Quietly over Christmas the US Justice Department announced that it had reached a deferred prosecution agreement with Keppel Offshore and Marine. Under the agreement Keppel O & M, a unit of Keppel Corp, will pay $422 million to resolve charges that it paid $55 million in bribes to Brazilian politicians to win business from the state oil company Petrobras, an offence under the US Foreign Corrupt Practices Act.

According to the WSJ, “Keppel admitted in court documents that it paid about $55 million in bribes to officials at Brazilian state-owned oil company Petróleo Brasileiro and the then-governing party in Brazil from 2001 to 2014 to win 13 contracts with Petrobras, as the company is also known, and another company. It paid the bribes through outsize commissions to an intermediary, who in turn made payments to the officials and the political party, prosecutors said.”

The  bribes were disguised by being channelled through a series of bank accounts in he names of shell companies controlled by Keppel’s Brazilian agent, Zwi Skornicki. Shockingly, despite allegations by Skornicki that five leading executives at Keppel had authorised him to make the payments, the only individual who is being prosecuted is a former senior member of the Keppel legal department. All we are told is that he has pleaded guilty and will presumably face a long US jail sentence.

It looks like this individual is being thrown to the wolves so that Keppel and Temasek senior management, which is synonymous with the PAP Government and its ministers and MPs, can escape unscathed. Lee Boon Yang, former PAP minister and MP for Jalan Besar GRC, currently chairman of Keppel and state media monopoly Singapore Press Holdings, has been quick to rush out the usual hypocritical humbug about regretting and being “deeply disappointed” by the company’s misconduct and that the company has instituted stricter controls since the allegations surfaced.

“Global companies such as Keppel have both a legal and a moral duty to operate fully within international laws and regulations. Any perception that illegal payments can be condoned, if they are made by agents, is wrong and will not be tolerated,” his statement read.

Temasek still holds a 20% shareholding in Keppel which has been reduced since it was  but despite the reduction in its shareholding since Keppel was listed, the Government clearly controls the board of directors and senior management. Not only Lee Boon  Yang but most of Keppel Corp’s directors are from Temasek or GIC or state-owned companies within that group.  The CEO, Loh Chin Hua, is from GIC and also on the board of EDB. The former PAP MP Alvin Yeo, whom I wrote about when he was found to have massively overcharged when he acted for Singapore Medical Council against Dr Susan Lim (Clash of the Grossly Overcharged Means Alvin Yeo Must Resign), is also on the board.

It is inconceivable that senior management were not aware of such large payments amounting to tens of millions of US dollars to Keppel’s representative in Brazil and that these were being used to pay bribes to local politicians to win business. Internal auditors should have flagged the payments which should have led to qualifications in the company’s accounts. Either that or Keppel’s entire management is grossly incompetent and should be sacked because the company has no internal controls.  Keppel at first denied the allegations but then in October 2016 made a show of cooperating with the investigation.

Sembcorp Marine, which also supplied rigs to Petrobras, will almost certainly be forced to agree to a similar settlement with the US Justice Department. Keppel’s settlement will also inevitably allow the company to be sued by US investors. In April 2017 a US court dismissed claims against Keppel and Sembcorp Marine brought by US firm EIG Management as part of its lawsuit against Petrobras after the companies denied involvement in bribery. Those claims will now presumably be revived. Temasek holds 49.5% of Sembcorp Marine’s shares.

Keppel is also still denying allegations from 2016 that it used a Monaco-based company called Unaoil to pay bribes to win business in Kazakhstan but after today’s admission it seems likely that this is true as well.

The Keppel case follows the conviction in 2014 of seven ST Marine executives for giving bribes amounting to $24.9 million to employees of customers disguised as expenses to win business. ST Marine is a subsidiary of ST Engineering which is 50.1% owned by Temasek. Coincidentally ST Engineering’s aerospace subsidiary owns the corporate jets which are used by the PM and his wife on undisclosed terms.

The fact that CPIB has got involved and issued a conditional warning to Keppel O & M as part of the deferred prosecution agreement with the US Justice Department does not disguise the fact that the only reason that Keppel and other Temasek companies are on the hook here is because of the actions of the US and Brazilian prosecutors.

Yet despite the sanctions against Keppel, the whole management team, including a former PAP Minister, is getting off scot free. The press release does not disclose what conditions the US Justice Department has imposed as part of the deferred prosecution agreement but given that the Singapore government has got involved these are unlikely to result in repercussions for the top individuals. Part of the money from the Keppel fine is coming back to Singapore which like the small fines meted out to SMRT is just an example of  transferring money from one pocket to the other.

Clearly there is a systematic culture of corruption at Temasek-owned companies which must be condoned, if not actively approved, by the CEO, Ho Ching, and the board. These scandals involve public companies where there should be more transparency.  One can only speculate at what is going on at private companies which have formed an increasing proportion of Temasek’s investments. Similarly if controls are so lax and unusual payments can be so easily authorised how do we know that there is not widespread theft? The only other alternative is gross incompetence of which there is plenty of evidence. The Government blankets everything as a state secret and protected under the Official Secrets Act, including the PM’s wife’s remuneration.

This disregard for legality and integrity comes from the top downwards despite LHL’s bogus claims, like his father, that his government has a zero tolerance for corruption. We have seen again and again that LHL cannot understand the distinction between state resources and his personal interests as when he got his Press Secretary to defend his defamation suit against an unemployed blogger. He still claims not to see anything wrong with getting advance discounts from property developers as in the Nassim Jade scandal of two decades ago. He appoints his own wife, on undisclosed remuneration but surely hundreds of millions of dollars, to run Temasek, something that goes against all acceptable standards of good governance.

So to those international organisations responsible for producing the indices that place Singapore at the top for transparency and lack of corruption, we should say stop.  We do not know what drugs you are taking but we simply do not believe you.

Published by kjeyaretnam

I'm a Singaporean economist who became an opposition activist. I blog to provide an alternative to the porkies that the Pinkies tell. It just so happens that my alternative is the truth. That's why I've never been sued in any civil or criminal court no matter how hard hitting my criticism. I'm quoted and interviewed and asked to speak across the world but largely censored in Singapore in an effort to silence my political opinions. The left hate me because they think I split their vote and because I eschew their outmoded economic models. Models that don't work. The Right and the Conservatives hate me because I'm a liberal. I'm not sure what the middle think of me. I don't think there are more than a handful of people in the middle, here in Singapore. I'm a Singaporean born and bred, dual heritage, my parents Singaporean established here before the State of Singapore was created. I'm not Eurasian. I read economics at Cambridge and could be broadly described as from the Keynesian school but I believe in interventions. I was formerly a successful hedge fund manager. After economics and politics my greatest interests are history, film and Makan. I run but I run so I can eat like a Singaporean. View all posts by kjeyaretnam