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In the Matter of Oil States, International, Inc.

Securities and Exchange Commission
Release No. 53732 (2006)


Facts

Hydraulic Well Control, LLC (HWC), a subsidiary of Oil States, International, Inc. (Oil States), hired a Venezuelan consultant to assist with its interactions with Petroleos de Venezuela, S.A. (PDVSA), a Venezuelan company. HWC did not look into the consultant’s background before making the hire and did not train the consultant in compliance with United States laws, including the Foreign Corrupt Practices Act (the Act). HWC’s contract with the consultant did not contain any provisions regarding compliance with the Act. The consultant and certain PDVSA employees intentionally overbilled HWC and took kickbacks. HWC unknowingly made several improper payments to the PDVSA employees. HWC’s bookkeepers, not realizing that these payments were improper, recorded them as ordinary business expenses. The expenses were incorporated into Oil States’s books. The Securities and Exchange Commission (SEC) instituted cease-and-desist proceedings against Oil States, alleging a violation of the Act.

Rule of Law

Issue

Holding and Reasoning

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