Keppel: Court dismisses racketeering cause of action in EIG lawsuit

KEPPEL Offshore & Marine (Keppel O&M) has succeeded in its motion to dismiss one of two causes of action brought against it by EIG Management Co's funds.

The court dismissed the cause of action under the Racketeer Influenced and Corrupt Organizations Act (RICO) in the US, even though "it is typically difficult to succeed in a motion to dismiss as the court would assume all facts alleged by plaintiffs to be accurate", Keppel Corp said in a bourse filing on Wednesday morning.

As disclosed in February 2018, eight funds managed by EIG brought a racketeering suit under RICO against Keppel O&M in the US District Court for the Southern District of New York.

The funds later amended the complaint to include an additional cause of action - of Keppel O&M allegedly aiding and abetting the fraud committed by Petroleo Brasileiro (Petrobras) and Sete Brasil Participacoes against EIG.

The suit concerns Keppel O&M's role in a Brazilian bribery scheme connected to a failed drill ship venture, for which Keppel Corp reached a US$422 million settlement between Keppel O&M and US prosecutors, according to an article on the Law360 website on Feb 8, 2018.

EIG is seeking to recover US$221 million in purported investment losses as well as punitive damages, under the amended complaint, Keppel Corp said in a May 2, 2018 filing.

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Keppel O&M then filed a pre-trial motion to dismiss both causes of action before substantive litigation commenced, on the basis that EIG failed to meet certain legal requirements necessary to bring the claims.

With the RICO cause dismissed, EIG will now only be allowed to proceed to trial on its allegation of aiding and abetting fraud. Keppel Corp on Wednesday reiterated its view that this cause of action is "without merit" and that Keppel O&M will continue to "vigorously" defend it.

The lawsuit came after the US District Court for the District of Columbia in early 2017 dismissed a 2016 civil action by EIG and eight of its managed funds against Keppel Corp, Keppel O&M, Sembcorp Marine (Sembmarine), Jurong Shipyard and other entities.

In the previous lawsuit announced in June 2016, EIG alleged that Keppel Corp and Keppel O&M participated in an unlawful conspiracy under which EIG was induced to invest over US$221 million of equity in Sete Brasil, a rig-building unit of Petrobras. Sete Brasil went on to award rig-building contracts valued at about US$10 billion to business units of Keppel O&M and Sembmarine.

Shares of Keppel Corp were trading at S$6.01 as at 10.41am on Wednesday, down S$0.05 or 0.8 per cent.