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| PDE > SEC Filings for PDE > Form 8-K on 2-Jun-2009 | All Recent SEC Filings |
2-Jun-2009
Creation of a Direct Financial Obligation or an Obligation under an Off-B
In addition, we included the following updates to the risk factors included
in our annual report on Form 10-K for the year ended December 31, 2008:
We are conducting an investigation into allegations of improper payments to
foreign government officials, as well as corresponding accounting entries and
internal control issues. The outcome and impact of this investigation are
unknown at this time.
During the course of an internal audit and investigation relating to certain
of our Latin American operations, our management and internal audit department
received allegations of improper payments to foreign government officials. In
February 2006, the Audit Committee of our Board of Directors assumed direct
responsibility over the investigation and retained independent outside counsel
to investigate the allegations, as well as corresponding accounting entries and
internal control issues, and to advise the Audit Committee.
The investigation, which is continuing, has found evidence suggesting that
payments, which may violate the U.S. Foreign Corrupt Practices Act, were made to
government officials in Venezuela and Mexico aggregating less than $1 million.
The evidence to date regarding these payments suggests that payments were made
beginning in early 2003 through 2005 (a) to vendors with the intent that they
would be transferred to government officials for the purpose of extending
drilling contracts for two jackup rigs and one semisubmersible rig operating
offshore Venezuela; and (b) to one or more government officials, or to vendors
with the intent that they would be transferred to government officials, for the
purpose of collecting payment for work completed in connection with offshore
drilling contracts in Venezuela. In addition, the evidence suggests that other
payments were made beginning in 2002 through early 2006 (a) to one or more
government officials in Mexico in connection with the clearing of a jackup rig
and equipment through customs, the movement of personnel through immigration or
the acceptance of a jackup rig under a drilling contract; and (b) with respect
to the potentially improper entertainment of government officials in Mexico.
The Audit Committee, through independent outside counsel, has undertaken a
review of our compliance with the FCPA in certain of our other international
operations. In addition, the U.S. Department of Justice has asked us to provide
information with respect to (a) our relationships with a freight and customs
agent and (b) our importation of rigs into Nigeria. The Audit Committee is
reviewing the issues raised by the request, and we are cooperating with the DOJ
in connection with its request.
This review has found evidence suggesting that during the period from 2001
through 2006 payments were made directly or indirectly to government officials
in Saudi Arabia, Kazakhstan, Brazil, Nigeria, Libya, Angola and the Republic of
the Congo in connection with clearing rigs or equipment through customs or
resolving outstanding issues with customs, immigration, tax, licensing or
merchant marine authorities in those countries. In addition, this review has
found evidence suggesting that in 2003 payments were made to one or more third
parties with the intent that they would be transferred to a government official
in India for the purpose of resolving a customs dispute related to the
importation of one of our jackup rigs. The evidence suggests that the aggregate
amount of payments referred to in this paragraph is less than $2.5 million. We
are also reviewing certain agent payments related to Malaysia.
The investigation of the matters described in the prior paragraph and the
Audit Committee's compliance review are ongoing. Accordingly, there can be no
assurances that evidence of additional potential FCPA violations may not be
uncovered in those or other countries.
Our management and the Audit Committee of our Board of Directors believe it
likely that then members of our senior operations management either were aware,
or should have been aware, that improper payments to foreign government
officials were made or proposed to be made. Our former Chief Operating Officer
resigned as Chief Operating Officer effective on May 31, 2006 and has elected to
retire from the company, although he will remain an employee, but not an
officer, during the pendency of the investigation to assist us with the
investigation and to be available for consultation and to answer questions
relating to our business. His retirement benefits will be subject to the
determination by our Audit Committee or our Board of Directors that it does not
have cause (as defined in his retirement agreement with us) to terminate his
employment. Other personnel, including officers, have been terminated or placed
on administrative leave or have resigned in connection with the investigation.
We have taken and will continue to take disciplinary actions where appropriate
and various other corrective action to reinforce our commitment to conducting
our business ethically and legally and to instill in our employees our
expectation that they uphold the highest levels of honesty, integrity, ethical
standards and compliance with the law.
We voluntarily disclosed information relating to the initial allegations and
other information found in the investigation and compliance review to the DOJ
and the SEC. We continue to cooperate with these authorities as the
investigation and compliance reviews continue.
