In November 2007, Chevron Corporation (Chevron) agreed to pay $30 million in combined fees and penalties to settle enforcement actions relating to its procurement of Iraqi oil under the United Nations Oil-for-Food Program. (OFFP).
Pursuant to a DOJ non-prosecution agreement, Chevron acknowledged that it purchased Iraqi oil under the OFFP from various third parties that paid secret, illegal surcharges to the former Government of Iraq. In doing so, Chevron violated U.S. wire fraud statutes and U.S. administrative regulations that prohibited transactions with the former Government of Iraq. Pursuant to the non-prosecution agreement, Chevron agreed to pay $27 million as follows: (i) $20 million to the U.S. Attorney's Office for the Southern District of New York; (ii) $5 million to the New York County District's Attorney's Office; and (iii) $2 million to the U.S. Department of Treasury's Office of Foreign Assets Control. In announcing the non-prosecution agreement, the DOJ noted, among other things, Chevron's cooperation with the government's various OFFP investigations and Chevron's implementation of various remedial measures.
The SEC also filed settled FCPA books and records and internal control charges against Chevron. According to the SEC's complaint, between approximately April 2001 - May 2002, Chevron violated the FCPA when third parties with which Chevron contracted made approximately $20 million in illegal surcharge payments to the Iraqi government in connection with the purchase of Iraqi oil under the OFFP. The SEC alleged that Chevron knew or should have known that the illegal surcharge payments were being paid by the third parties and that they were funded via inflated premiums paid by Chevron to the third parties. The SEC noted that although Chevron implemented a company-wide policy prohibiting the payment of surcharges in securing Iraqi oil under the OFFP, Chevron's management was unsuccessful in ensuring compliance. For instance, the SEC alleged that one third party from which Chevron secured Iraqi oil was a "brass plate company" with no oil experience, no business operations, and no known assets. Nevertheless, the SEC alleged, Chevron entered into two transactions with the third party to secure Iraqi oil and that illegal surcharges were paid by the third party on both transactions. According to the SEC, the illegal surcharge payments were characterized on Chevron's books and records simply as premiums and Chevron's system of internal controls failed to detect and prevent such illicit payments.
Based on the above conduct, and without admitting or denying the SEC's allegations, Chevron agreed to disgorge $25 million in profits (satisfied by the $20 million and $5 million payments referenced above to the SDNY and the DANY) and pay a $3 million civil penalty to the SEC. In announcing resolution of the matter, the SEC specifically noted Chevron's cooperation in its investigation.