Source: Saudi Aramco
As Saudi Aramco proceeds with its ongoing investigation of the Tyco fraud case the Company would like to clarify a number of matters that have been misreported in the press and become the subject of speculation or rumor. This statement is a follow-up to Saudi Aramco’s press release in Arabic on September 28, 2012.
The U.S. Department of Justice (DOJ) investigation and subsequent settlement with Tyco involved state owned companies and in some cases government officials in at least 18 countries. The U.S. DOJ investigation determined that among others, bribes were paid by Tyco Valves & Controls Middle East Inc. to employees of four different state owned customers located in three Gulf countries between 2003 and 2006. The total amount of bribes paid to employees of these four companies was reported by the DOJ to total $488,479 (less than SR 2 million). The $26 million fine assessed against Tyco was a penalty for the global pattern of corruption in which it was engaged for over 10 years, and $2.1 million of the total fine related to Tyco’s crimes in the Arabian Gulf.
Saudi Aramco was not aware that Tyco was the subject of an investigation in the U.S. until the U.S. DOJ issued its press release on September 24, 2012, announcing that Tyco International Ltd. and its affiliate, Tyco Valves & Control, Middle East Inc. had been charged with violations of the U.S. Foreign Corrupt Practices Act and entered guilty pleas. As soon as Saudi Aramco became aware of the case against Tyco and the reported involvement of a Saudi Aramco employee, all further business with all Tyco affiliates was suspended. In addition, Saudi Aramco launched a special internal investigation to determine whether there were any further illicit business practices involving Tyco or any of its affiliates or its agents.
Saudi Aramco has determined the business done with Tyco related companies during the last 12 years to add up to about $31 million plus another $11 million worth of Tyco products purchased for Company projects through contractors on turnkey contracts. The vast majority of these purchases were made on the basis of competitive bidding where multiple suppliers competed with Tyco.
The ongoing Saudi Aramco investigation has confirmed that a prior internal investigation conducted in 2009 into unethical business practices involving a Company employee revealed that a technical specialist employee violated the Company’s Conflict of Interest and Business Ethics policies by receiving bribes and kickbacks from various companies, including Spanish company Belgicast, which has now been determined to be affiliated with Tyco International Ltd. As a result, this individual was terminated by Saudi Aramco “for cause” in 2009 immediately following discovery of his illicit actions resulting in a loss of all benefits. The former employee was further placed on a list with whom Saudi Aramco will conduct no business nor with any company that employs him.
The Tyco affiliated company, as well as 17 other companies also implicated in this bribery scheme, were suspended from business by Saudi Aramco and continue to be suspended to this day. Following the 2009 investigation, Saudi Aramco undertook a thorough review of its systems and processes for technical evaluation and approval of contractors and vendors and modified them to include additional controls and processes to guard against similar problems. In addition, the criteria for suspending contractors and vendors from business with the Company as a result of unethical or illegal business activities were revised and strengthened.
In addition to its internal reviews, the Company contacted Tyco through their lawyers to request additional information regarding individuals and agents involved in misconduct. Tyco has responded and provided information which Saudi Aramco is now using to supplement its own thorough investigation. The information from Tyco identified a single Saudi Aramco employee who was the recipient of bribes from a Tyco affiliate. This individual is the same person identified by Saudi Aramco in its 2009 investigation and terminated without benefits by the Company.
Saudi Aramco wishes to clarify reports that a Saudi Aramco “official” accepted bribery payments. The term “official” as used in the Tyco court case is used to refer to any employee of a state owned company regardless of their position. The individual who Saudi Aramco has confirmed to have accepted bribes in the previous case involving a Tyco company was a technical specialist and not an “official” in a management position.
Despite the low ranking level of the Company employee involved, Saudi Aramco has taken this incident most seriously, initiating a second investigation to supplement the one conducted in 2009 and undertaking an in-depth review of its Conflict of Interest reporting, fraud awareness and legal compliance processes and procedures. The confirmation by Tyco of the identity of the one company employee terminated in 2009 will not in any way diminish the company’s commitment to vigorously pursue the current investigation to identify and deal with any other employee or intermediary party who may have been involved in the Tyco matter.
