COLUMN | See you in court…again – Sembmarine, Sete and the Feds [Offshore Accounts]
Last month we pointed out here and here that the best place to see some of the big names in the offshore industry was the courtroom rather than at the conference podium. And the trend has continued, with some more unfortunate revelations from Latin America returning to sully the reputation of one of Singapore biggest offshore and marine companies.
The Brazilian car wash sucks in another Singaporean
The first week of February saw Brazilian prosecutors file money-laundering charges against two individuals connected to a Brazilian shipyard owned by Singaporean rig-building giant Sembcorp Marine (widely known as Sembmarine).
This was yet another layer in the wide-reaching Operation Car Wash corruption saga, which involved billions of dollars of bribes being paid via shady brokers and consultants to managers in the Brazilian state oil company Petrobras, leading Brazilian politicians, including several former presidents, and other political figures across Latin America. An overview of this massive scandal can be found here.
Sembmarine’s fellow Singaporean rig builder Keppel Offshore and Marine previously settled criminal charges with the US Department of Justice for the massive sum of US$422 million in 2018 (see the summary here and the full Department of Justice indictment here) and twelve of its employees were fined nearly US$9 million, with two jailed.
Seven Keppel employees involved in the corruption left the firm, and seven more “were demoted or given written warnings”. Which shows you how seriously the company took the situation. Readers can reach their own conclusions as to the severity of a written warning in the context of a case where the company paid out US$422 million in fines.
Keppel’s major problem was that it had an American subsidiary, which was involved in the illegal activity in Brazil, and that an American citizen and employee of Keppel’s, Jeffrey Chow, was a major player in the crimes, and he pled guilty to the charges. This gave the US Department of Justice jurisdiction, rather than only law enforcement in Brazil and Singapore.
Sembmarine shocked at one rotten apple
Sembmarine, seems to have emerged in a better legal position than Keppel, at least for now. The company has acknowledged that one bad actor existed within its organisation, authorising bribes and dubious consultancy payments in Brazil, but that he acted alone, without the knowledge or approval of the company’s board, and that, fortunately, he was fired from Sembmarine in 2015, as soon as the Car Wash scandal began to envelope the Brazilian rig building yards.
Nobody else even received a demotion or a written warning, at least not on the public record, so perhaps we can be confident that the company has got to the bottom of the problem rigorously.
This rogue player and bad apple is the unfortunate Martin Cheah Kok Choon, who was the president of Sembmarine’s Brazilian rig building subsidiary Estaleiro Jurong Aracruz (EJA). Sembmarine has been quick to stress that the Brazilian authorities are acting against him in a personal capacity not against the company or its other directors in Singapore. Crucially, he is not an American citizen either, so the Department of Justice can’t get involved to dig deeper.
Game, Sete and match for corruption
Brazil’s Federal Public Ministry filed charges against Mr Cheah relating to money laundering and corruption in connection with, you guessed it, drilling rig construction contracts entered into with Brazilian rig-building entity Sete Brasil, now long since bankrupt itself, and at the epicentre of legal claims, criminal cases, and financial defaults after it was awarded 28 long term, new build, deep-water rig contracts by Petrobras at the peak of the pre-salt bubble.
Petrobras was a shareholder in the ill-fated company, which is now reduced to a rump of four nearly finished rigs, which will be operated by Etesco, as Petrobras announced in the settlement in December 2019, which you can read here.
Sembcorp Marine won seven drillship construction contracts with Sete Brasil, with a total contract value of US$5.5 billion. Clearly, Sembmarine gave its local manager Mr Cheah a lot of independence in marketing and approving the contracts if nobody else in the organisation knew about how he was channelling cash through a consultant as bribes.
A former Petrobras engineering manager, Pedro Jose Barusco, had already alleged back in 2015 that illegal payments had been made in connection with contracts entered into by Petrobras and Sete Brasil. Mr Cheah was quickly axed. His whereabouts are currently unknown.
The middleman goes down too?
The missing link in the sad saga of Sembmarine and Sete is the “middleman”, the alleged carrier of the bag, Guilherme Esteves de Jesus, who was also charged with money laundering last weekend.
He had signed various consulting agreements with Sembmarine’s Brazilian yard, which were designed to channel bribes from the rig builder to Petrobras and Sete managers, prosecutors allege.
The Brazilian authorities had previously executed a physical search warrant in the shipyard as part of their investigations against Cheah and Esteves de Jesus, but many years after the first claims of malfeasance first surfaced.
Mr Esteves de Jesus was arrested and held in custody in Brazil after fleeing through the back entrance of his apartment in 2015 with his wife, cash and a bunch of evidence, when law enforcement came to the front door, as reported in the Brazilian press here
Sembmarine denies any corporate wrongdoing
Sembmarine has been quick to stress that not only had Cheah been fired, but also that the consultancy contracts with companies connected to Mr Esteves de Jesus had been suspended indefinitely. Phew!
To further wash its hands of the affair, Sembmarine announced that it would also be lodging a further suspicious transaction report with the Commercial Affairs Department of the Singapore Police Force, against Mr Cheah, adding to the one it lodged in July last year. Quite what the Singapore authorities will do about this report remains to be seen.
In a statement Sembmarine said, “The company wishes to reiterate that the group is committed to the highest standards of compliance with anti-corruption laws and does not condone and will not tolerate any improper business conduct.”
Sembmarine has reassured its shareholders and investors several times by stating that it was not aware of any current or former employees, other than Mr Cheah, being investigated by the Brazilian authorities in Operation Car Wash.
And there is no evidence that the Singapore authorities are taking any action to investigate other individuals at their end, either.
So, case closed. Mr Cheah is hung out to dry for the Brazilian authorities to investigate and bring to trial, if they can find him, and there’s nothing else to see.