Oil Driller Settles SEC Probe Over African Payments By Keith Goldberg
Law360, New York (September 29, 2015, 4:41 PM ET) -- Houston-based oil and gas driller Hyperdynamics Corp. on Tuesday settled a U.S. Securities and Exchange Commission probe into payments it made in the western African nation of Guinea, payments that were subject to a Foreign Corrupt Practices Act investigation.
The SEC issued a cease-and-desist order accusing Hyperdynamics — a startup focused on drilling in Guinea — of failing to accurately record $130,000 in payments made by its Guinean subsidiary to two supposedly unrelated companies between 2007 and 2008. The company initially recorded the payments as public relations and lobbying expenses to the companies without showing that services were rendered, according to the order.
Hyperdynamics later determined that a Guinean-based employee controlled the companies, but didn't record the payments as related party transactions, the SEC order said. The company also didn't implement or maintain adequate internal accounting controls to track its Guinean subsidiary's use of funds or determine whether the company's subsidiary paid related parties, the commission said.
Hyperdynamics, which neither admitted nor denied the SEC's allegations, agreed to pay a $75,000 fine.
“In reaching this resolution, the commission considered remedial acts undertaken by the company and cooperation afforded the commission staff,” the company said in a statement on Tuesday. “The SEC order recognizes that beginning in July 2009, Hyperdynamics replaced its senior management team and its entire board of directors, revised its policies, implemented training programs, increased its legal and accounting personnel and instituted a series of procedures to more strictly control transfers of funds.”
Both the SEC and the U.S. Department of Justice had previously issued subpoenas to Hyperdynamics concerning possible violations of the FCPA and other laws stemming from its activities in Guinea. The DOJ closed its investigation in May without bringing any charges against the company.
Last month, Hyperdynamics ducked investor suits claiming it failed to disclose the FCPA investigation, as well as allegations it deceived investors by issuing optimistic statements about failed offshore exploration efforts in Guinea.
U.S. District Judge Melinda Harmon on Aug. 25 refused to consolidate the three actions against Hyperdynamics, saying that two of them concerned only the FCPA issues. But she granted dismissal to the defendants in the first one, which focused on non-FCPA-related securities law allegations.
In the single suit being considered under the motion to dismiss, the so-called Parker suit, “plaintiffs have not alleged FCPA-related facts which would render either the 16 risk disclosures or the four specific denials misleading by omission and which defendants had a duty to disclose," she said. "Furthermore, plaintiffs have failed to allege facts which would render the specific denials false or misleading."
The company was also accused of lying to investors about the costs for its projects. But the judge disagreed, saying that they were close enough.
DOJ Drops Oil Co. FCPA Investigation, Citing Cooperation
Share us on:
By Jacob Batchelor
Law360, New York (May 26, 2015, 3:00 PM ET) -- Oil and gas startup Hyperdynamics Corp. said in a regulatory filing last week that the U.S. Department of Justice had ended a Foreign Corrupt Practices Act investigation into the company without bringing charges, which could stop short a pending class action against the company.
The company announced late Thursday that the DOJ had sent it a declination letter stating it would no longer pursue an FCPA investigation against the company, which is engaged in exploring for oil and gas resources off the coast of the Republic of Guinea in West Africa.
In the letter, the DOJ deputy chief Patrick Stokes made clear the company had cooperated with the investigation.
“You have provided certain information to the department and have described the results of the company’s internal investigation into this matter,” he said in the May 21 letter. “As you know, the department values cooperation with investigations, such as shown here.”
Ray Leonard, president and CEO of the company, said in a statement last week that he was relieved at the news.
"This is an important development for Hyperdynamics,” he said. “We are extremely pleased to be informed that the DOJ has closed its inquiry into this matter."
Hyperdynamics has been plagued with more than just the DOJ investigation since last March, when some investors in the company hit it with a putative class action alleging it made false and misleading statements during the probe.
Investor Dennis Gerami, on behalf of investors who purchased Hyperdynamics stock between Nov. 8, 2012, and March 11, 2014, claimed the Houston-based company and its top executives failed to disclose the fact that it obtained oil and gas concession rights in violation of the FCPA and that it lacked adequate internal and financial controls.
The investor suit came directly on the heels of a statement that the company’s partner Tullow Oil PLC had halted activities because of a “force majeure event” — the DOJ's and SEC’s probes into the company’s alleged fraud and corruption in securing drilling licenses in Guinea.
“The asserted force majeure event prevents Tullow from performing its contractual obligation under the [production sharing contract],” Hyperdynamics said in the statement.
On that news, Hyperdynamics securities dropped $3.07 per share — more than 58 percent — to $2.19 per share at close, according to the complaint.
Hyperdynamics first disclosed in September it had received a DOJ subpoena requesting that it produce documents relating to its business in Guinea for potentially violating the U.S. Foreign Corrupt Practices Act or U.S. anti-money laundering statutes.
Immediately following the announcement, Hyperdynamics’ shares dropped nearly 15 percent, according to Gerami.
In February, the company disclosed in a quarterly report that the SEC had launched a similar probe into its activities in Guinea
The company’s stock is now hovering around $0.50 per share.
The company did not immediately respond to request for comment.
Hyperdynamics was advised in the investigation by Nancy Kestenbaum, Lanny Breuer and Barbara Hoffman of Covington & Burling LLP.
--Additional reporting by Cara Salvatore. Editing by Stephen Berg.
All Content © 2003-2015, Portfolio Media, Inc. |
