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IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

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SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,

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vs.

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MARK A. JACKSON, et al.,

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Defendants.

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No. 4:12-cv-00563
Houston, Texas
May 29, 2014
1:30 p.m.

TRANSCRIPT OF PROCEEDINGS - MOTION HEARING
BEFORE THE HONORABLE KEITH P. ELLISON
UNITED STATES DISTRICT JUDGE
For the Plaintiff:

U. S. SECURITIES AND EXCHANGE COMMISSION
Alfred A. Day
Patrick M. Bryan
Nicholas A. Brady
Sharan Custer
100 F Street NE
Washington, DC 20549
Phone: 202.551.4702
Daya@sec.gov

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For the Defendant Mark A. Jackson:
BUCKLEYSANDLER LLP
David S. Krakoff
Adam Miller
Lauren R. Randell
Paige Ammons
1250 24th Street NW, Suite 700
Washington, DC 20037
202.349.7950
Dkrakoff@buckleysandler.com

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For the Defendant James J. Ruehlen:
GIBSON DUNN CRUTCHER LLP
Daniel P. Chung
Martin A. Hewett
Nicola T. Hanna
1050 Connecticut Ave., NW
Suite 300
Washington, DC 20036-5306
Phone: 202.887.3729
Fax:
Dchung@gibsondunn.com
Gerger & Clarke
SAMY K. KHALIL
1001 Fannin
Suite 1950
Houston, Texas 77002
Phone: 713.224.4400
Fax: 713.224.5153
Samy@gergerclarke.com

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Contract Court Reporter: Peggy Ann Antone, CSR, RMR, CRR
2515 Crescent Drive
La Porte, Texas 77571
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713.858.3140
pantonecrr@gmail.com
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Proceedings recorded by mechanical stenography, produced by
computer aided transcription.

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P R O C E E D I N G S

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THE COURT:

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Okay.

Good afternoon.

Welcome.

I'm

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always happy to have people in court.

You do have the

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option, though, on a nonevidentiary hearing of appearing by

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telephone, but good to see all of you.
I know you've been through it once with the

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court reporter, but for my sake we'll go through it again.

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Let's have appearances of counsel, beginning with plaintiff,

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please.
MR. DAY:

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Yes, Your Honor.

My name is Al Day.

I'm

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here on behalf of the United States Securities and Exchange

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Commission.

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THE COURT:

Thank you.

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MR. BRYAN:

Good afternoon, Your Honor, Patrick

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Bryan for the Commission.

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MS. CUSTER:

Sharan Custer.

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MR. BRADY:

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for the Commission.

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THE COURT:

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MR. KRAKOFF:

Good afternoon, Your Honor, Nick Brady

For Defendants?
Good afternoon, Your Honor.

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Krakoff for Mark Jackson.

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Adam Miller.

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Honor.

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David

Lauren Randell, Paige Ammons and

Mr. Jackson is here at counsel table, Your

THE COURT:
Yes.

Welcome to all of you.

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MR. HANNA:

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Good afternoon, Your Honor, Nick Hanna

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on behalf of Jim Ruehlen, who is present in court.

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colleagues, Daniel Chung, Mark Hewitt and Samy Khalil of

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Gerger & Clark.
THE COURT:

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Thank you very much.

Also my

All right.

Have

you discussed among yourselves how you wish to proceed?
MR. HANNA:

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Your Honor, we made a proposal to the

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SEC of a proposed order.

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proposal.

I'm happy to give the Court our

I think we've agreed on the top half, maybe, that

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we would start with the defendants' motion for summary

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judgment, and then the SEC's partial motion for summary

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judgment.

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agreement yet, but I'm happy to give the Court our list if

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that would be helpful.

And then after that, I don't think we have an

MR. DAY:

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Yes, Your Honor, we agree.

That makes

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sense to start with the dispositive motions and then move to

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the nondispositive motions.

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feels that it may make sense to group some of the Daubert

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motions together.
THE COURT:

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The parties -- well, the SEC

Let's go through the MSJs first.

want to hand that to Ms. Loewe.

Do you

Thank you very much.

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MR. HANNA:

Thank you, Your Honor.

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THE COURT:

We don't have anybody on the phone, do

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we?

All right.

Mr. Krakoff.

MR. KRAKOFF:

Afternoon, Your Honor.

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THE COURT:

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MR. KRAKOFF:

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Good afternoon.

here for a second.

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THE COURT:

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MR. KRAKOFF:

Very well.

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Okay.

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THE COURT:

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MR. KRAKOFF:

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I'm just going to get myself organized

With the court's indulgence.

May I proceed?
Yes.
Thank you, Your Honor.

Your Honor,

when we were here in December, 2012, for the motion to

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dismiss argument, the Court, of course, had to accept the

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allegations in the complaint as true.

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THE COURT:

We're past that.

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MR. KRAKOFF:

But we've -We're past that.

Things have changed.

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half has transpired.

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Nine expert witnesses have testified.

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testified.

A year and a

We've had full discovery in this case.
19 fact witnesses have

All of the evidence is in.
And what it shows, Your Honor, is that the SEC

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through discovery cannot prove the allegations in the

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complaint.

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The -- the facts as they have been established

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point in one direction, and that is, that Mark Jackson did

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not act with requisite state of mind to violate the Foreign

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Corrupt Practices Act.

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The undisputed evidence, Your Honor, is that he
acted transparently in reliance upon experts and with the

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belief that Noble was entitled to the permits and extensions

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that it sought.

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That's what discovery has shown, Your Honor.

THE COURT:

How much of your argument depends on the

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advice from Ms., is it Onodugo?

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MR. KRAKOFF:

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It -- we rely upon that, if -- in our

argument, certainly, but this is about state of mind.
THE COURT:

I know, but isn't state of mind shaped

somewhat by what -- by advice given you by counsel?
MR. KRAKOFF:

It does.

It was.

And that's true,

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Your Honor.

But it's far from the only fact that has been

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established in discovery that has impacted --

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THE COURT:

State of mind.

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MR. KRAKOFF:

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Court's indulgence --

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THE COURT:

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MR. KRAKOFF:

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THE COURT:

-- his state of mind.

And with the

Carry on.
-- I'll address that.

I think I need to ask you questions as

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we go along, because on some points I need help; on other

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points I think I'm in agreement.

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MR. KRAKOFF:

The SEC's burden, Your Honor,

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obviously, is to show that there's no genuine issue or

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material fact.

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That's not metaphysical doubt, it's not just

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their disbelief.

It's not unsubstantiated assertions.

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not unreasonable inferences.

It's

They have to present to the

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Court precise and specific evidence as to Mr. Jackson's state

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of mind.
I want to give you a little bit of a road map

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as to where I'm going to go.

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minutes about Mr. Jackson himself.

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about the context of his role at -- at Noble Corporation.

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THE COURT:

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MR. KRAKOFF:

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I'd like to speak for a few
I'd like to secondly talk

Okay.
And then I'd like to look at each one

of the actual payments that he approved.

And I wanted to

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take them one at a time, because I think that to really,

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really understand what discovery has shown about his state of

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mind you have to look at each one of them.

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Now, Mr. Jackson, Your Honor, was -- graduated

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from Oklahoma Christian University with an accounting degree

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in 1978.

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He went into the -- from public accounting, he then went into

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the corporate world, and he eventually moved into management

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and he did that because of his hard work, his brains, his

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drive, ultimately became the CFO of two large exploration and

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production oil companies, Apache and Santa Fe Snyder.

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his fine reputation in the industry got the attention of Jim

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Day, who was the long-time CEO of Noble, who hired him as the

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CFO of Noble in 19 -- in 2000 -- in 2000.

And

At Noble, his responsibilities were extremely

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He started at the bottom of the accounting ladder.

broad.

The handful of transactions that the SEC challenges

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were a tiny bit of all of the work that Mr. Jackson did while

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he was at Noble in his seven years.

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The -- Noble had 5,000 employees.

They had 60

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offshore rigs, all over the world, in 12 different countries.

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They had over a billion dollars in net income in 2007.

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It was a big, sprawling company.

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And Mr. Jackson's role as CFO was to be -- to

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supervise all of those financial functions that touched

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operations:

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Accounting, tax, budgeting, treasury, investor

relations, all of them.
And he took on more responsibilities even in

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operations as time went on.

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president, and CEO.

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He became the COO, later

And for an executive at his level, the

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day-to-day transactions, one at a time, he's not --

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Mr. Jackson at Noble, like executives at any company, cannot

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be expected to personally gather the minute facts, make all

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the decisions, do all the analysis, to come up with the right

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decisions on each transaction.

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A responsible executive, like Mr. Jackson, has
to receive all of the relevant information -THE COURT:

I understand.

He has to delegate.

understand that.
MR. KRAKOFF:

He does.

experts inside and outside.

And he has to look to

I do

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THE COURT:

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MR. KRAKOFF:

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I understand that.
He's got to ensure that the system has

a strong system of internal controls.
THE COURT:

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The SEC is not really pursuing its

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internal controls argument that much, is it?

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that.

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MR. KRAKOFF:

I'll ask them

I guess we'll hear from the SEC on

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that, but, I mean, there are some -- they did back off of --

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of a number of those claims.

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I think that's what the Court

may be referring to.

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THE COURT:

Yeah, I am.

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MR. KRAKOFF:

But I think that what the case is all

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about are his approvals of payments, facilitating payments to

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Nigerian officials to obtain TIPs in Nigeria and his state of

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mind when -- when he approved those payments.

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assessing his state of mind, Your Honor, Mr. Jackson has to

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be judged on what he knew, just what he knew.

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And in

We've heard in the papers that -- about what

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the defendants knew, what management knew, what Noble knew.

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State of mind is about Mr. Jackson, and --

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THE COURT:

Do you think it just is simply a

question of knowledge, not knew or should have known?

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MR. KRAKOFF:

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THE COURT:

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It's knowledge, Your Honor.

Yes, sir.

That would incentivize ignorance,

wouldn't it, that standard?

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MR. KRAKOFF:

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THE COURT:

I'm sorry, Your Honor?

That would incentivize ignorance,

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wouldn't it?

If it's just purely what he knew, he would be

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incentivized to keep himself away from knowledge, wouldn't

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he?
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Well, I suppose theoretically, yes.

I

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don't think -- there's no evidence from the 28 witnesses who

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testified in discovery of that -- of ignorance, willful

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ignorance, conscious disregard.

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THE COURT:

Okay.

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MR. KRAKOFF:

And certainly I think, Your Honor, the

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evidence is, frankly, quite to the contrary that -- that

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Mr. Jackson was somebody who was conscientious about his role

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as the CFO, his role in -- in being the head of the FCPA

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compliance at -- at Noble.
The SEC says that there were some 30 payments

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that he approved, but that's not true.

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Eight of them, Your Honor, were for extensions of import

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permits.

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And what I'm going to do is address each one of them, one at

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a time, and focus on what the evidence showed about his state

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of mind when he made the decision as to each one of them.

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There were ten.

Two of them were for the paper process.

That's it.

And because I think, Your Honor, it's important

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for the Court to look at what he knew at the time that he

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made his decision, and to -- to make an approval, and it's

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also important to look at the timing of each approval, to

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look at the order of each approval, to -- because each one

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follows on the other.

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through time.

And the information that he had builds

Now, you'll see, Your Honor, that, and I think

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you'll recall from the papers, that the extensions, the

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import extensions did not require the paper process.

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is, the submission to the Nigerian customs service of papers

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that -- that indicated that a rig had gone out into

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international waters and come back when it had not.

That

That -- the paper process, Your Honor,

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throughout this entire litigation is the lynchpin of the

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SEC's case.

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had corrupt intent.

That's how they -- they argue that Mr. Jackson

And so what you're going to see, Your Honor, is

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that the first five approvals that he made for payments,

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facilitating payments, were for extensions with no paper

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process.

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indicate the reliance upon false paperwork, which is, again,

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the lynchpin of the -- of the government's case.

No -- no evidence whatsoever of anything that would

So I want to turn to the -- to the first

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approval.

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Court would permit me.

