Transocean Settlement – The Public Face of Compliance Violations

Lost in a sea of hot politics over firearms and ammunition was the multi-billion dollar settlement reached by Transocean with the Department of Justice on January 3, 2013.  Named corporations of the settlement were Transocean Deepwater Inc., Transocean Ocean Holdings LLC, Transocean Offshore Deepwater Drilling Inc., Transocean Deepwater Inc., and Triton Asset Leasing GMBH.  At the top of the responsibility list was BP Exploration & Production, Inc.

The statutes involved and even the nature of the events leading to the Gulf region disaster may not immediately seem relevant to the kind of manufacturing compliance with which we assist our clients, here at Orchid Advisors.  But there is a very important lesson to highlight for all businesses charged with compliance responsibilities who owe a reporting requirement to a government entity:  tell the truth or you will be publicly shamed.

The 56-page “Guilty Plea Agreement” includes one particularly notable charge, a series of admitted acts, and several specialized penalties.  The one count that jumps off the page is a violation of 18 U.S.C. section 1505, “Obstruction of Congress.”  Further into the document, six specific statements made to the House of Representatives Committee on Energy and Commerce on May 24, 2010 were admitted to be “omissions and false and misleading statements.”  Specifically at issue were estimates, actual flow rates, methodology, and withholding accurate information.

The take-away for all companies hits in item 23 under the heading of “Transparency,” which requires the defendant companies to create a “public website” that will include the following information:

  • lessons learned from the Deepwater Horizon incident;
  • annual progress reports on its compliance with the special terms of probation contained in the Settlement Order;
  • annual summaries of recordable safety incidents, days away from work, hydrocarbon spills with volume; and,
  • an annual list of all incidents of non-compliance with the Bureau of Safety and Environmental Enforcement (“BSEE”) or the Bureau of Ocean Energy Management (“BOEM”) regulations or probation for which the company is cited, including corrective actions taken and penalties assessed.

The public website is to be created within 90-days.  Third party safety and ethics compliance oversight is to last for five years.

The “transparency” terms of the Settlement Order, in particular, harkens to the “Wall of Shame” on the DHHS-CMS website for data breaches affecting 500 or more individuals, as required under the HITECH Act section 13402(e)(4).  

If the Transocean settlement signals anything to those involved with compliance, it is the expanding use by the government of public broadcasting of compliance failures.  One could even say that in compliance cases involving false statements to government auditors and authorities, penalties can and will go beyond third party monitors and into the realm of public opinion and the bottom line of sales.