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Wednesday
Sep302015

Hyperdynamics resolves FCPA offenses linked to Guinea payments

Hyperdynamics Corporation Tuesday settled alleged FCPA books and records and internal controls offenses by agreeing to pay the SEC $75,000.

The Houston-based oil and gas company received subpoenas from the SEC and DOJ in 2013 requesting documents relating to its business in the African country of Guinea.

In May this year, the company said the DOJ had closed its FCPA investigation without bringing any charges against the company.

Tuesday's settlement fully resolved the SEC's investigation, the company said in a release.

The SEC resolved the enforcement action with an internal administrative order and didn't go to court.

Hyperdynamics consented to the SEC order without admitting or denying the agency's findings and by paying a $75,000 penalty.

The SEC order described books and records and internal controls offenses that occurred in 2007 and 2008.

From July 2007 through October 2008, Hyperdynamics, through its subsidiary, paid $130,000 for public relations and lobbying services in the Republic of Guinea to two supposedly unrelated entities -- $55,000 to BerMia Service SRL, and $75,000 to Africa Business Service (“ABS”).

The subsidiary’s books and records were consolidated with Hyperdynamics’s books and records, and these payments were recorded as public relations and lobbying expenses, even though the company lacked  sufficient supporting documentation to determine whether the services were actually provided and to identify the ultimate recipient of the funds.

In late 2008, Hyperdynamics discovered that a Guinean-based employee controlled BerMia and ABS. Hyperdynamics also learned that this employee was the sole signatory on the ABS account. But Hyperdynamics could not determine how, if at all, BerMia or ABS spent the funds they had received, or whether any services actually were provided. Moreover, the company could not recover the funds.

There is no evidence that these funds were in fact spent on legitimate public relations and lobbying activities, yet Hyperdynamics’s books and records continued to reflect that the funds were spent for these purposes.

In a 2013 disclosure, Hyperdynamics said the FCPA investigation focused on whether its "activities in obtaining and retaining the Concession rights and [its] relationships with charitable organizations potentially violate the FCPA and anti-money laundering statutes."

Charitable contributions can violate the FCPA if they benefit foreign officials personally and are intended to obtain or retain business or gain an unfair advantage.

Tuesday's SEC order didn't mention charitable contributions or money laundering.

Beginning in July 2009, the SEC order said, Hyperdynamics replaced its senior management team and its entire board of directors. It also "revised its policies, implemented training programs, increased its legal and accounting personnel, and instituted a series of procedures to more strictly control transfers of funds."

The company spent about $7.5 million on the FCPA investigation, it said earlier.

Hyperdynamics Corporation trades in the over-the-counter market under the symbol HDYN. It previously traded on the New York Stock Exchange under the symbol HDY.

The company received notice in January this year from the NYSE that its shares, which traded at less than $1.00 over a consecutive 30 trading-day period, no longer met the NYSE listing requirements

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The SEC's Securities Exchange Act of 1934 Release No. 76006 and Administrative Proceeding File No. 3-16843 In the Matter of Hyperdynamics Corporation (both dated September 29, 2015) are here (pdf).

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.