The FCPA Files: Tesoro Petroleum Corp. (1980)
For decades, John O’Halloran was the man to see if you wanted something done in Trinidad and Tobago. He had many nicknames—“Johnny O”, “Cockfighting Johnny” and, most notoriously, “Mr. Ten Percent”—and a comfortable home on Flamboyant Avenue in the hills outside Port of Spain. Whatever his official role—from minister of petroleum to chairman of the country’s racing authority—O’Halloran had the ear of Dr. Eric Williams, founder of the People’s National Movement party and Prime Minister from independence in 1962 until his death in 1981.
Among O’Halloran’s many schemes, perhaps the most baleful was the sweetheart deal he arranged for Tesoro Petroleum, a then-small Texas oil company that in 1968 acquired a 49.9% share in the country’s petroleum production with an initial investment of $50,000, the full $10 million to be paid from future profits. When the price of oil soared in the 1970s, the company’s revenues ballooned. O’Halloran got his $2 million—ten percent of the deal’s initial value—and payments continued to be made over the years to a range of “finders” and “consultants” with a hand in the concession’s administration.
The country lived well during the boom years, but the party ended with the oil glut of the 1980s. Recession led to significant cutbacks in salaries and cost-of-living adjustments, and in 1986 the PNM lost its previously unchallenged grip on parliament to the newly formed National Alliance for Reconstruction. Tesoro had left the market by then, selling its share of the operation back to the government in exchange for 3.23 million barrels worth about $200 million. O’Halloran was also out of the picture, having fled to Canada in 1982 after the death of his protector, where he himself passed away in 1985.
The new government, through the efforts of Attorney General Selwyn Richardson, started digging around. They were able to recover a few million from O’Halloran’s son in Canada, and began piecing together the full story behind the Tesoro arrangement. (The SEC’s 1980 consent agreement with Tesoro had addressed the matter only in passing, as one of a number of “finder/consultant” infractions in various countries.) The company eventually agreed to settle the matter for about $3.3 million. The merits of the settlement were under discussion in parliament on July 27, 1990 when the chamber was suddenly overtaken by armed insurgents mounting an attempted coup. The trauma lingers to this day.
This post is part of "The FCPA Files" series, examining key enforcement cases under the Foreign Corrupt Practices Act and the lessons they offer for modern compliance. |