Baker Hughes: Greasing the Wheels in Kazakhstan

This case focuses upon the Texas-based Baker Hughes Foreign Corrupt Practices Act (FCPA) violations and settlement which involved penalties of more than $44 million, and the resultant corporate management and internal control actions taken to help prevent future violations. The company punishment included an $11 million criminal penalty, a $10 million civil penalty, the requirement to disgorge almost $20 million in ill-gotten profits and prejudgment interest of $3.1 million. Moreover, the company reported that the five-year internal probe cost over $50 million, involved 330 lawyers, 31 forensic accountants, the review of hundreds of thousands of pages of hard-copy documents and 1.69 tetra-bytes of electronic data (the equivalent of 90 million pages) from computers in 20 cities on four continents. Baker Hughes FCPA woes serve as a roadmap of what companies operating internationally should and should not do, and highlight the red flags that executives and students of corporate management and accounting should be watching for. The subsequent creation of a new Baker Hughes Code of Conduct, FCPA Guide, and Anti-Corruption Compliance Program provides a good case study of the actions that companies can implement to help avoid the costly penalties and investigations brought on by such corrupt behavior. This case is designed to be used in graduate and undergraduate level International Accounting, Auditing, Forensic Accounting, and Ethics courses.