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And I'm going to use some slides if the -- if the

THE COURT:
Just a second.

Yes, sir.

Let me get my screen working.

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MR. KRAKOFF:

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the Court prefers.
THE COURT:

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And I do have a hard copy of these if

Some courts have been -Yeah, please hand it to Ms. Loewe, if

you would.

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MR. KRAKOFF:

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THE COURT:

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MR. KRAKOFF:

Sure.

All right.

I'm with you.

I'm with you.

And Your Honor, if you -- it would be

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helpful to have a second copy, or more of the -- of the

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slides, I -THE COURT:

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helpful.

Do you have two extras?

MR. KRAKOFF:

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THE COURT:

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MR. KRAKOFF:

That's fine.

THE COURT:

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MR. KRAKOFF:

I'm ready.

THE COURT:

I'm ready.

I'm sorry.

We did not bring another

That's all right.

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to her.

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individualized screen.

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Oh, I'm sorry, Your

set.

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So here we are.

Honor, I was looking --

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I think we can come up with another

one.

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That would be

That's fine.

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Give one to my law clerk.

I'm going to give it

I think I can read it on the screen with my little

MR. KRAKOFF: So here we are on the -- the first
request for an approval for a facilitating payment regarding

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the permits.
And the date is August the 30th, 2004.

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The

request, you can see, was made to Mr. Jackson by Bill Rose.
Says, and this was for a third extension, Your

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Honor, for temporary import and it says, "This extension is

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allowed under the customs codes however, this payment is

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required to make it happen...

This is a, again, a request for approval of a

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Please approve this payment."

payment for an extension.

No paper process.

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And the reason I'm showing this to you, Your

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Honor, is because it shows that there was nothing that was

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being hidden here, this is totally transparent.

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following the -- the procedures of the company, the approval

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process.

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recorded in the facilitating payments account of the company.

They were

It was documented, and this -- this payment was

Who was Mr. Rose?

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Well, Mr. Rose was the vice

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president for the eastern hemisphere of -- of Noble

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Corporation.

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knew the West Africa Division.

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had run the West Africa Division for several years himself.

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He had worked with IC Network.

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He had been with the company for decades.

He

He knew Nigeria because he

So here -- here's a guy with substantial

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experience, and he says to Mr. Jackson, that the payment is

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required, it's allowed under the customs code of the country.

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Now, Mr. Jackson's decision was not made, Your

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Honor, strictly on this one e-mail.
As any of us, when we're -- when we make

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decisions, we make them based upon a range of information

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that we have in front of us, and some of that we may have

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learned years before, but it all informs our knowledge.

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THE COURT:

Yeah.

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MR. KRAKOFF:

Yes.

And that, Your Honor, I think is --

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I'd ask the Court to take that as an important point,

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because -- because what I want to do is lay out for the Court

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the information about Noble's FCPA compliance program, and

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the West Africa Division and its temporary import permit

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issues that Mr. Jackson had when he got up to this state.

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THE COURT:

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MR. KRAKOFF:

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is all in the record.

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he had.

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That's fine, is it in the record.
It's all undisputed, Your Honor.

This

This is information and knowledge that

The first piece of information -- I guess I

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should say, Your Honor, that one -- one other issue I'd like

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to point out on this first approval is the date.

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date, which is August the 30th, 2004, is nearly two years

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before the statute of limitations, which is May the 12th of

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2006, so for this -- this approval, no penalties can be

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assessed against Mr. Jackson.

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And the

Now, the first thing that he -- piece of
information that he had was from 2002.

I'm going to use a

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time line on the -- the --

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THE COURT:

I see it.

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MR. KRAKOFF:

I see it.

And that first piece of information

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was from when he was the CFO, he was in charge of the C -- of

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FCPA compliance at the company, and he asked Noble's outside

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FCPA expert, which was the Thompson & Knight law firm, to

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review the FCPA program that they had.

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a report, and they concluded that the program was excellent.

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They made certain recommendations to enhance the program, and

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They wrote

those were readily accepted.
So that's point of information one, that Mr. --

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They did.

Mr. Jackson had.
Second, Jackson asked Thompson & Knight to give

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training on the FCPA to -- to all of the senior executives.

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They did that late in 2002.
And, again, in discovery, we've seen the slides

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that they used in those -- in that presentation.
And we see that they -- that they -- that they

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determined when they -- when they trained, they used a

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hypothetical.

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payment regarding customs duties.

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The hypothetical was that there was a $10,000

And they concluded in that training that that
could be a facilitating payment.

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Third point that -- of information that he had.

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Prior to the first request to him for -- to

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approve a facilitating payment was in 2003, early that year,

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one of the enhancements to the FCPA program that had been

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recommended was implemented and that was to create a special

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facilitating payments account so that it would be easily

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auditable by the outside auditors of the -- of the company

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and that was implemented.
Later in 2003, again, Mr. Jackson, what did he

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do in his role as the final person in the FCPA program at

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Noble?

He directed the controller of the company to have all

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accountants in the divisions put even more detail in the

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accounting records when facilitating payments were made and

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recorded.

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So if you just -- if you just stop right there,

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just for a moment, you can see that what Mark Jackson is

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about is FCPA compliance.

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question in this record that that's where he was coming from,

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that's what he was focused on, that was his state of mind.

There's just -- there's no

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The next point of information that he had.

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The audit department, he was quite aware of the

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role of the audit department.
Audit department, internal audit, the kind of

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internal cops of the company, they look at issues where

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there's risk of noncompliance.

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THE COURT:

Yeah, I understand the whole thing.

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MR. KRAKOFF:

Okay.

And they had a process and the

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process was that they would study issues and they would write

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reports, they would -- they would assign action items to the

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responsible executive to fix things.
THE COURT:

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up reported as facilitating payments; is that right?
MR. KRAKOFF:

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That's right, Your Honor.

In the

special facilitating payments account.
THE COURT:

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And the payments in question would end

And the nature of -- the nature of the

auditing function required the auditors to look behind that
and see exactly what the payments were about?
MR. KRAKOFF:

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It certainly was available to them, to

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do that, and certainly the -- the auditors in Nigeria were

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fully aware of what the payments were for.
And there was -- there's testimony in the

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record about that.

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THE COURT:

Okay.

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MR. KRAKOFF:

All right.

Now, what else was he aware of?

He was aware that the -- that the audit

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department conducted a worldwide Foreign Corrupt Practices

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Act audit of all of the divisions of the company during 2003,

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and they finished their report early in January of 2004.
And the way the process works is that the head

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of internal audit is a guy named Tom O'Rourke, and he would

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take his final draft and send it over to Mr. Jackson for his

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review.

When Mr. Jackson got that report, he looked at it

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and he said:

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Nigeria, because this report says that there were no

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facilitating payments made by the Nigeria division in 2003

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and that just can't be.

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that there have to be facilitating payments there to get

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things done, to expedite things.

I know enough about Nigeria to know

That's what he said.

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There's something off here, something off about

That's what the record

shows.
And so he sent it back to Mr. O'Rourke, and

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Mr. O'Rourke took it from there and he went back, worked with

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the division and found out and determined that the division

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did not fully understand facilitating payments and how to

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book them.

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And so they had a lot of facilitating payments,

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it turned out, but they had been booked in other expense

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accounts, and so what that initiated was a full review of all

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of the facilitating payments in the Nigeria division.

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This is what the discovery showed.

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And it turned out there were a lot of them,

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over 200 payments, and totalling about $670,000.
And among the $670,000 of payments, over

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200,000 of them were made to IC Network as facilitating

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payments for extensions, for permits, to -- to be made to the

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Nigerian Customs Service.

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Those payments were made in 2003.

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And they were reclassified into this

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facilitating payments account.

And so that -- Mark Jackson

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initiated that process.

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the -- that was a result in the -- of the West Africa -- of

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the worldwide audit.

And he was aware of that in the --

Now, and it's important, Your Honor, because

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those payments to IC Network to be made to the Nigerian

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Customs Service are the same payments that later and today in

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this case are claimed to be illegal, in violation of the

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securities laws.
What else did Mr. -- Mr. Jackson know and

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learn?
He learned that in April of 2004, internal

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audit sent him a report of a -- of an audit it did of the

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West Africa Division.

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particular audit.

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for the company's rigs.

There were lots of findings in this

One of them did involve an import process

And they identified in that -- in that

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particular finding the paper process that we have heard

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about.

I'm going to -- and that was used for new permits.
I'm going to get more into the paper process in

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a few minutes, but suffice it to say that that issue was

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viewed by -- in the -- in the internal audit report that went

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to the audit committee as an issue regarding a question of a

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Nigerian law.

It was not viewed as a -- an issue of Foreign

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Corrupt Practices Act compliance.
It was viewed that way because of the question

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asked about using paperwork that was submitted to the

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Nigerian Customs Service that indicated rigs had moved out

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and moved back in when they had not.
So as part of that audit, he also learned the

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following:

He learned that PricewaterhouseCoopers, which is

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the outside auditor to the company, had advised the division

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the following -- and this is in the -- the audit report --

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that "additional renewals of the temporary import license may

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be obtained as long as the Company can justify continued use

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of the rig in Nigeria."
Now, what he understood that to mean, Your

13
14

Honor, is that Noble was entitled to import permits for its

15

rigs so long as they were on contract with the Nigerian

16

government.

17
18
19

THE COURT:

Well, can Price Waterhouse opine to a

legal question like that?
MR. KRAKOFF:

They opined based upon their knowledge

20

of the Nigerian market and their knowledge of the import

21

process and their knowledge of the customs service.

22
23
24
25

Could they -- as a matter of law, could they -could they reach a legal opinion?
THE COURT:

I -- I can't address that.

You're just talking about what shape

Mr. Jackson is thinking.

21

1

MR. KRAKOFF:

2

THE COURT:

3

MR. KRAKOFF:

That's right.

I understand.
Yes, sir.

I understand.

And not just Mr. Jackson.

4

He took that to mean that they were entitled to a permit.

5

wasn't the only one, Your Honor.

6

Noble executive who testified in this case about that audit

7

finding reached the same opinion.

Every

They concluded that they were -- the company

8
9

He wasn't alone.

He

was entitled to those permits.

10

So that was an important fact that was known to

11

him, again, before he was asked some months later to make his

12

first approval.

13

What else did he know coming out of this audit?

14

He knew that the general counsel of the company, because this

15

was in the audit, Bob Campbell, was tasked -- he was assigned

16

with advising the company on the previous payments that had

17

been made in this facilitating payments account, and the

18

reporting requirements.
In other words, he could see -- Mr. Jackson

19
20

could see that the compliance process of the company was

21

working.

22

see when you're in that position.

It was at work.

And that's what you would want to

23

What else did he know?

24

He knew that Bill Rose, again, the vice

25

president for eastern hemisphere with a lot of experience in

22

1

Nigeria, had been tasked with obtaining detailed -- a

2

detailed understanding of the risks and the liabilities

3

associated with temporary import -- with the temporary import

4

process.
So they were looking at this.

5
6

THE COURT:

Yeah.

7

MR. KRAKOFF:

And they put the guy, the executive

8

with all the experience and the -- and the responsibility for

9

that part of the world on this -- on this issue.
Again, the FCPA compliance process was at work.

10
11

That's what the CFO responsible for FCPA compliance could

12

see.

13

that Mr. Campbell, the general counsel, hired Thompson &

14

Knight, the FCPA experts, to investigate another finding in

15

the West Africa Division report and that finding was about a

16

potential FCPA violation for payments of $18,000 over a

17

couple of years to a Nigerian labor official.

18

What else did he know?

He knew that from -- from --

They looked at that in the audit report, they

19

gave the assignment to Mr. Campbell to find out:

20

a FCPA problem?

21

Do we have

And they did identify that finding as a

22

potential problem.

And so what did he do?

He went out.

He

23

hired the experts.

He asked them to do an investigation.

24

They did what law firms do.

25

looked at all of the relevant documents, they wrote a lengthy

They interviewed witnesses, they

23

1

report, some 30-40 pages, to the audit committee of the board

2

of directors and what did they conclude?
They concluded that the payments to the labor

3
4

official, $18,000, could be facilitating payments and that

5

reporting was not required.

