By Mark Curriden, The Texas Lawbook
The U.S. Securities and Exchange Commission is investigating Houston-based Key Energy Services for possible violations of federal bribery laws involving its operations in Mexico and Russia, according to corporate documents filed with the SEC.
In a Form 8-K filed with the SEC on June 4, Key Energy General Counsel Kimberly Frye said the oil well services company “became aware of an allegation” involving its Mexico activities “that, if true, could potentially constitute a violation” of the Foreign Corrupt Practices Act.
Key Energy, a publicly traded oil well services company with about 8,500 employees, disclosed in separate SEC filings in May that the federal regulatory agency is investigating possible FCPA violations involving the company’s operations in Russia.
Key Energy has hired an outside law firm to conduct an “external independent” investigation into the allegations. The company did not disclose the name of the lawyers or firms that it has engaged, but it has previously employed Thompson & Knight to handle its litigation disputes.
Frye, a former lawyer at Porter Hedges in Houston, stated in the June 4 filing that Key Energy is cooperating fully with federal investigators.
Key Energy officials did not respond to requests for an interview.
Legal experts noted that the SEC has issued no charges, that it appears that Key Energy officials self-reported the potential violations and that the investigation is likely to be led by lawyers in the SEC’s Fort Worth Regional Office.
“Because Russia and Mexico have been countries that have had issues with corruption, these regions automatically raise red flags for the SEC,” said Toby Galloway, a partner at Kelly Hart & Hallman and a former senior enforcement lawyer with the SEC.
In addition to the specific facts and allegations, “the SEC will likely examine what kind of internal controls and corporate compliance standards Key Energy has in place,” says Galloway. “In a case like this, the SEC is also very interested in possible third party intermediaries working for the company.”
Galloway says the SEC will want to know how much intermediaries are being paid and exactly what services company officials expect from them.
On May 21, 2010, Key Energy officials sent a copy of the company’s official 41-page FCPA Compliance Manual to all employees in the company instructing them to “understand and comply” with FCPA requirements.
The Texas Lawbook is an online publication that covers business law in Texas. Articles are at texaslawbook.net.
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