If violations of the FCPA occurred, we could be subject to fines, civil and
criminal penalties, equitable remedies, including profit disgorgement, and
injunctive relief. Civil penalties under the antibribery provisions of the FCPA
could range up to $10,000 per violation, with a criminal fine up to the greater
of $2 million per violation or twice the gross pecuniary gain to us or twice the
gross pecuniary loss to others, if larger. Civil penalties under the accounting
provisions of the FCPA can range up to $500,000 per violation and a company that
knowingly commits a violation can be fined up to $25 million per violation. In
addition, both the SEC and the DOJ could assert that conduct extending over a
period of time may constitute multiple violations for purposes of assessing the
penalty amounts. Often, dispositions for these types of matters result in
modifications to business practices and compliance programs and possibly a
monitor being appointed to review future business and practices with the goal of
ensuring compliance with the FCPA.
We could also face fines, sanctions and other penalties from authorities in
the relevant foreign jurisdictions, including prohibition of our participating
in or curtailment of business operations in those jurisdictions and the seizure
of rigs or other assets. Our customers in those jurisdictions could seek to
impose penalties or take other actions adverse to our interests. We could also
face other third-party claims by directors, officers, employees, affiliates,
advisors, attorneys, agents, stockholders, debt holders, or other interest
holders or constituents of our company. In addition, disclosure of the subject
matter of the investigation could adversely affect our reputation and our
ability to obtain new business or retain existing business from our current
clients and potential clients, to attract and retain employees and to access the
capital markets.
We have commenced discussions with the DOJ and the SEC regarding a negotiated
resolution for these matters, which could be settled during 2009 and which, as
described above, could involve a significant payment by us. There can be no
assurance that a settlement will be reached or, if a settlement is reached, the
timing of any such settlement or that the terms of any such settlement would not
have a material adverse effect on us. No amounts have been accrued related to
any potential fines, sanctions, claims or other penalties, which could be
material individually or in the aggregate, but an accrual could be made as early
as the second or third quarter of 2009. We cannot currently predict what, if
any, actions may be taken by the DOJ, the SEC, any other applicable government
or other authorities or our customers or other third parties or the effect the
actions may have on our results of operations, financial condition or cash
flows, on our consolidated financial statements or on our business in the
countries at issue and other jurisdictions.
We are subject to numerous governmental laws and regulations, including those
that may impose significant costs and liability on us for environmental and
natural resource damages.
Many aspects of our operations are affected by governmental laws and
regulations that may relate directly or indirectly to the contract drilling and
well servicing industries, including those requiring us to obtain and maintain
specified permits or other governmental approvals and to control the discharge
of oil and other contaminants into the environment or otherwise relating to
environmental protection. Our operations and activities in the United States are
subject to numerous environmental laws and regulations, including the Oil
Pollution Act of 1990, the Outer Continental Shelf Lands Act, the Comprehensive
Environmental Response, Compensation, and Liability Act and the International
Convention for the Prevention of Pollution from Ships. Additionally, other
countries where we operate have adopted, and could in the future adopt
additional, environmental laws and regulations covering the discharge of oil and
other contaminants and protection of the environment that could be applicable to
our operations. Failure to comply with these laws and regulations may result in
the assessment of administrative, civil and even criminal penalties, the
imposition of remedial obligations, the denial or revocation of permits or other
authorizations and the issuance of injunctions that may limit or prohibit our
operations. We are currently
subject to pending notices of assessment pursuant to which governmental
authorities in Brazil are seeking an aggregate amount of less than $750,000 for
releases of drilling fluids from rigs operating in offshore waters of Brazil. We
are contesting these notices.
Laws and regulations protecting the environment have become more stringent in
recent years and may in certain circumstances impose strict liability, rendering
us liable for environmental and natural resource damages without regard to
negligence or fault on our part. These laws and regulations may expose us to
liability for the conduct of, or conditions caused by, others or for acts that
were in compliance with all applicable laws at the time the acts were performed.
The application of these requirements, the modification of existing laws or
regulations or the adoption of new laws or regulations curtailing exploratory or
development drilling for oil and natural gas could materially limit future
contract drilling opportunities or materially increase our costs or both. In
addition, we may be required to make significant capital expenditures to comply
with laws and regulations or materially increase our costs or both.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
1.1 Underwriting Agreement, dated as of May 28, 2009, between Pride
International, Inc. and Goldman, Sachs & Co., Citigroup Global Markets
Inc., Banc of America Securities LLC and Wachovia Capital Markets, LLC,
as representatives of the several underwriters named in Schedule I of the
Underwriting Agreement.
4.1 Indenture, dated as of July 1, 2004, between Pride International, Inc. and The Bank of New York Mellon, as trustee, relating to senior debt securities (incorporated by reference to Exhibit 4.1 to Pride's Registration Statement on Form S-4 (Registration No. 333-118104)).
4.2 Form of Second Supplemental Indenture.
4.3 Form of the Notes (included in Exhibit 4.2).
5.1 Opinion of Baker Botts L.L.P.
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