6

there was -- and they wrote this in their report to the audit

7

committee, that there was no evidence of a broader scheme to

8

improperly influence Nigerian government officials.

They also concluded that the --

That was -- that report was given to

9
10

Mr. Jackson.

Mr. Jackson saw that, came from the lawyers,

11

and he understood that.
THE COURT:

12

Was that -- was that written exclusively

13

for internal use or was that meant to be shared with outside

14

parties?

15

MR. KRAKOFF:

It was for internal use.

It was not

16

one of those reports that you -- that law firms do that are

17

given to the government for purposes of -- of settlement.

18

was an internal report.
What else did he know, Your Honor, that was

19
20
21

It

relevant?
He knew that Mr. Campbell and Thompson &

22

Knight, the law firm, received all of the information about

23

the facilitating payments account.

24

was put together with all of these some 200 payments,

25

$670,000, that had been misclassified and were now being

It was a spreadsheet that

24

1

reclassified into the facilitating payments account and as I

2

mentioned earlier, some ten of those payments were to IC

3

Network as facilitating payments to go to the Nigerian

4

Customs Service.
And that spreadsheet went to the general

5
6

counsel, it went to the outside law firm, Jackson knew that.
And despite the amounts of the payments to IC

7
8

Network for facilitating payments to Nigerian Customs

9

Service, despite those amounts, neither Mr. Campbell nor

10

Thompson & Knight raised any concerns.

11

THE COURT:

Okay.

12

MR. KRAKOFF:

Now, I want to look for a moment, Your

13

Honor, and it's going to be a little difficult for you to see

14

from this distance, the spreadsheet that they actually saw.
So what I -- I would -- I'll do --

15
16

THE COURT:

Just tell me what it says.

17

MR. KRAKOFF:

It says, Your Honor, that -- and what

18

it shows is that the spreadsheet actually identifies the

19

following:

20

of $23,000.

21
22
23
24
25

Temporary import extensions for a particular rig
It -- that's on line number 3.
On line number 6, temporary import extension

for another rig called the -- the NOBLE PERCY JONES, $11,500.
Eight -- another one, line number 8, temporary
import permit for the NOBLE DON WALKER, $14,000.
THE COURT:

Yeah, I see it.

I see it.

25

MR. KRAKOFF:

1

Again, line number 10 -- line number

2

9, temporary import extensions, $52,000.

3

temporary import extension, 12 -- 12,000, a little over

4

$12,000.
So that's what was in front of lawyers, inside

5
6

and outside lawyers.
Those amounts for that purpose.

7
8

Line number 10,

any issues.

That was known to Mr. -- Mr. Jackson.
What else did he know?

9

Nobody raised

He knew that there was

10

a follow-up, an update, to the West Africa Division audit.

11

The original audit report, as I mentioned, was in April of

12

2004.
Their process was that there would be an update

13
14

at the next audit committee meeting to advise the -- the

15

audit committee as to the action that had been taken

16

regarding a prior audit.
So that if there was a potential issue, they

17
18

would report to -- to the audit committee, well, we've taken

19

care of this or we're in the process of taking care of this

20

and so and so, this executive or that executive, is the one

21

who's -- who's going to --

22

THE COURT:

Yeah, I understand.

23

MR. KRAKOFF:

So the July, 2004, update reported the

24

following:

It reported that for paper process permits that

25

that wouldn't be used, that the -- a free trade zone, rigs

26

1

would be taken out to a free trade zone and then brought

2

back.

3

that point.

That was the conclusion that they -- they reached at

Didn't apply to extensions, permits -- permits

4
5

that were being extended, only to new permits, Your Honor.
And, indeed, the controller of the company and

6
7

the tax manager of the company, reported to the audit

8

committee and this was known to Mr. Jackson was because he

9

went to the audit committee meeting in July, they reported

10

that the -- that the rigs that were in Nigeria met the

11

criteria necessary for an extension for each temporary import

12

permit.
They had been assigned this task by the -- the

13
14

internal audit department.

They looked at each of the rigs,

15

and they were all in need of extensions and they met the

16

criteria.

17

Mr. Jackson knew.

That's what was reported and that's what

So that brings us back, Your Honor, to the

18
19

August 30th, 2004, request -- first request to Mr. Jackson to

20

approve a facilitating payment for an extension.

21

process.

No paper

And, again, as -- as Mr. Rose wrote, "This"

22
23

extension "is allowed under the customs codes however, this

24

payment is required to make it happen...

25

payment."

Please approve this

27

So the e-mail was copied, also, to the

1
2

controller, Mr. Thomasson, and who's Mr. Thomasson?

3

he now?

4

is Mr. Rose?

5

company.

Where is

He's now a professor of accounting at Baylor.

Where

He's now the CEO of an oil company, public

Mr. Rose, what did he testify to in discovery,

6
7

in his deposition?

He testified that he never would have

8

asked Mr. Jackson to approve what he -- what he knew was a

9

bribe, never.
THE COURT:

10

I appreciate your presentation.

I'm

11

concerned, we're not going to have time for everybody to

12

speak, so -- everybody can assume I've read the papers.

13

read those, so how long do you anticipate you'll go,

14

because -MR. KRAKOFF:

15
16

I would say about ten minutes, Your

Honor.

17

THE COURT:

18

MR. KRAKOFF:

19

I've

Okay.

All right.

That's fine.

So I'll -- I'll go -- I'll go through

these -- the other approvals quickly, Your Honor.

20

THE COURT:

Okay.

21

MR. KRAKOFF:

What we had, Your Honor, was going to

22

the second approval.

23

Again, this is for an extension, it's not the paper process.

24
25

Again, this is September of 2004.

It was -- and that, again, was a request by a
variety of people to Mr. Jackson.

28

THE COURT:

1

You say the cost itself is in line.

Do you -- do you agree that generally a number

2
3

that would be way out -- out of line would be reason for

4

suspicion?

5

MR. KRAKOFF:

6

THE COURT:

7

MR. KRAKOFF:

8

Not necessarily, Your Honor.

Okay.
I mean, it depends upon the

circumstances.
THE COURT:

9

Okay.

MR. KRAKOFF:

10

All right.

For instance, a longer -- if it were

11

a -- a third extension, you might see a greater amount.

12

other words, it's relative to the duration.
THE COURT:

13

In

Is it relative to what was going on in

14

other countries or other parts of Nigeria or is it just --

15

how does one know what is excessive?
MR. KRAKOFF:

16

Well, it's -- I think it's relative to

17

what is going on in Nigeria.

18

THE COURT:

19

MR. KRAKOFF:

20

Okay.
Nothing had changed his state of mind

from August to September.
The third approval was initially -- it was

21
22

requested on October the 8th, and later, of 2004, just

23

another month later and he was also requested on November the

24

10th, and -- by Mr. Thomasson, the controller, who we've seen

25

before.

29

And Mr. Thomasson wrote in his e-mail request:

1
2

The NOBLE ED NOBLE is eligible, and the law allows for the

3

extension of this temporary import.

4

to have the temporary import processed in a reasonable time

5

frame..

The payment is necessary

6

So that's the third.

7

The fourth and the fifth, Your Honor, again,

8

are extensions, and they're in January of 2005, requests by

9

Mr. Rose, again, to Mr. Jackson for -- for extensions for a

10
11
12
13
14
15
16
17

couple of the rigs of Noble.
Again, there had been no change -- no new
information that would change his state of mind.
So that brings us, Your Honor, to the sixth
approval, which was for the paper process.
That was some months later.

That was May 17th,

to the 25th of 2005.
There had been five -- five requests for

18

extensions, which didn't use the paper process.

19

of the SEC's case.

20
21

The lynchpin

Now we come -- and that's how he was introduced
to these -- these facilitating payments.

22

THE COURT:

I got that.

23

MR. KRAKOFF:

So when the sixth approval came --

24

request for approval came to him, this is what -- and it came

25

to him from Mr. Ruehlen.

Mr. Ruehlen by then was the

30

1

division manager in Nigeria, and he sent an e-mail to

2

Mr. Jackson, and in that e-mail, here's what he said.
He said that the paper process had already been

3
4

approved by Mr. Rose.

He said, secondly, that the

5

facilitating payment by IC Network to the Nigerian Customs

6

Service had already been approved by Mr. Rose.

7

indicated that the payment to the Nigerian Customs Service

8

had already been made by IC Network.

9

happened.

He also

All of that had

10

And he asked -- Mr. Jackson was asked by

11

Mr. Ruehlen, simply to approve the reimbursement to IC

12

Network for the facilitating payment that he had already

13

made.

14

How did Mr. Jackson respond?

15

He responded as someone who you would -- as you

16

would expect, someone who is the CFO, who's got

17

responsibility for FCPA compliance, but who does -- who's not

18

involved in this in Nigeria, he's not their day-to-day.

19

THE COURT:

Yeah.

20

MR. KRAKOFF:

And what did he do?

He asked what

21

this was all about and he said -- he had a vague recollection

22

that this issue had come up, this paper process issue had

23

come up in the audit the year before.

24
25

And so he asked Mr. Ruehlen -- excuse me -Mr. O'Rourke, who was the head of internal audit and had done

31

1

that audit, to weigh in.

And -- with that audit finding.

2

And what he -- what he -- what he had and what

3

he learned, Your Honor, is that in that audit finding, there

4

had been -- there had been an assignment to the controller of

5

the company, to the vice president for eastern hemisphere, to

6

come up with a -- a full understanding of the import process.

7

He learned that they -- that they did undertake

8

that process and they did a detailed study, and they

9

determined that all of the rigs were -- met the criteria for

10
11

extensions.
Just what we -- what I've been talking about --

12

THE COURT:

13

MR. KRAKOFF:

14

Yeah.
-- up to this point.

That was the

extent of Mr. Jackson's knowledge.

15

So what did he do then?

16

The issue on the table that was left open was:

17

Are these payments with the paper process, are they legal

18

under Nigerian law?

19

permissible under Nigerian law?

20

He asked that question:

Are they

And the answer that came back to him was that

21

the companies -- this is where the company's lawyer, Jo

22

Onodugo, in Nigeria comes into the -- into the case and she

23

reported, yes, they are legal in Nigeria.

24
25

That's what was reported to Jim Ruehlen.
O'Rourke reported that to -- to Mr. -- Mr. Jackson.

Tom

That's

32

1

what he knew.

And it was at that point, with that

2

information, that was the basis on which he approved the

3

reimbursement to IC Network.

4

THE COURT:

5

MR. KRAKOFF:

Okay.

I got you.

That -- that same -- the only other

6

paper process that he approved was actually for the same

7

import permits.

8

again and he did that again.

It was three months later.

He was asked

Otherwise, everything in this case --

9
10

THE COURT:

Okay.

11

MR. KRAKOFF:

-- are extensions.

And I'm sure you'll hear from the -- from the

12
13

SEC that -- questioning whether or not there really was

14

advice by Ms. Onodugo.

15

THE COURT:

We don't have any record of it; right?

16

MR. KRAKOFF:

We don't have a written record at that

17

time.

However, what we do have is unrebutted testimony in

18

this case from Mr. Ruehlen, from Mr. O'Rourke, from

19

Mr. Jackson, and we have e-mails from 2007 that -- one from

20

her, in which she said, "Yes, my advice is that this is legal

21

in Nigeria."
There was -- and there were other e-mails from

22
23

Mr. O'Rourke demonstrating and corroborating his

24

recollection.

25

So there's no evidence, frankly, Your Honor, to

33

1

the contrary.

2

THE COURT:

Yeah.

3

MR. KRAKOFF:

Okay.

None.

Now, so, Your Honor, the -- all of this

4
5

informed Mr. Jackson's belief that Noble was entitled to

6

temporary import permits.

7

advice, the -- the rigs were under contract with the Nigerian

8

government.

9

understanding.

The audit finding had said so, PWC

Many others had testified to the same
The Nigerian government itself had a -- had

10

an incentive to keep the -- the rigs pumping oil, because of

11

the importance of that to the economy, and not losing a month

12

or two months of oil production.
It was consistent with Mark Jackson's own

13
14

understanding of the importance to the Nigerian government of

15

the continuing production of oil, how important that was to

16

their economy.