“Saudi Aramco condemns unethical business practices and takes allegations of impropriety very seriously. I want to assure our stakeholders that we have a zero-tolerance policy towards unethical business practices. Saudi Aramco is continuing its own investigation of this case and we are committed to taking firm actions against illegal business practices,” said Khalid A. Al-Falih, president and CEO, Saudi Aramco.
He added: “Sadly, the improper actions of just one individual can tarnish the reputation of the Company, which the rest of our employees work so diligently to maintain.”
Saudi Aramco is committed to the highest ethical and legal standards in the conduct of its business and requires that our employees conduct all our business ethically and in compliance with applicable laws.
Because Saudi Aramco takes matters involving unethical behavior by its employees so seriously, and is committed to ensuring that employees and suppliers conduct Saudi Aramco’s business to the highest ethical standards and in compliance with relevant laws, Saudi Aramco has well established the following policies: an Conflict of Interest and Business Ethics Policy; a Code of Supplier Conduct; as well as other compliance policies and procedures to prevent, detect and punish misconduct by Saudi Aramco employees and suppliers.
For example, Saudi Aramco’s robust Conflict of Interest and Business Ethics Policy is mandatory and is agreed to in writing by each of its employees. The Company has equally high expectations of ethical and lawful conduct from each of its suppliers and business partners and the Company’s Supplier Code of Conduct applies to every contractor, subcontractor, and vendor who must accept it in writing.
Before the Company will resume business dealings with a company that has been suspended for unethical or criminal activities, that company must undergo a thorough review of their corporate structure and governance processes; hold fraud awareness and ethics workshops for their employees; and allow for an independent audit of their business, controls and financial practices by an approved independent specialized firm.
Saudi Aramco also stresses that it has a competitive bidding process in place for procurement of materials and supplies. It has an internal auditing function that ensures the Company meets its operational and financial goals, and reports to the Company’s Board of Directors.
As part of its application of international best practices in corporate governance, Saudi Aramco is audited by an external auditor, at the direction of Saudi Arabia’s Supreme Council for Petroleum and Minerals Affairs. Internal communication and reporting channels have been established to allow employees and third parties to report business ethics violations and a General Auditor Hotline is available to provide a secure and confidential venue for employees and outsiders to report suspected fraud, unethical conduct and irregularities. The General Auditor can be contacted at telephone +966 3 874-3333 or e-mail: email@example.com
These policies, internal systems, processes, and reporting channels that have helped the Company and its employees maintain their firm commitment to the highest ethical and legal standards throughout the Company’s businesses will continue to be applied and reinforced.
Unfortunately, this case was not the only one of its kind Saudi Aramco has uncovered over the past several years. In the past, Saudi Aramco’s internal audit processes have identified violations of the Company’s business ethics policies by a number of individuals, each of whom was terminated from employment with Saudi Aramco. During the same period, many companies — local and international — were suspended or terminated from doing business with the Company for fraudulent practices.
Al-Falih expressed his determination to pursue this matter with the utmost vigor. He said: “Although the official Tyco court documents indicate that the alleged violations involving a Saudi Aramco employee occurred in 2003 and 2004, and are limited in scope, amount, personnel, and contract value, Saudi Aramco is conducting an extensive review to confirm that no other irregularities or misconduct involving Tyco companies occurred in the past.
“Although significant time has passed since the alleged violations reportedly occurred, we are reexamining our compliance processes and procedures to avoid a repeat of such violations in the Company. We are also examining our business partnerships and relationships to ensure that we identify firms and do business only with companies of the highest ethical standards.”
He concluded by stating that: “fighting fraud and corruption is a collective responsibility for us all. We depend on all our business partners to abide by the highest ethical standards, as we are committed to do, and to report to us any cases of unethical or criminal actions directed against the Company or involving any Saudi Aramco employee of whom they become aware.”
Saudi Aramco clarifies position in Tyco case
Source: Saudi Aramco