Pemex Terminates Odebrecht Refinery Contract Amid U.S. Probe

(Bloomberg) -- Pemex last month terminated a 1.8 billion peso ($100 million) contract with Odebrecht SA amid a probe by the U.S. Justice Department into the Brazilian construction company’s operations.

The contract, signed in November 2015, involved engineering, procurement and construction services for works related to the Miguel Hidalgo refinery in the community of Tula, Petroleos Mexicanos wrote in a filing with the U.S. Securities and Exchange Commission. The June 16 termination resulted from the failure of the Brazil company’s Mexican arm, Odebrecht Ingenieria y Construccion Internacional de Mexico SA, or ODM, “to comply with its obligations," according to the filing.

The decision by the state-owned oil company followed the start of sanctioning procedures by Mexico’s public auditor against two affiliates of Odebrecht and its representatives, in accordance with the Federal Anti-corruption Law Against Public Procurement, according to the filing.

In December, Odebrecht SA and Braskem SA both pleaded guilty to conspiring to pay bribes in violation of the U.S. Foreign Corrupt Practices Act. The company agreed to pay more than $3.5 billion to settle the case after facing charges it bribed executives and officials for more than 100 projects in 12 countries.

In its report, the U.S. Justice Department said Odebrecht paid about $10.5 million to Mexico public servants between 2010 and 2014 to win contracts, and that payments of as much as $6 million were made to a senior officer of a Mexico state-owned company.

Pemex’s liabilities unit started an investigation into possible instances of bribery or corruption related to these allegations in December, according to the SEC filing. The company is cooperating with the public auditor’s office and the Federal Attorney General’s Office "in order to hold those responsible for these acts accountable and ensure that we recover any damages to which we are entitled," the filing said.

Pemex has hired Hogan Lovells US LLP to conduct an internal investigation of Pemex’s contracts with Odebrecht and Braskem, the Mexican oil company said Monday in an emailed statement.

--With assistance from Cyntia Barrera Diaz

To contact the reporters on this story: Adam Williams in Mexico City at awilliams111@bloomberg.net, Amy Stillman in Mexico City at astillman7@bloomberg.net.

To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net, Carlos Caminada