17

And the competition.

He also knew that the

18

competition, the other drilling companies that were hired by

19

the Shells and Chevrons and the Nigerian government, they

20

also kept their rigs in the country under the same process.

21

So there's nothing in this record that is in

22

dispute about what the information that informed

23

Mr. Jackson's knowledge.

24
25

It's really as simple as that.

If you take each one of these -- this is why I
went into some -- some length.

34

1

THE COURT:

I understand.

2

MR. KRAKOFF:

I understand.

-- to go into each one of these import

3

permits, because you really have to not do what the SEC has

4

attempted to do through this litigation, and that is to

5

conflate the extensions with the new import permits.

6

THE COURT:

Okay.

7

MR. KRAKOFF:

The -- the final three approvals, Your

8

Honor, were -- and we've got them on a slide, but they're

9

in -- they're extensions, again.

10

THE COURT:

Okay.

11

MR. KRAKOFF:

In June of 2005, July of 2005 and May

12

of 2006.

And, Your Honor, you can see this is how they line

13

up, in chronological order.
Five extensions, the paper process, two more

14
15

extensions, and this -- actually, the same rigs in a second

16

paper process, in the final extension.

17

THE COURT:

18

MR. KRAKOFF:

19

I understand.

Okay.

So that's really what we have, Your

Honor.
Bottom line, Your Honor, is that Mr. Jackson,

20
21

the evidence in the -- that has been presented in discovery,

22

is undisputed, that he did not have corrupt intent, as the

23

Court has defined "corrupt intent" in the motion to dismiss

24

opinion.

25

He did not act with an evil motive or wrongful

35

1

purpose to influence a foreign official to misuse his

2

position.
He simply didn't.

3

And when -- what we tried to

4

do is to not overstate what he knew.

5

out exactly what he did know, because that's what informed

6

his state of mind.

7

he could not have the requisite corrupt intent.

10

If he believed that they were entitled,

And that's where we are, Your Honor.

8
9

That's

why we -- Mr. Jackson should be granted summary judgment in
this case.

11

THE COURT:

12

MR. KRAKOFF:

13

THE COURT:

14

from the other side.

15

later.

16

We're trying to weigh

Okay?

Thank you very much.

Thank you.

Thank you.

Okay.

I think it'd be fair now to hear

Then we'll come back to Mr. Ruehlen

Is that agreeable?

MR. DAY:

Yes, sir.

Good afternoon, Your Honor.

17
18

THE COURT:

19

MR. DAY:

Good afternoon.

What we've just heard from Mr. Jackson's

20

counsel amounts to little more than argument about how

21

disputed and inconclusive evidence should be interpreted by

22

the jury.
We heard a lot about what Mr. Jackson

23
24

purportedly knew, what he purportedly believed, and the

25

question is:

Was his belief reasonable?

Does the evidence

36

1

that's been adduced in discovery support his own claims about

2

what he knew at various points in time?
THE COURT:

3
4

Do you agree with Mr. Krakoff that it's

a knowledge standard, not -- not knew or should have known?
MR. DAY:

5

Your Honor, with respect to knowledge, the

6

FCPA has a specific provision addressing deliberate ignorance

7

of facts in the face of red flags, so, no, I don't agree that

8

it's an actual knowledge standard, if we're talking about

9

knowledge of facts.
Corrupt intent is a different issue, but

10
11

knowledge of facts can be established through deliberate

12

ignorance.
THE COURT:

13
14
15

about.

All right.

That's what I'm talking

Knowledge of facts.
MR. DAY:

Yeah.

Your Honor, I think the fundamental

16

argument that the SEC makes in opposition to Mr. Jackson's

17

summary judgment motion is that the undisputed facts in this

18

case, in fact, give rise to a powerful inference of corrupt

19

intent, and everything that you've heard from Mr. Jackson's

20

counsel today is an effort to overcome that inference.

21
22
23

This sets up a classic dispute that has to be
resolved by the jury.
Mr. Jackson does not dispute that he authorized

24

payments to Nigerian government officials in connection with

25

obtaining TIPs and TIP extensions.

He does not dispute that

37

1

some of these TIPs were obtained using false paperwork.
Mr. Jackson does not dispute the amounts of the

2
3

payments, roughly $12,000 to $56,000 per transaction.

Nor

4

does he dispute that each payment was followed by an action

5

favorable to Noble.
These undisputed facts give rise to an

6
7

inference of corrupt intent; that is, in this Court's words,

8

"the wrongful purpose of influencing an official to misuse

9

his position."
Mr. Jackson, as I've already alluded to,

10
11

advances a number of excuses for his conduct that he says

12

overcomes this inference.

13

heart with respect to the authorizations that we heard about

14

from Mr. Krakoff, but these excuses just underscore factual

15

disputes and credibility determinations that must be made by

16

the jury.

17

He says that he acted with a pure

Your Honor, I don't want to occupy the Court's

18

time today rehashing arguments set forth in our briefing.

19

The briefing in this case is extensive and comprehensive.

20

THE COURT:

21

MR. DAY:

Yes, it is.

I want to use my time today as efficiently

22

as possible to address some of the arguments raised in

23

Mr. Jackson's reply, to address a few comments that

24

Mr. Krakoff just made, and to answer any question that the

25

Court may have.

38

First, Your Honor, with respect to

1
2

Mr. Jackson's reply, the 5th Circuit has held, and the

3

defendants don't dispute, that summary judgment is generally

4

inappropriate in cases that turn on a defendant's state of

5

mind.

That is the controlling law in the 5th Circuit.
Mr. Jackson relies on the Krim case for the

6
7

proposition that summary judgment can be granted in a state

8

of mind case.

9

forward-looking statements where there was absolutely no

Of course, Krim is apposite, it involved

10

evidence whatsoever that at the time the statements were made

11

the makers of the statements knew that they were untrue or

12

unlikely to come to fruition.
Here, in contrast, defendant's undisputed

13
14

conduct gives rise to an inference of corrupt intent that

15

cannot be swept under the rug by self-serving denials.

16

I want to turn to the issue of corrupt intent.

17

Mr. Jackson promotes a view of corrupt intent

18
19

in his reply brief that is unduly restrictive.
THE COURT:

As --

I would appreciate some help on what

20

"corruptly" means.

21

defendants, of course, take the position that the SEC's

22

construction of the antibribery provisions renders

23

"corruptly" superfluous, so I need all the help I can get on

24

this point.

25

MR. DAY:

It's -- it's very confusing to me.

The

Yes, Your Honor, that's exactly what I

39

1

want to address from their reply brief.
Nick, could you put up slide number 2 for me,

2
3

please.
As an initial matter, I think it's important to

4
5

keep in mind the purpose of the FCPA and the manner in which

6

Congress set about to prohibit -- I have hard copies, as

7

well.
THE COURT:

8
9

would.

Yeah, give them to Mrs. Loewe, if you

And do we have them for the other side, too?

10

MR. DAY:

I think we probably have enough.

11

THE COURT:

Just give one to me, then let's see --

12

it's more important that the other side have it than I have

13

it.

14

MR. DAY:

Your Honor, I think it's useful to keep in

15

mind the policy and the structure of the FCPA as we discuss

16

the meaning of the word "corruptly" in the statute.

17

The 5th Circuit has described "bribery" as

18

immoral, inefficient and unethical.

19

In short, bribery of foreign officials is a pernicious

20

practice that Congress sought to condemn through the FCPA.

21

The FCPA's proscriptions are broad and the exceptions

22

narrowly drawn.

23

much foreign bribery as possible, and the exceptions are

24

narrowly drawn so as not to swallow the overall prohibition.

25

That's the Kay I case.

The purpose of the FCPA is to prohibit as

Jackson, nevertheless, accuses the SEC of

40

1

attempting to move the goal post and read the word

2

"corruptly" out of the statute and this goes to Your Honor's

3

question.
Proof of corrupt intent is, of course, a

4
5

necessary predicate to liability under the FCPA, but as a

6

matter of proof, the SEC contends that corrupt intent may be

7

inferred from evidence that a defendant engaged in one of the

8

three categories of conduct enumerated in the statute.
Go to slide number 3.

9

The -- specifically the FCPA prohibits corrupt

10
11

payments to foreign officials, the purpose of which is to

12

influence any official act, to induce an act or omission

13

inconsistent with the official's lawful duty, or to secure an

14

improper advantage.

15

Evidence that the defendant engaged in conduct

16

falling within one of these prohibited categories gives rise

17

to an inference of corrupt intent.

18

defendant were to admit that he made a payment to a foreign

19

official for the purpose of securing a valuable government

20

contract, corrupt intent would be manifest.

For example, if a

Put another way, this type of evidence of one

21
22

of the prohibited purposes under the statute will support the

23

inference that the defendant was acting with the wrongful

24

purpose of influencing a foreign official to misuse his

25

position.

41

No additional evidence of an evil motive or

1
2

wrongful purpose is required or necessary precisely because

3

payments to government officials are inherently wrongful, as

4

the 5th Circuit has recognized.
Your Honor, United States versus Aguilar, 515

5
6

U.S. 593, is instructive on this point.

Albeit in the

7

context of 18 U.S.C. 1503 which prohibits corruptly

8

influencing jury proceedings, Justice Scalia noted that "Acts

9

which influence, obstruct or impede the due administration of

10

justice are," quote, "'obviously wrongful,' just as they are

11

necessarily corrupt."
In other words, once an act is shown to

12
13

interfere with the jury process, in that case, it does not

14

require a leap to deem the act corrupt.
Similarly, in the United States versus Ogle,

15
16

the 10th Circuit rejected the defendant's contention that the

17

term "corruptly" refers to something that is "especially

18

diabolical."

19

That was the term from the case.
And, instead, held that the evidence that the

20

defendant sought to influence a jury was, per se, corrupt.

21

That's 613 F.2d, 233.

22

Finally, in the 5th Circuit in United States

23

versus Reeves, the 5th Circuit held that the corrupt intent

24

may be inferred from wrongful conduct itself; in that case,

25

an effort to impede a tax investigation by filing bogus liens

42

1

on a government agent's property.

That's 752 F.2d, 995.

In each of these cases, the nature of the

2
3

conduct itself, proof of the conduct itself, gave rise to an

4

inference of corrupt intent.
It doesn't read "corrupt intent" out of the

5
6

statute.

Instead, the evidence supports the inference of

7

corrupt intent.
This is consistent with cases assessing the

8
9
10

sufficiency of evidence or allegations under domestic bribery
statutes, such as 18 U.S.C. 201.

11

We cited in our opposition brief, and I won't

12

rehash this for the Court, but at pages 22 and 23, a number

13

of cases standing for the proposition that corrupt intent may

14

be inferred from the fact of payments to government officials

15

followed by favorable treatment.
Those are the Jennings, Sawyer, Biagi and Gil

16
17
18
19

Ramirez cases.
THE COURT:

I have such trouble understanding the

facilitating payment exception.

20

MR. DAY:

Yes, Your Honor.

21

THE COURT:

I mean, it almost swallows the rest of

22

the statute.

And I know it's in the legislative history that

23

these, I think reference is made to grease payments, somehow

24

to grease the skids.

25

do seem to be contemplated, from the payments that you allege

How do I separate those payments, which

43

1

were made in this case, which you think are squarely within

2

the FCPA's prohibitions?
MR. DAY:

3

Yes, Your Honor, we're arguably getting a

4

bit ahead.

5

the SEC's motion for partial summary judgment, but I'm happy

6

to address the facilitating payment exception.
THE COURT:

7
8

This comes up, perhaps, more in the context of

motion.

Well, I think it transcends any one

I think it's at the heart of the case.
And I don't understand it.

9

Whether we make the

10

distinction based on size of payments, regularity of

11

payments, purpose of the payments, nature of the -- of the

12

favorable conduct elicited.
I just really struggle with it.

13
14

MR. DAY:

Yes, Your Honor.

For the -- for the

15

exception to apply, the SEC's position is that two elements

16

must be met.

