Baker Hughes 2009 Annual Report Download - page 135

2009 Form 10-K 61
was $241 million, $227 million and $179 million for the years
ended December 31, 2009, 2008 and 2007, respectively. We
have not entered into any significant capital leases during the
three years ended December 31, 2009.
Litigation
We are involved in litigation or proceedings that have
arisen in our ordinary business activities as well as in relation
to the pending merger with BJ Services. We insure against
these risks to the extent deemed prudent by our management
and to the extent insurance is available, but no assurance can
be given that the nature and amount of that insurance will be
sufficient to fully indemnify us against liabilities arising out of
pending and future legal proceedings. Many of these insur-
ance policies contain deductibles or self-insured retentions in
amounts we deem prudent and for which we are responsible
for payment. In determining the amount of self-insurance, it is
our policy to self-insure those losses that are predictable, mea-
surable and recurring in nature, such as claims for automobile
liability, general liability and workers compensation. The accru-
als for losses are calculated by estimating losses for claims
using historical claim data, specific loss development factors
and other information as necessary.
Department of Justice and Securities
and Exchange Commission Matters
On April 26, 2007, the United States District Court, South-
ern District of Texas, Houston Division (the “Court”) unsealed a
three-count criminal information (the “Information”) that had
been filed against us as part of the execution of a Deferred
Prosecution Agreement (the “DPA”) between us and the
Department of Justice (“DOJ”). The three counts arose out
of payments made to an agent in connection with a project
in Kazakhstan and included conspiracy to violate the Foreign
Corrupt Practices Act (“FCPA”), a substantive violation of
the antibribery provisions of the FCPA, and a violation of the
FCPA’s books-and-records provisions. All three counts related
to our operations in Kazakhstan during the period from 2000
to 2003. The DPA relates to our March 29, 2002 announce-
ment that the SEC and the DOJ were conducting investiga-
tions into allegations of violations of law relating to Nigeria
and other related matters. In connection therewith, the SEC
had issued a formal order of investigation into possible viola-
tions of provisions under the FCPA and issued subpoenas
regarding our operations in Nigeria, Angola and Kazakhstan.
On April 26, 2009, the DPA expired and pursuant to
a motion filed by the DOJ, the Court issued an order on
April 28, 2009, dismissing the Information on the basis that
the Company had fully complied with its obligations under
the DPA.
The DPA also required us to retain an independent monitor
(the “Monitor”) for a term of three years to assess and make
recommendations about our compliance policies and proce-
dures and our implementation of those procedures. In addi-
tion, the Monitor was required to perform two follow up
reviews and to “certify whether the anti-bribery compliance
program of Baker Hughes, including its policies and proce-
dures, is appropriately designed and implemented to ensure
compliance with the FCPA, U.S. commercial bribery laws and
foreign bribery laws”. On April 8, 2009, the Monitor issued his
report for the first of such follow up reviews, and the Monitor
issued his certification that our compliance program is appro-
priately designed and implemented to ensure such compliance.
Pursuant to the DPA, the DOJ has agreed not to prosecute
us for violations of the FCPA based on information that we
have disclosed to the DOJ regarding our operations in Nigeria,
Angola, Kazakhstan, Indonesia, Russia, Uzbekistan, Turkmeni-
stan, and Azerbaijan, among other countries.
On April 26, 2007, the Court also accepted a plea of guilty
by our subsidiary Baker Hughes Services International, Inc.
(“BHSII”) pursuant to a plea agreement between BHSII and the
DOJ (the “Plea Agreement”) based on similar charges relating
to the same conduct. Pursuant to the Plea Agreement, BHSII
agreed to a three-year term of organizational probation. The
Plea Agreement contains provisions requiring BHSII to cooper-
ate with the government, to comply with all federal criminal
law, and to adopt a Compliance Code similar to the one that
the DPA requires of the Company.
Also on April 26, 2007, the SEC filed a Complaint (the
“SEC Complaint”) and a proposed order (“2007 Order”)
against us in the Court. The SEC Complaint and the 2007
Order were filed as part of a settled civil enforcement action by
the SEC, to resolve the civil portion of the government’s investi-
gation of us. As part of our agreement with the SEC, we con-
sented to the filing of the SEC Complaint without admitting or
denying the allegations in the Complaint, and also consented
to the entry of the 2007 Order. The SEC Complaint alleged
civil violations of the FCPA’s antibribery provisions related to
our operations in Kazakhstan, the FCPA’s books-and-records
and internal-controls provisions related to our operations in
Nigeria, Angola, Kazakhstan, Indonesia, Russia, and Uzbeki-
stan, and the cease and desist order that we had entered into
with the SEC on September 12, 2001 (“2001 Order”). In enter-
ing into the 2001 Order, we had neither admitted nor denied
the factual allegations contained therein including alleged
violations of Section 13(b)(2)(A) and Section 13(b)(2)(B) of
the Securities Exchange Act of 1934 that require issuers to:
(x) make and keep books, records and accounts, which, in rea-
sonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the issuer and (y) devise and main-
tain a system of internal accounting controls sufficient to pro-
vide reasonable assurances that: (i) transactions are executed
in accordance with management’s general or specific authori-
zation; and (ii) transactions are recorded as necessary: (I) to
permit preparation of financial statements in conformity with
generally accepted accounting principles or any other criteria
applicable to such statements, and (II) to maintain accountability
for assets. The 2007 Order became effective on May 1, 2007,
which is the date it was confirmed by the Court. The 2007
Order enjoins us from violating the FCPA’s antibribery, books-
and-records, and internal-controls provisions. As in the DPA, it
required that we retain the independent monitor to assess our
FCPA compliance policies and procedures.