 April 2013 – Rights Issue Prospectus which repeats the false statement of the 28 March 2013 Press Release regarding the absence of proof of improper payments outside Africa and erroneously refers to the “Management Board…appointed in the course of 2012” when 3 of its members (BC, JPL and MW) were appointed in the course of 2010 or 2011!

21. 15 July 2013 - Marica and Saquarema FPSOs completed for a total contract value of $3.5billion – with no disclosures!

22. 23 July 2013 – Award of FPSO Stones Contract by Shell for a total contract value of approximately $1billion – once again, with no disclosures!

23. 7 August 2013 – Half-yearly results announced with a repetition of the false and misleading statements made in the 28 March 2013 press release.

The company was the first to offer an integrated oil and gas production service through the investment in a Floating Production Storage and Offloading (FPSO) unit. The lease and operation of FPSOs has become a large component of the company's activity and SBM Offshore now owns and operates the world's largest fleet. Other activities include design and engineering, turnkey supply, and specialised services such as maintenance and offshore installation. The most recent addition to the product line is midscale LNG (liquefied natural gas) FPSOs for a capacity in the range of 1 and 2 MTPA (Million Tonne Per Annum) with Nitrogen expansion liquefaction technlogy, developed in collaboration with The Linde Group.

The firm operates from four main execution centres: the global headquarters in Schiedam, Monaco, Kuala Lumpur, and Houston. The company employs over 8,000 individuals worldwide.

On 18 August 2009, SBM Offshore announced the signing of a framework agreement with Shell for the supply of turret mooring systems for Shell's floating liquified natural gas (FLNG) project. The deal covers the supply of turret mooring systems for a period of up to 15 years. The 3.5-million-tonne-per-annum FLNG facility will produce liquefied natural gas offshore and will be moored with an internal and permanently connected freely weather-vaning turret mooring system.

SBM Offshore said the turret mooring system is expected to be the largest in terms of diameter with capability to handle mooring loads in excess of current systems.

Group companies

• LMC Holding Inc. S.A
• Single Buoy Moorings Inc., Monaco
• LMC Atlantia Inc., Houston
• SBM Schiedam B.V.
• SBM Malaysia Sdn. Bhd., Kuala Lumpur
• SBM Production Contractors Inc., Monaco

In November 2012 SBM sold offshore design company GustoMSC B.V. in Schiedam, the Netherlands, to investment firm Parcom Capital, a subsidiary of ING Group Capital.

FPSOs

• Aseng FPSO
• Brasil FPSO
• Capixaba FPSO
• Cidade de Anchieta FPSO
• Cidade de Ilhabela FPSO (Under construction)
• Cidade de Paraty FPSO
• Espirito Santo BC-10 FPSO
• Falcon FPSO
• Kikeh FPSO
• Kuito FPSO
• Marlim Sul FPSO
• Mondo FPSO
• P-57 FPSO
• Saxi-Batuque FPSO
• Serpentina FPSO
• Stones FPSO (Contract Award)
• Cidade de Marica FPSO (Under construction)
• Xikomba FPSO (Under life extension program to be redeployed as FPSO N'Goma)

Vessels

• Deep Water Installation Vessel - Normand Installer
• Diving Support and Construction Vessel - SBM Installer
• DSV Dynamic Installer (Sold in 2012)

External links

• Official website