17

the act must be a routine government action within the

18

meaning of the statute.

19
20

There must be a purpose to expedite an act and

THE COURT:

temporary -- to the temporary import, though, couldn't it?

21

MR. DAY:

22

THE COURT:

23
24
25

Both those could apply to the

Well, in what way, Your Honor?
Well, because its purpose was to

expedite an act and it was a routine government action.
These import permits were granted all the time.
MR. DAY:

Your Honor, two things to keep in mind

44

1

about the temporary import permit regime.
The first one is the temporary import permits

2
3

and extensions were granted only when large payments were

4

made to government officials in connection with them.

5

can't extrapolate from the fact that bribery was successful

6

that the action is routine.

7

through the middle of the FCPA's prohibition on bribery.

10

That would just drive a truck

So going back to the elements, there has to be

8
9

So you

a purpose to expedite and an objectively routine government
action.

11

Your Honor held in the context of the motion to

12

dismiss ruling in this case that the SEC could demonstrate --

13

could negate the applicability of the routine government

14

action exception most simply, I believe was Your Honor's

15

term, by pleading that Nigerian law provided for discretion.

16

The legislative history --

17
18
19

THE COURT:
major variable.

Well, that's all right.

Discretion is a

I understand that.

MR. DAY:

And the SEC's position is that the

20

statute, both the text of the statute, the legislative

21

history and the policy behind the statute, is best served by

22

a reading that the discretion, the nature of the act, is an

23

objective inquiry that relies on what the law in the country

24

requires.

25

Now, with respect to the purpose to expedite,

45

1

our motion for partial summary judgment does not bring to

2

bear any arguments about the purpose.

3

objective nature of the act sought.

4

It rests solely on the

However, I will note for Your Honor that there

5

is absolutely no evidence other than repeated statements by

6

the defendants in this case that there was any reason to seek

7

to expedite these TIPs or TIP extensions.

8

evidence, there has been no testimony, there is no

9

documentary evidence that Noble ever encountered any problem

There has been no

10

or delay in obtaining TIPs or TIP extensions such that they

11

needed to be expedited.

12

The -- Your Honor, the size of the payments and

13

the escalating nature of the payments also undermines any

14

claim that these were expediting payments if, as the

15

defendants posited, each of these TIPs and TIP extensions was

16

an entitlement, meaning that the Nigerian government

17

officials had absolutely no choice under any circumstances

18

but to grant the request.

19

They offer no explanation why 1.6 million Naira

20

for first and second extensions, 5 million Naira for third

21

extensions, 7 million Naira for the one fourth extension and

22

6.9 to 7.2 million Naira for false paperwork TIPs.

23

no logical explanation for that escalating cost if the

24

purpose of these payments was to simply expedite.

25

There is

In fact, the opposite inference is true.

The

46

1

further Nigerian officials were asked to deviate from the

2

letter of the law, the more they were required to be bribed.

3

Your Honor, going back to the issue of corrupt

4

intent, unless you have further questions?

5

THE COURT:

6

MR. DAY:

7

Okay.

On the issue of corrupt intent, I

just want to make a few more comments on the inference.
Mr. Jackson in his reply brief suggests that

8
9

No, go ahead.

some additional showing is required, apparently in the nature

10

of independent evidence of a wrongful purpose beyond the

11

inference to be drawn from the undisputed conduct in this

12

case.

13

Mr. Jackson doesn't say what such a showing

14

would look like.

15

purpose is presumably rare.

16

case that a person engaged in bribery says or writes, "I am

17

doing this for a wrongful purpose to influence a government

18

official," or "Enclosed please find a corrupt payment."

19

That's not going to be the usual case.

20

Indeed, direct evidence of a wrongful
It would not ordinarily be the

Instead, as the 5th Circuit case law makes

21

clear, corrupt intent may be established by circumstantial

22

evidence, and that's exactly what the SEC has put forth in

23

its opposition to Mr. Jackson's summary judgment motion,

24

circumstantial evidence based upon the nature of the

25

payments, the size of the payments and the escalating size of

47

1

the payments that gives rise to an inference of corrupt

2

intent.
We've already covered some aspects of the size

3
4

of the payments at issue in this case, but I do want to

5

respond to a few arguments put forth from Mr. Jackson's reply

6

brief.

7

The SEC is not attempting to place a cap on

8

facilitating payments, as Mr. Jackson suggests.

Rather, Your

9

Honor raised earlier the question of how do we assess whether

10

the size of a payment is such to raise a red flag as to the

11

nature of the payment.

12

he agreed with Your Honor that this must be assessed with

13

respect to what else is going on in Nigeria and it depends on

14

the circumstances.

15

And if I heard Mr. Krakoff correctly,

Your Honor, I would submit right there, that's

16

a jury question.

17

circumstances and has to be compared to what else was going

18

on in Nigeria, that is a question for the jury.

19

If it depends on the facts and

When you actually look at what else Noble was

20

doing in Nigeria with respect to purported facilitating

21

payments, these payments dwarfed any other payment that Noble

22

was characterizing as a facilitating payment in Nigeria.

23

It's set forth in our brief in one month, May of 2005, a

24

handful of payments made in connection with false paperwork

25

TIPs accounted for roughly 94 percent of all of the

48

1

facilitating payments in that month.

There were scores of

2

other facilitating payments that averaged around $11.
The jury is entitled to conclude from that

3
4

disparity between what are much more plausibly facilitating

5

payments and what was going on with respect to TIPs and TIP

6

extensions, that these were unusual payments, unusually large

7

payments, and that Noble sought something unusual in return

8

for that size payment.
Mr. Jackson also contends and this comes up in

9
10

Mr. Ruehlen's brief, as well, that the size of the payments

11

must be judged against the value of the drilling rigs or the

12

value of the contracts in place with Noble's customers.
However, the legislative history is clear that

13
14

the question is whether the payment is proportional to the

15

government action sought, not the value of something internal

16

to the company.
In this case, there is no dispute that the

17
18

government benefit sought, which was an exemption from

19

temporary -- from import duties, was free.

20

charge.

21

There was no

So if the size of the payment is to be judged

22

with respect to the government benefit sought, these

23

payments, the jury is entitled to conclude, were dramatically

24

large in comparison to a free process provided by the

25

Nigerian government.

49

Finally, Mr. Jackson points to the NOBLE DON

1
2

WALKER physical rig import to argue that there's some flaw in

3

the SEC's reasoning about the size of the payments.
First of all, as a factual matter, the special

4
5

handling charges for the NOBLE DON WALKER were 5 million

6

Naira.

7

government officials authorized in connection with false

8

paperwork TIPs, were 6.9 to 7.2 million Naira.

9

paperwork TIPs actually cost more in unlawful payments to

Special handling charges, those are payments to

10

government officials than the physical import.

11

factual matter, the comparison is not correct.

So the false

So as a

Second, the fact that Noble may have paid

12
13

bribes to obtain a discretionary import permit for a rig that

14

was physically imported doesn't change the character of

15

obtaining false paperwork TIPs in other cases.

16

that somehow this excuses or renders the size of the payments

17

for the false paperwork TIPs is unpersuasive.

18

THE COURT:

So the logic

Do you agree that when it comes to

19

facilitating payments, the comparator is other Nigerian

20

payments?

21

United States, not anything like that?

22

in Nigeria?

23
24
25

Not other countries, not domestic payments in the

MR. DAY:

It's what is going on

It depends, Your Honor.

I think if the issue is corrupt intent and the
issue is what did these defendants intend when they made

50

1

these particular payments in this jurisdiction, the

2

appropriate comparison would be other payments that were made

3

by these defendants and others within Noble in that

4

jurisdiction to put those defendants on notice that these

5

were unusually large payments as compared to other payments

6

that might appropriately be characterized as facilitating

7

payments.

8
9

THE COURT:

You also argue that recording the

payments as facilitating payments in the company's books is

10

essentially duplicative or duplicitous.

11

government officials, just say to that, like so, would that

12

be accessible?

13

MR. DAY:

Would payments to

Your Honor, these payments were recorded

14

as a particular kind of payment, a lawful payment.

A payment

15

that meets a legal exception to liability under the FCPA.
As this Court recognized in the motion to

16
17

dismiss opinion, calling a payment something that it is not

18

is false.

19
20
21

THE COURT:

What would they have needed to call it?

That's what I'm asking.
MR. DAY:

Payments to government official -- I can't

22

speculate all the things that it possibly could have been

23

called, but payments to government officials may have been --

24

may have been adequate.

25

However, they weren't designated payments to

51

1

government officials in this case, and I would also note,

2

Your Honor -- I would also note, Your Honor, that the

3

argument promoted by the defendants in this case as to the

4

economic substance of these -- the recording as facilitating

5

payments, if taken to its logical extreme, clearly cannot be

6

the law.
If you accept the defendants' argument,

7
8

embezzled funds could be recorded as salary, because both are

9

payments to employees, transfers of money to employees.

10

cannot possibly be the right result under the securities

11

laws.

12

THE COURT:

13

MR. DAY:

That

Okay.

Your Honor, I want to touch very briefly

14

on the books and records and circumvention claims in this

15

case.

16

any time at all in his argument on these, so I'll keep my

17

comments very brief on this.

18

clearly laid out in -- in our briefing.

Mr. Jackson did not spend much time in his brief or

I think our position is very

However, I want to be very clear that both

19
20

Mr. Jackson and Mr. Ruehlen are promoting a view of the books

21

and records and circumvention provisions of the securities

22

law that imposes a much stricter state of mind requirement

23

than what is actually provided for both under the statute and

24

by law.

25

There is no scienter requirement under

52

1

13(b)(5), Section 13(b)(5) or under Rule 13b2-1

with respect

2

to 13(b)(5), there's no scienter requirement for either

3

falsification of books and records or circumvention of

4

internal controls.
So the -- if there's one thing that I want the

5
6

Court to take away, hopefully, from today's argument on those

7

claims, it's that the standard is misstated and often

8

conflated in the defendants' briefing.

9
10
11
12
13

THE COURT:

Have you had any success in locating

Ms. Onodugo?
MR. DAY:

Your Honor, actually we have had a

development just this week on that front.
We have received a communication from

14

Ms. Onodugo just, I believe it was on Monday, in which she

15

indicated that she is in Nigeria and that she is willing and

16

happy to provide testimony in this case.

17

She would prefer to do so --

18

THE COURT:

19

MR. DAY:

20

THE COURT:

21

MR. DAY:

In Nigeria?

Sorry?
Prefer to do so in Nigeria?

In Nigeria by a written statement.

22

However, we have inquired whether she would be willing to

23

travel to London, as she had previously agreed to, to sit for

24

a deposition in London.

25

We know she has family and other ties in the

53

1
2

UK.
THE COURT:

Mr. Krakoff says there's -- although

3

there's no written evidence of what she said, there's no --

4

nothing in the evidence that would controvert Mr. Jackson's

5

memory that she testified that what was going on was

6

perfectly appropriate, perfectly legal.

7

MR. DAY:

It's a credibility issue, Your Honor.

8

There is not one shred of contemporaneous evidence suggesting

9

that that advice was ever given to Mr. Ruehlen or

10

communicated to Mr. Jackson, other than Mr. Ruehlen's

11

self-serving testimony, Mr. Jackson's self-serving testimony,

12

and Mr. O'Rourke's self-serving testimony.

13

extremely vague on -- on these points.

14

The testimony is

The e-mails in which Mr. Jackson approved

15

payments to government officials in connection with the false

16

paper process in May of 2005 make no mention of any legal

17

advice whatsoever from Ms. Onodugo about the propriety of the

18

false paperwork process.

19

It's not until 2007 that Ms. Onodugo writes an

20

e-mail which, frankly, in our view, doesn't even reflect

21

legal advice, but reflects her assumption that the Nigeria

22

Customs Service knew that the rigs weren't moving.

23

until 2007 that we first see any evidence that Ms. Onodugo

24

weighed in on this, and as Your Honor is well aware from the

25

extensive briefing on this issue, Ms. Onodugo denies having

It's not

54

1
2

given such advice.
THE COURT:

Let me ask about, on your MDSJ briefing

3

you argue for an interpretation of the facilitating payments

4

exception as an objective inquiry.

