DOJ Drops Oil Co. FCPA Investigation, Citing Cooperation 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 FCPA investigation by Lanny Breuer, Nancy Kestenbaum and Barbara Hoffman of Covington & Burling LLP.
--Editing by Philip Shea.
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