Ex-Brazil agent Skornicki's transactions 'may be suspicious', says Keppel

Singapore

KEPPEL Corporation fell nine Singapore cents or 1.7 per cent to S$5.30 after it said on Monday morning that a former Brazil agent might have engaged in illegal activity.

"Following further internal investigations, Keppel recognises that certain transactions associated with Mr (Zwi) Skornicki may be suspicious," Keppel said.

It said it has notified the authorities in the relevant jurisdictions that it wants to cooperate and work towards resolving underlying issues on the transactions. Keppel also reiterated that it does not tolerate any form of illegal activity, including bribery and corruption, involving its employees or associates.

The firm is investigating allegations that illegal payments were made by Skornicki on contracts entered by Keppel entities with their long-standing customer, Brazil national oil company Petrobras, and rig charter firm Sete Brasil.

Skornicki, arrested in Brazil earlier this year, had also alleged that senior Keppel executives had authorised him to bribe public officials to win contracts.

In response to queries from The Business Times on the nature and parties involved in the transactions associated with Skornicki, a Keppel spokeswoman said that the company was unable to make any further comments on the details due to ongoing investigations.

She added: "No formal charges have, to Keppel's knowledge, been filed against any company within the group or any of its employees."

RHB equity analyst Wan Zahidi Zakwan said that the latest announcement was somewhat expected, though more bad news could be in store for Keppel. "Investors are already jittery with Keppel as its order book dwindles due to the downturn in the oil and gas market . . . our view is that Keppel needs to resolve this issue as quickly as possible," he said.

Petrobras is ensnared in a scandal that began in 2014 when its directors are alleged to have colluded with politicians to siphon money out of contracts for personal use or to fund political campaigns.

The scandal has led indirectly to the eventual impeachment of Brazil President Dilma Rousseff in August.

Contractors such as construction groups and foreign companies have also been implicated in paying bribes to politicians and Petrobras executives in exchange for contracts.

In February last year, allegations first surfaced about Keppel's involvement in the scandal. Keppel denied them, and noted that its agreement with Skornicki and the agent firm which employed him categorically stated that no improper payments should be made to any official connected to contracts.

A year later, Skornicki was arrested in Brazil and charged with corruption, criminal conspiracy and money laundering. The agency relationship between Keppel's entities and Skornicki had by then been put on hold.

Then, a Bloomberg report in August said that Skornicki told a Brazil judge in July that five leading Keppel executives, including current Keppel Offshore and Marine CEO Chow Yew Yuen, had authorised him to bribe officials to win contracts.

In response, Keppel strongly denied the allegations. It said that none of its executives named in the article had authorised Skornicki to make any payments as bribes.

Last month, a representative of the Brazilian government visiting Singapore said that the government is looking to start discussions with Keppel and fellow rigbuilder Sembcorp Marine to find solutions to their challenges in Brazil.

Meanwhile, the fallout from the Petrobras corruption scandal sent ripples through the oil and gas supply chain, exacerbated by an oil price crash.

For example, Sete Brasil had ordered billions of dollars of rigs from Keppel, intending to lease them to its sole client Petrobras. But Sete faced difficulties securing long-term financing and making payments to its contractors. It filed for bankruptcy protection earlier this year.

Keppel stopped work on Sete's rigs since end-2015, and has said that it will not resume until payments flow again. It also made a S$230 million provision for its Q4 2015 results, which it said in July "remains appropriate and adequate" as it awaits more clarity on Sete's plans.

Asked what has happened to companies caught up in the Petrobras scandal, Ang Ding Li, IHS Markit's Asia-Pacific head of research for upstream costs, said that implicated contractors were banned from future Petrobras tenders until further notice. However, several contractors have been released from the ban after giving satisfactory assistance during the investigations, he said.

Mr Ang, however, declined to comment on Keppel-specific issues, adding he does not want to speculate on what the firm might face.