5

that you have to prove corrupt intent.

6
7
8
9

But you also maintain

How do those two analyses fit together,
facilitating payment and the broader antibribery prohibition?
MR. DAY:

The jury will be called upon to assess

whether these defendants acted with corrupt intent, based on

10

all of the facts and circumstances, all of the testimony, all

11

of the documents that are put before the jury.

12

The applicability of the facilitating payment

13

exception, in our view, hinges on whether the act sought was

14

discretionary or not.

15

As we've set forth in our Rule 44.1 motion and

16

our motion for partial summary judgment, there is no dispute,

17

no dispute as to the governing provisions of Nigerian law.

18

The defendants have offered nothing to

19

contradict Section 42 of the Customs and Excise Management

20

Act, which clearly says that temporary import permits may be

21

granted at the discretion of the Nigerian government.

22

That's consistent with advice from PWC, and

23

consistent from -- with advice received in 2007 from one of

24

Ms. Onodugo's associates, Sam Dakare.

25

There is nothing --

55

THE COURT:

1
2

Nigerian law might be, that's an objective inquiry.

3

MR. DAY:

4

THE COURT:

5

Yes, Your Honor.

MR. DAY:

Then

what these defendants intended.
THE COURT:

9

MR. DAY:

THE COURT:

11

MR. DAY:
Exactly.

What was in the mind of Mr. Jackson?

Sorry?

10

13

Okay.

Well, the subjective inquiry is what --

8

12

Yes, I think that's right.

how does the subjective inquiry fit into that?

6
7

And what governing provisions of

What was in the mind of Mr. Jackson?

What was in the mind of Mr. Jackson.

Exactly.
THE COURT:

And so we decide the statute means one

14

thing and we need then to -- the SEC needs then to show that

15

he proceeded knowing that what he was doing was illegal?

16
17
18

MR. DAY:

Knowing that what he was doing was

illegal, no.
But what Your Honor has defined "corrupt

19

intent" to mean is the purpose, the wrongful purpose to cause

20

a government official to misuse his or her position.

21

we've been discussing during this argument, the -- the

22

purpose to cause a government official to misuse his or her

23

position may be inferred from the conduct, and the conduct

24

here is payments followed by -- essentially quid pro quo,

25

payments followed by a favorable action, so the jury is going

And as

56

1

to have to look at what did Mr. Jackson do.
THE COURT:

2
3

And from that decide what was in his

mind?

4

MR. DAY:

Exactly.

5

corrupt intent, Your Honor.

6

THE COURT:

7

MR. DAY:

8

Anything further?

Your Honor, there were other points I was

going to make, but I'm sensitive to the time.
THE COURT:

9
10

Okay.

Circumstantial evidence of

Yeah, I'd like to take a five-minute

break, then we'll hear from Mr. Ruehlen's counsel, Mr. Hanna.
And I want everybody to get a chance to speak

11
12

once.

Then we'll start going back and getting rebuttals or

13

surrebuttals.

14

reporter if she needs any help with spellings.

Thank you.

Please check with the court

15

(Recess taken from 2:50 p.m. to 2:59 p.m.)

16

THE COURT:

All right, Mr. Hanna.

17

MR. HANNA:

Thank you, and good afternoon, Your

18

Honor.

Again, I am on behalf of Jim Ruehlen.

19

THE COURT:

Good afternoon.

20

MR. HANNA:

Your Honor, I'm going to address

21

Mr. Ruehlen's motion for summary judgment.

22

the tasks on our side a little bit, so some of the issues

23

that relate to the SEC's motion, Mr. Chung is going to

24

handle.

25

We've split up

But I'd like to address Mr. Ruehlen's motion.
The order I'd like to address the issues in are

57

1

the books and records claims, the circumvention claim and the

2

bribery claim.

3

address one of the Court's questions.

4

a couple of times about the Jo Onodugo advice and I think

5

that -- that is really critical.

Before I get to that, though, I wanted to
The Court has inquired

6

THE COURT:

I agree.

I think it's very critical.

7

MR. HANNA:

It's important to understand the

8

evidence, and we've tried to lay it out in our papers, but

9

Mr. Day said there's not a shred of contemporaneous evidence.

10

That's not quite accurate.

11

Mr. Ruehlen has testified -- and they call it

12

self-serving, but it's unrebutted -- he's testified that in

13

2005 he spoke with Jo Onodugo.

14

long-standing lawyer for Noble in Nigeria.

15

before -- long before Mr. Ruehlen ever got to Nigeria.

16

was the advisor to Noble in Nigeria.

17

issues, compliance issues, all sorts of things.

18

The evidence is she is the
She was there
She

She advised on labor

He was in regular contact with her in 2005 on a

19

variety of issues, including this issue.

20

he spoke with her about the paper process and she said, it's

21

lawful in Nigeria because the Nigerian Customs Service as a

22

government entity wants it that way.

23

He testified that

Mr. O'Rourke testified that he recalled in 2005

24

speaking with Jim Ruehlen and Jim told him that he had

25

contacted Jo Onodugo and gotten Ms. Onodugo's advice.

Now,

58

1

Mr. O'Rourke, they say, he's making it up.

But Mr. O'Rourke

2

is a cooperating witness for the SEC and if they think he's

3

lying, they have provisions in their cooperation agreement so

4

that they can come back to court and do something about it.

5

They haven't done anything about it.
He also wrote an e-mail a couple of years

6
7

later, in April, 2007, when he referred to the Jo Onodugo

8

advice.

9

THE COURT:

Okay.

What do we know about her?

How

10

long has she been practicing, where was she educated, was she

11

with a firm, was she on her own?

12

MR. HANNA:

She had -- what we know is she had her

13

own firm.

We know she is highly respected in Nigeria.

We

14

know that, according to Jim Day, who was the CEO of Noble at

15

the time, Shell or one of the other big oil companies

16

referred Noble to Onodugo when they moved into Nigeria.

17

THE COURT:

Where was she educated?

18

MR. HANNA:

I don't have that handy, Your Honor, but

19

she's a lawyer in Nigeria.

20

THE COURT:

How senior a lawyer was she?

21

MR. HANNA:

My understanding today, she's in her

22

late 60s or 70s, so she was senior at the time.

23

a junior, young associate.

24
25

She was not

She was a senior lawyer.

And -THE COURT:

I mean, you -- you represent very

59

1

sophisticated clients and I'm sure you have a very

2

sophisticated practice.

3

looking for legal advice to require that it be in writing?
MR. HANNA:

4

Isn't it the custom when you're

Well, I think, Your Honor, you have to

5

come at it from Mr. Ruehlen's perspective.

So Jim Ruehlen in

6

2005, when this conversation occurred, had just moved to

7

Nigeria with his family.

8

before.

9

had never -- he had never lived in Nigeria before.

He had never been division manager

He had never been manager of any country before.

He

He was -- started in the oil business as a

10
11

roustabout right out of high school and he worked his way up.

12

He's an operations guy.

He knows how rigs operate.

If there's anything that he, I'm sure, regrets

13
14

in this case it's not pinning down the lawyers and getting

15

everything in writing.

16

he talked with her, she gave him the advice and then what I

17

think is really important is in May of 2007, when all these

18

issues came up -- and Mr. Ruehlen's the one who raised the

19

issue twice, to management -- and in May of 2007, he gets a

20

press release showing that Tidewater had an issue with how

21

they were getting their TIPs and they launched an internal

22

investigation.

23

But he took her advice at face value,

He sees the press release.

Doesn't hide it.

24

He goes to his management and says, "They're doing the same

25

thing we're doing."

60

Then management contacted Jo Onodugo about the

1
2

advice that she had given, and she writes an e-mail in May of

3

2007 that says, "I am of the opinion," that's the language

4

she uses, "that it's legal in Nigeria."

5

legal in Nigeria.
So we have it in writing from Jo Onodugo

6
7

herself, in writing from her -- and --

8

THE COURT:

9

preparation of false papers?

10

MR. HANNA:
The paper process.

13
14

What all does that cover?

Is that -- does she think

That's the -- that was the question.
She says right in that e-mail.

THE COURT:

She says creating false documents is

MR. HANNA:

She says that submitting -- we can get a

okay.

15
16

copy of the e-mail, Your Honor.

17

papers.

18
19

Does it cover

that's --

11
12

The paper process is

We've attached it to our

She says submitting the false paperwork is not -THE COURT:

No, I've seen the e-mail.

As a lawyer,

that's just remarkable to me, to say that.

20

MR. HANNA:

Your Honor, I think --

21

THE COURT:

I know, Nigeria is a different legal

22

experience.

I know, it's not -- it can't -- we can't compare

23

our experience to their experience, but that's precisely what

24

troubles me.

25

that I don't know what we mean when we refer to opinion of

I know so little about Nigeria's legal practice

61

1

counsel.

2

MR. HANNA:

Well.

3

THE COURT:

That is not to demean Nigeria at all.

4

It's just I don't know much about the legal practice in any

5

other country.
MR. HANNA:

6

Well, Your Honor, and Mr. Ruehlen didn't

7

either.

And so when he talks to the person who is the

8

long-standing lawyer of the company, the person he's directed

9

to, if you have any questions about local law, talk to Jo

10

Onodugo, he talks to Jo Onodugo, she says it's lawful in

11

Nigeria, that's -- that's his mind set and that's what he

12

communicated.
And so in all that evidence that I've laid out,

13
14

it's uncontroverted.

Now, the evidence says, well, these

15

guys all got together and made it up.

16

that opinion in 2007, there's no reason she wouldn't have had

17

that opinion in 2005, no reason at all.

18

reason why she -- they haven't explained that e-mail.

But if Jo Onodugo had

And they show no

And, Your Honor, it's game time.

19

It's summary judgment.

We're a month

20

before trial.

They've had years to

21

investigate this case.

22

investigation phase, they've deposed people in the discovery

23

phase.

24

at summary judgment and say, "We think we might get a witness

25

some day."

They've deposed people in their

It's frankly not good enough for them to come in here

62

Now's the time --

1
2

THE COURT:

I understand.

3

MR. HANNA:

-- for them to put their cards on the

5

THE COURT:

I understand that.

6

MR. HANNA:

-- and they don't have it and I think

4

7

table --

that the Court has to find that -THE COURT:

8
9

Well, I wish, frankly, we had a lot more

evidence on both sides.

I wish we had a contemporaneous

10

writing from her, I wish we had a -- a corresponding legal

11

opinion from American counsel on that point.
I wish the government would -- I wish the

12
13

government could adduce evidence of -- from a witness who

14

knew the practice at the same time that -- that parsed

15

Ms. Onodugo's advice, but trials are -- proceed on

16

imperfect -- imperfect evidence all the time.

17

nature of the beast.
MR. HANNA:

18

That's the

Your Honor, I would just say that the

19

evidence in this case all goes one way.

They can -- they

20

can -- they're making arguments and things like that, but

21

they don't have any evidence that refutes that she gave that

22

advice in 2005.

23

advice and two e-mails reflect that that advice was given,

24

one from Ms. Onodugo herself.

25

record.

Three witnesses have testified she gave that

That's the state of the

63

1

There's nothing on the other side.

2

complain about it.

3

tell the Court that we'll get a witness later.

4

THE COURT:

They can

They can wish it never happened, they can

No, but Mr. Hanna, you make good points,

5

but the -- I think there is a possibility that the inference

6

that a jury would draw from all that is that for an attorney

7

to give such remarkable advice and not put it in writing is

8

another kind of signal of some sort.

9

MR. HANNA:

Your Honor, they have to come at it from

10

Mr. Ruehlen's perspective, because that's the issue, is what

11

did Mr. Ruehlen understand and what was his intent?

12

And I submit to the Court that the evidence is

13

that when you have a person who is not sophisticated in

14

dealing with lawyers, he's not -- that's not his job, he's

15

not a general counsel.

16

THE COURT:

I understand.

17

MR. HANNA:

He's not trained as a lawyer.

