Schlumberger Probed Payments Made in Yemen

Source: The Wall Street Journal, By DIONNE SEARCEY , 18/11/2010

New documents have emerged relating to possible bribery in Yemen by global oil-services giant Schlumberger Ltd.

Internal company documents reviewed by The Wall Street Journal show that Schlumberger employees raised concerns in 2008 about payments for cars the company rented from Yemeni government officials at above-market rates—including $6,000 a month for a Toyota Camry and two Toyota Corollas. Employees also cited a contract with customs broker Dhakwan Management Petroleum Co., whose chairman had ties to Yemen's president.

Internal emails say the company was aware of those ties.

The new details of Schlumberger's activities in Yemen come as the U.S. Justice Department continues an investigation into whether the company made improper payments to a government-related consulting firm there. Last month, the Journal reported that the probe, which was at an early stage, concerned contract payments Schlumberger made several years ago to a consulting firm headed by a nephew of Yemeni President Ali Abdullah Saleh.

At the time, the company was seeking approval from Yemen's government to create an oil-exploration databank on the country.

A spokeswoman for the Justice Department declined to comment on its probe.

The documents reviewed by the Journal were part of an internal investigation in which Schlumberger delved into possible incidents of bribery reported by employees. It isn't clear what conclusion, if any, the company probe reached or if documents from it are part of the Justice Department inquiry.

A spokeswoman for Schlumberger declined to comment. The company, with principal offices in Houston, Paris and The Hague, has said it has a robust compliance program and thoroughly investigates any concerns raised.

The internal documents show that Schlumberger tried to cancel contracts in Yemen out of concern they could violate U.S. foreign-bribery laws but sometimes faced what it said was retribution. In 2007, after it canceled a car-rental contract with one government official, a Schlumberger truck packed with three tons of explosives—which are commonly used in the oil-services industry—was hijacked in a volatile area of Yemen, according to the documents.

Schlumberger managers suspected the incident was tied to the contract's cancellation, but didn't cite any conclusive evidence.

No one was hurt in the incident, and the truck and explosives were recovered, the documents say.

The Schlumberger documents say that for years the company rented vehicles from officials of Yemen's Petroleum Exploration and Production Authority, which approves crucial permits, contracts and activities of foreign oil companies. In 2008 alone, PEPA awarded $30 million worth of work to Schlumberger, company documents say; the documents don't cite figures for other years. The car-rental contract that Schlumberger believes led to the hijacking incident wasn't one of the contracts with a PEPA official.

Between 2005 and 2007, Schlumberger paid a total of $6,000 a month to rent one Camry and two Corollas from PEPA committee member Ahmad Abdul Jaleel Al-Shameeri, the Schlumberger documents say. The market rate for renting the cars was about $950 each per month, according to company documents.

As a member of the committee, Mr. Al-Shameeri would have signed off on contracts awarded to oil-service firms, including Schlumberger, the company's documents say, though they didn't identify any Schlumberger contracts he approved.

It's unclear how much business, if any, Schlumberger got from the committee while it was renting cars from Mr. Al-Shameeri. The company documents indicate it canceled the contract out of concerns it might be violating U.S. foreign-bribery laws.

Mr. Al-Shameeri couldn't be reached, and it isn't clear if he is still works at PEPA.

The documents say that for four years starting in 2004, Schlumberger also rented three Toyota Land Cruisers for $2,700 a month each from Abdul Hameed Al-Miswari, a PEPA general manager of materials. The documents say he was responsible for permitting and signing off on imports of equipment by oil-services companies.

"He has it within his power to stop all importation and therefore, all work," said one internal document that describes Mr. Al-Miswari. The document cited the market rate for Land Cruisers rentals as $1,600 each a month.

Schlumberger managers elsewhere in the Persian Gulf region learned about the contract with Mr. Al-Miswari and canceled it on Jan. 26, 2008, company documents say. Two weeks later, on Feb. 10, 2008, "Al-Miswari apparently stopped two [Schlumberger] imports into the country," one company document states. The documents don't indicate why the company believes Mr. Al-Miswari was personally involved in blocking the shipments. Mr. Al-Miswari, who continues to work at PEPA and was a committee member while Schlumberger was renting cars from him, didn't return calls seeking comment.

PEPA's current chairman, Nasser Al-Humaidi, didn't return phone calls or answer emails seeking comment about whether the agency allows officials to conduct private business with oil or oil-service firms or why the PEPA committee members would be involved in renting cars to such companies.

Other internal documents say that Schlumberger has been using customs broker Dhakwan since 2003. Dhakwan prepares and processes customs exemptions and re-export permits at PEPA, according to internal Schlumberger documents. Schlumberger paid Dhakwan $280,000 between 2004 and 2007, the documents show.

Schlumberger documents identified Dhakwan's chairman then as Major Gen. Ali-Mohsen Al-Ahmar, a political ally and close friend of the Yemeni president. A person who answered Dhakwan's phone said Gen. Al-Ahmar wasn't available, and declined to comment further. Yemeni government officials didn't return calls seeking comment.

When Schlumberger's internal investigation revealed Dhakwan's ties to the government, the documents say, the company tried to terminate its contract. But it found its imports stalled, and decided to reinstate the broker, according to company emails and other documents. The documents say Schlumberger thought Dhakwan officials might have interfered with its imports, but didn't cite specific evidence for the company's suspicions.

"It appears that PEPA will process NO documents unless they are presented by Dhakwan (and this applies to ALL companies in Yemen, not only SLB)," read an Aug. 11, 2009, email from Nigel Bennett, Gulf Supply Chain Services Manager for Schlumberger, to several other Schlumberger employees. "It appears that we have no choice but to continue to use them to present the paperwork to PEPA if we wish to continue business."

Mr. Bennett couldn't be reached for comment.

Schlumberger managers tried using another customs broker for a time but found it used Dhakwan to process its customs transactions, company documents say. The Schlumberger managers decided it wasn't worth angering Dhakwan, according to the documents, and let the new company keep using the broker. The website of Dhakwan, now called Dhakwan Petroleum & Mineral Service Co., lists Schlumberger as a current customer