He

18

doesn't have, you know, the experience as to "I need to get a

19

written legal opinion from this lawyer."

20

when he gets there -- he's very new.

21

of -- he was assigned in September of 2004.

22

had just moved his family to Nigeria.

23

assignment by any -- by any means.

24

things for him.

25

All he knows is

It's within six months
In February he

Not a glamorous job

There were a lot of new

He's told, "This is our lawyer."

THE COURT:

I'm sympathetic to the human dimension.

64

1

I am.

I am.
MR. HANNA:

2

Your Honor, let me -- let me move on to

3

the books and records, because that's the large focus of our

4

motion.

I'd like to address it while we have this time.

5

THE COURT:

Yes, sir.

Yes, sir.

Please go ahead.

6

MR. HANNA:

The SEC has got three books and records

7

claims relating to Mr. Ruehlen:

8

directly or indirectly causing the falsification of the

9

books, and aiding and abetting Noble's failure to keep the

10

Knowing falsification,

books and records --

11

THE COURT:

Not too fast now.

12

MR. HANNA:

-- fairly and accurately reflect the

13

transactions.

14

All of these claims boil down to one question.

15

Can a defendant be liable for books and records

16

violations where the person did not make any of the

17

accounting entries, did not direct any accounting personnel

18

as to how the entry should be recorded, did not have any

19

responsibility whatsoever for the accounting function, and

20

did not withhold material information from accounting

21

personnel?

22
23
24
25

The answer is demonstrably no.

He cannot be

held liable under the law for that.
As a factual matter, the place to start as to
what happened is to talk to the person who did, in fact, make

65

1

the entries, and who did, in fact, have the accounting

2

responsibility, and that is Alan Middleton.

3

in our pleadings.
Mr. Middleton was an accountant, 15 years'

4
5

experience, CPA equivalent.

6

Scotland.

7
8

We reference him

He's a -- I think he's from

THE COURT:

Chartered accountant is what they called

MR. HANNA:

Chartered accountant.

him.

9

Exactly.

10

Court's -- Court's read on it.

11

contrasted with Mr. Ruehlen who's got no accounting

12

background, he has no accounting training.

The

And that has to be obviously

Like most companies, Noble split and had a

13
14

separation between the accounting function and the operations

15

function to give the -- the accountant some degree of

16

independence.
Mr. Middleton was the division controller in

17
18

Nigeria at the time, Jim Ruehlen was the division manager in

19

Nigeria.

20

reported back to Texas up to the operations controller, who

21

then reported to the controller, and then reported up to the

22

financial organization.

23

Mr. Ruehlen reported up to Bill Rose, Mr. Middleton

Different chains of command.

24

THE COURT:

Okay.

25

MR. HANNA:

Middleton's testimony is in Exhibit 12

66

1

to our motion.

And his testimony is uncontroverted in this

2

case, and it established that when Middleton started he was

3

instructed by Tom O'Rourke, the head of internal audit, on

4

how to account for these payments.

5

Jim Ruehlen had no role in that.

6

He also testified that Jim Ruehlen had no role

7

in determining how the IC Network payments would be booked.

8

And they were, in fact, booked to the 799 facilitating

9

payments account, but Ruehlen had no role in that.
And with the Court's indulgence, I've got about

10
11

a minute of --

12

THE COURT:

Yeah, that's fine.

13

MR. HANNA:

-- Mr. Middleton's testimony I'd like to

14

play for the Court.

15

THE COURT:

16

(Video playing.)

Okay.

That's fine.

Did you receive any training or guidance on performing

17

Q

18

your job responsibilities from Mr. Ruehlen when you started

19

as division controller in Nigeria?

20

A

No, I didn't.

21

Q

How did you as division controller know that a particular

22

transaction should go into that account?

23

A

24

similar payment, or otherwise as our -- like a new payment

25

that would be made to a government official, then the

Just based on, you know, historically, if we'd made a

67

1

question would arise and, you know, I would ask Tom O'Rourke

2

or someone at corporate just to qualify that it was a

3

facilitating payment.

4

Q

5

knowledge, in determining whether a particular proposed

6

payment was properly recorded in the facilitating payments

7

account?

What was the role of the operations staff in -- to your

COUNSEL:

8
9

A

Objection.

They did not detail, you know, whether it was the correct

10

account in SEP because they were not involved in the process

11

of that payment being booked into the system.

12

Q

Did Mr. Ruehlen have a role in coding invoices?

13

A

No.

14

Q

Did he have a role in determining the general ledger

15

account into which a payment would be booked?

16

A

No.

17

Q

Do you recall any instance where Mr. Ruehlen tried to

18

hide anything about the operations from you?
COUNSEL:

19
20

occurred.

21

A

Objection.

Assumes facts that have not

Lack of foundation.

No.

22

(Video ended.)

23

MR. HANNA:

Your Honor, there's no material dispute

24

of fact here.

Noble's accounting personnel kept the books

25

based on their professional judgment and they booked these

68

1

payments to the 799 facilitating payments account.

2

Ruehlen had no role in it.

Jim

Additionally, it's important for the Court to

3
4

know where the 799 account came from.

Did not come from

5

Mr. Ruehlen.

6

2013, Noble had retained Thompson & Knight to give some

7

advice on their FCPA program.

8

the creation of a facilitating payments account.

As Mr. Krakoff indicated, in the beginning of

Thompson & Knight suggested

Thompson & Knight did that a year and a half

9
10

before Mr. Ruehlen was assigned to the West Africa Division.

11

Mr. Ruehlen had absolutely nothing to do with setting up the

12

799 account and, as you heard from Mr. Middleton, he had

13

nothing to do with booking payments into the 799 account.
So faced with these facts, the SEC's come up

14
15

with a fallback position, to salvage their claims, and they

16

say, well, because Mr. Ruehlen participated in the process of

17

approving payments, signed off on checks going out, then he

18

necessarily caused the accounting.
Put another way, the SEC says if there were no

19
20

payments, then there wouldn't have been any accounting.

It's

21

as simple as that.

22

this but for analysis, when you look at the cases we've cited

23

quite a few.

24

case, it's very clear that the defendant has to do something

25

with respect to the accounting, either withhold information

But there's no support in the law for

The Nacchio case, the Patel case, the Ravelli

69

1

from the accountants, deliberately withhold information from

2

the accountants or do something with the accounting.

3

not enough that they were involved in the underlying issue.

4

The Ravelli case, which we cite in our papers, is very much

5

on point.

It's

There the defendant participated in a series of

6
7

sales transactions and the defendant also participated in

8

side letters.

9

a side letter it affects revenue recognition.

10

And as I'm sure the Court knows, when you have
And the

company recognized the revenue in spite of the side letters.
The Court granted summary judgment for the

11
12

defendant on 13b2 claims because the defendant didn't make

13

the entries, accounting didn't report to the defendant and

14

there was no evidence that the defendant concealed anything

15

from the accountants.
The bribery claims and the accounting claims

16
17

are separate.

The SEC wants the Court to rule that if you're

18

alleged to have committed bribery, by -- by necessity, then,

19

you are in hot water on the accounting.
But they're two separate violations.

20

Congress

21

created two separate violations with separate elements and

22

one does not dictate the other.

23

accounting claims all the time when there's no bribery

24

allegations.

25

treat them separately.

They're separate.

The SEC brings these

And I think that you have to

70

If you take the SEC's argument to its logical

1
2

extreme, then anybody who's in the payment chain, anybody,

3

would be liable for the accounting violations.

4

puts a stamp on the envelope to mail the check would

5

theoretically be liable.

6

check would theoretically be liable, because but for that

7

person -THE COURT:

8

Clerk who

Somebody who simply prepares a

I understand your argument.

He had no

9

accounting experience, and simply involved in the underlying

10

act does not equal a false account -- false document charge.

11

I understand that.
MR. HANNA:

12

And I would just, one step further the

13

cases even indicate that reviewing and approving the

14

accounting is not enough.

Here Mr. Ruehlen did neither.

And the Catch-22 is that if Mr. Ruehlen, who

15
16

has no accounting degree, no accounting background, no role

17

in accounting, if he would have stepped in and said,

18

"Mr. Middleton, chartered accountant, I want you to record

19

them in a different way," then they'd be here claiming that

20

he circumvented the internal controls, so that's a -- it's a

21

Catch-22.

22

involved in accounting and he was not involved in accounting.

He had no role in accounting, he shouldn't be

The accounting also was not false.

23
24

Accounting -- falsity has to be judged under the accounting

25

rules.

It's not in the abstract.

And as we've established,

71

1

there's nothing under GAAP that requires these payments to be

2

called unlawful bribes.

3

backed off it now, but we asked them in the interrogatory, as

4

the Court asked:

And that's what they argue.

How should these have been booked?

5

And the answer was:

6

That's a legal determination.

7

10

That's a legal

And just because the SEC thinks there's a
better way to describe it, that's not the standard.
standard is:

The

Does it meet GAAP?
And the answer is:

11
12

Unlawful bribes.

determination that Mr. Ruehlen was not equipped to make.

8
9

They

GAAP does not require an

accountant to assign objectively correct legal labels.
The sum and substance of the label on the

13
14

account is facilitating payments, which means payments to

15

government officials.
Anybody looking at that account would know that

16
17

those are payments to government officials.

18

There's detail.

As you saw when Mr. --

19

Mr. Krakoff put it up on the screen, there's detail to those

20

accounts, so any auditor can look through and see.
There was no effort to hide anything.

21

What it's for is stated.

The

22

amounts are stated.

You could go

23

below and look at the detail and see, so any auditor can look

24

at it.

25

segregated these payments into one account was to comply with

And Mr. Middleton testified that the reason they

72

1

the FCPA, they thought they were complying, and to have audit

2

trail, to be able to audit them.
And one more snippet from Mr. Middleton, I

3
4

think, Your Honor, would be helpful here.
(Video playing.)

5

Do you believe it would have been clear to anyone

6

Q

7

reviewing the contents of that account that the payments in

8

the account were payments to government officials?
COUNSEL:

9

Objection.

Calls for speculation.

Lacks

10

foundation.

11

A

Yes, I would.

12

Q

Do you know why a separate account was used to record

13

facilitating payments?

14

A

It was to comply with the FCPA Act requirements.

15

Q

Did the division maintain files for the facilitation

16

payments it made related to temporary importation permits?

17

A

18

facilitating payments.

19

Q

20

facilitating payments?

21

A

22

FCPA Act, that we had to not only code the transactions in a

23

separate account but we had to have all documentation in one

24

place so they could be reviewed at any time.

25

Yes, it was included in the file that had all the

Who made -- why did you maintain this file for

Again, it's -- I believed it was a requirement of the

(Video ended.)

73

MR. HANNA:

1

Lastly, Your Honor, the SEC tries to

2

argue that they don't have to prove scienter, don't have to

3

prove anything.

4

Mr. Ruehlen acted unreasonably and when you're saying that

5

Mr. Ruehlen knew these weren't facilitating payments and knew

6

they should have been booked in a different way, then that's

7

going right to the issue of what did Mr. Ruehlen actually

8

know?

9

But they have to show, certainly, that

And as the Court said earlier, figuring out

10

what's a facilitating payment isn't quite that easy.

11

hard for the Court, it's hard for me, it's hard for lawyers

12

to figure it out.

13

say, Mr. Ruehlen should have figured out that years later the

14

SEC would say, "Well, there's some discretion here," or years

15

later, the SEC would come up with an expert, a supposed

16

expert who finds a code book that no one has ever seen before

17

and says, "Well, that sets what the law is," I think is --

18

is -- is absurd, frankly, to put that onus on Mr. Ruehlen.

19

And I don't think that that's reasonable at all.

20

It's

And to put that onus on Mr. Ruehlen and

For these reasons, Your Honor, we think the

21

falsification claims, all the books and records claims, fail.

22

Again, Mr. Ruehlen just had no role in it and shouldn't be

23

held accountable for it.

24
25

On the circumvention, I'm not to go through all
the elements of circumvention, but what's very clear is that

74

1

the word has meaning.

2

simple error.

3

internal controls.

4

don't contest it.

Doesn't mean mistake, doesn't mean

It means, an intent to evade the system of
That's what we say it means and they
And the law supports it.

Congress did not make it a federal violation

5
6

every time an employee in a publicly traded company fails to

7

follow some policy.

8

it, circumvent, evade that system of internal controls to do

9

something.

There has to be an intent to get around

There has to be culpability there.

They reserve

10

these onerous civil penalties for people who do bad things,

11

not for people who just make mistakes.
And the SEC's allegations don't get anywhere

12
13

near circumvention.

Their primary argument is there was a

14

policy.

15

before authorizing facilitating payments.

16

there was this policy.

You're supposed to get preapproval from the CFO
We acknowledge

In 30-something payments, the vast majority of

17
18

them, Mr. Ruehlen got preapproval.

In a handful, five, he

19

didn't get preapproval; five or six, he didn't get

20

preapproval.

21

before any money left Noble's coffers, and, you know, is that

22

surprising?

23

service and Internet service isn't that great.

24

the division.

25

issues.

He got approval right after.

He got approval

He's 6500 miles away in Nigeria.

He's got men on rigs.

Their phone
He's running

There are safety

So, yes, on a handful of occasions he was a little

75

1

bit late.

2

little bit late?

3
4
5

Is that a circumvention or is that just being a

THE COURT:

Was high school as far as he got in his

education?
MR. HANNA:

Yes, Your Honor.

The mistakes are immaterial.

6

All the payments

7

in this case are of the exact same character.

8

been approved.

9

approved.

They have all

It was very rational to believe they would be

There was nothing unique about the payments as

10

they continued.

11

years before Mr. Ruehlen got there, and when he got there the

12

payments continued.

13

They had been making these payments for

Even if he allowed IC Network to get started

14

before he got the approval from the CFO -- as I said, he

15

always got approval before money left Noble, and the central

16

goal of the control is to make sure management knows where

17

Noble's money is going.

18

where Noble's money was going, and management approved that

19

the money go where it was going.

20

And he certainly let management know

And, finally, Your Honor, the SEC hasn't ever

21

offered any kind of a cogent explanation for why anybody

22

would try to circumvent that control.

23

Why would you not tell the CFO but then tell

24

him immediately after you authorized IC Network to get going.

25

What would be the purpose?

There was no purpose.

And the

76

1

SEC claims that Mr. Jackson and Mr. Ruehlen are in it

2

together.

3

circumvention?

So what would be the purpose of this

violation.
Unless the Court has any question on the

6
7

It's just a mistake.

And that doesn't give rise to a federal law

4
5

There is no purpose.

circumvention, I'll move on to the bribery allegations.

8

Your Honor, this is a unique case.

9

All the -THE COURT:

10

Why do you say that?

I mean, the

11

impression you gave me is this happens a lot in Nigeria.

12

mean --

13

MR. HANNA:

That happens all the time.

I

The payments

14

happen all the time in Nigeria.

We have expert witnesses who

15

would testify to that.

16

unique case to be brought, because in every FCPA case I'm

17

familiar with, every one that I've handled in the past, the

18

defendants allegedly tried to hide stuff.

19

different things.

It's a unique FCPA case.

It's a

They called them

Here, everybody who's testified thought these

20
21

were lawful facilitation payments for permits that they were

22

entitled to.

23

government.

24

four, five years, and they -- they -- the Nigerian government

25

wanted those rigs on station and wanted those rigs drilling.

They were there at the request of the Nigerian
They had a contract to drill for two, three,

77

1

That was their mind set.

2

The permits were the Nigerian Customs Service,

3

saying we won't act unless we get something.

4

THE COURT:

Yeah.

5

MR. HANNA:

And for these defendants who then -- as

6

we'll talk about in a second, had all this legal advice, who

7

had all these lawyers who were involved, who had

8

PricewaterhouseCoopers that were involved, all these senior

9

executives involved, every single one thought they were

10

facilitation payments.
For the SEC to then come along and say, "Well,

11
12

you're wrong, and we're going to hold Mr. Ruehlen

13

accountable," I think makes it a very unique case.

14

Especially given -- especially given the fact that

15

Mr. Ruehlen raised the alarm twice.
In 2004, we heard about that West Africa audit,

16
17

the person who makes the paper process finding is

18

Mr. Ruehlen.

19

Mr. O'Rourke because he knew operations and they wanted

20

somebody there who knew how the rigs operated.

21

him out to Nigeria and when he's there he starts talking to

22

people and they say, "Hey, we're doing this paper process."

23

So he -- he -- sounded odd to him, it would sound odd to the

24

Court, sounds odd to me, he put it in writing and sent it to

25

management.

He got attached to an audit -- audit team with

So they send

78

So he did the right thing.

1
2

That's what he was

supposed to do.
And management came back and said -- it was

3
4

identified as a local law issue, not a FCPA issue, local law

5

issue and management came back and said, "Bill Rose, you're

6

in charge of figuring out whether this thing complies with

7

local law.

8
9

You're in charge."

And that's all he knows.

So he raises the alarm again in 2007 with the
Tidewater press release.

It was Mr. Ruehlen who raised that

10

issue to management, management started internal

11

investigation, that led to the SEC investigation.

12

voluntarily disclosed.

13

They

And that's why I say it's unique.

14

THE COURT:

Okay.

15

MR. HANNA:

A couple of facts, I think, are

16
17

I got you.

I understand that.

important to focus in on.
Noble had a contract with IC Network.

That

18

contract specifically provided for special handling fees.

19

That contract was drafted by Bob Campbell, the general

20

counsel, with Thompson & Knight.

21

It provides that IC Network does not have to

22

give receipts, because they understood that special handling

23

fees were facilitating payments.

24

special handling fees would go to the Nigerian government,

25

Nigerian government officials.

They understood that

79

1

So the lawyer for the company thought that

2

these were facilitation payments.

3

concept in the contract.

4

And he embedded that

As far as Mr. Ruehlen's concerned, as far as

5

anyone should be concerned, the lawyers blessed this.

6

lawyers, Thompson & Knight, Bob Campbell, they knew about the

7

payments, they thought the payments were lawful, and they --

8

they put it in the contract.

9

The

They didn't hide anything.

And then they created the facilitating payment

10

account to capture those payments, all done by the lawyers,

11

all recommended by the lawyers.

12

As Mr. Krakoff said, in 2004, the lawyers,

13

Campbell and Thompson & Knight, even saw the facilitating

14

payment account.

15

Now, I'm sure you're going to hear from the

16

SEC, they're going to say, well, Campbell says that Thompson

17

& Knight wasn't specifically tasked to look at that issue.

18

But they saw them.

They saw -- there's no

19

question, we have the e-mail trails.

20

They -- and you saw the account.

21

They saw the account.

And you saw the numbers.

And if anybody looked at that and said, "Geez,

22

we're paying $12,000 to Nigerian officials, maybe I should

23

think more about that," never happened.

24

THE COURT:

Okay.

25

MR. HANNA:

The paper process was considered a

80

1

separate issue, not implicating the FCPA.

2

it was a local law issue and in the 2004 audit report, the

3

"Mrs. O payments," as they're called, were identified as a --

4

that's the labor minister -- identified as an FCPA risk, when

5

you look at the paper process, it's identified as a local law

6

risk.

7

law.

8
9
10
11

Everybody thought

That's what they thought they were dealing with, local

And as I -- and if you have a local law issue,
what do you do?

You talk to a local lawyer.

And that's

exactly what Mr. Ruehlen did.
The SEC's argument, I think, has another couple

12

of fallacies with it.

13

an option that did not involve facilitating payments.

14

fact of the matter is, no option -- there is no option that

15

didn't involve facilitating payments.

16

One is that they claim that Noble had
The

The NOBLE DON WALKER is a case in point.

17

That's the one where the NOBLE DON WALKER actually had to

18

leave Nigerian waters, export to Benin, drill a well, came

19

back, applied for a new TIP, they still had to pay.

20

if they exported the rigs, as the SEC says they should have

21

done, even if they just stopped drilling, harmed the Nigerian

22

government because they weren't drilling, everything -- did

23

everything that way, they still would have had to pay.

24

the SEC's theory doesn't get us out of the issue, which is

25

the facilitating payment, which they would have had to pay

So even

So

81

1

anyway.
The Court asked earlier about, well, you know,

2
3

when does the number get out of line?
Well, I submit, Your Honor, that when you

4
5

actually export a rig, and you're paying close to what you're

6

paying for paper process, it -- it's -- you know, that blows

7

a hole in the SEC's theory that there's some escalating

8

payments and that should put you on notice.
The fact of the matter is, IC Network could say

9
10

whatever they wanted.
THE COURT:

11

Is it irrelevant to your argument

12

whether the government had no authority to grant a permit

13

needed or, conversely, had authority but required a bribe to

14

do it?

15
16
17
18

MR. HANNA:

The -- for my argument, Your Honor, the

issue is Mr. Ruehlen's intent, and Mr. Ruehlen believed -THE COURT:

So irrespective of whether the

government had the authority or not.

19

MR. HANNA:

Absolutely.

20

THE COURT:

Okay.

21

MR. HANNA:

He believed that they were entitled.

22

thought these were facilitating payments.

23

THE COURT:

Okay.

24

MR. HANNA:

He believed it.

25

Permanent importation is another option that

He

82

1

the SEC says that the defendants could have used.

2

basically paying all the taxes and converting it to home use.
Problem with that.

3

That's

Their own expert testified

4

that the same Nigerian officials who deal with TIPs, they're

5

the ones in charge of the permanent importation process.

6

to permanently import you have to do evaluation, you have to

7

negotiate with that group.

And

Same thing would happen.

8

THE COURT:

I understand.

9

MR. HANNA:

So the paper process, Your Honor, was

10

viewed as a lawful process, sanctioned by the Nigerian

11

Customs Service, because the Nigerian government wanted the

12

rigs there.

13

Under that -- those sets -- that set of

14

circumstances, when Mr. Ruehlen talks to Jo Onodugo and she

15

says it's lawful, it made sense to him.

16

make sense to a reasonable person at that point, given

17

Mr. Ruehlen's history with the company.

I submit it would

18

Your Honor, under these circumstances, and I

19

won't take any more of the Court's time, I think it's very

20

clear and the evidence is very clear that everybody involved

21

thought these were permits they were entitled to, thought

22

they were supposed to be there at Nigeria, thought the

23

Nigerian government wanted them and thought that the payments

24

were vetted, were reviewed --

25

THE COURT:

Okay.

83

MR. HANNA:

1

-- the lawyers were all over them and

2

that they were the facilitating payments.

And under those

3

circumstances we don't think they can show corrupt intent.

4

It negates corrupt intent.

5

THE COURT:

Thank you very much.

6

MR. HANNA:

Thank you, Your Honor.

7

THE COURT:

Does the SEC wish to have a turn at bat?

8

MR. DAY:

9

THE COURT:
MR. DAY:

10
11

Yes, Your Honor.

One moment.

Very well.

Your Honor, I think where I'd like to

start is corrupt intent.
We've just heard a lot about a belief in an

12
13

entitlement to a government benefit in Nigeria.

Your Honor,

14

a belief that a defendant is entitled to the act sought does

15

not excuse bribery.

Here's why.

The FCPA -- I've put a slide up that might help

16
17

here.

18

officials to influence any official act, to induce an act or

19

omission that violates lawful duty, or to secure an improper

20

advantage.

21

The FCPA is concerned with payments to government

Congress sought to prohibit payments that are a

22

quid pro quo for any official act.

23

which one has no entitlement, any official act.

24
25

Not only official acts to

There's a very narrow exception represented in
yellow here for routine government actions.

That applies

84

1

only to payments that have the purpose of expediting an act

2

which is demonstrably and objectively nondiscretionary.
We don't have that in this case.

3

So when

4

Defendant Ruehlen authorized a payment to a government

5

official to cause that official to act in Noble's favor, that

6

violated the law.

7

THE COURT:

8

MR. DAY:

9

Even if he thought it was legal?

Even if he thought it was legal, Your

Honor.
THE COURT:

10

What does the corruptly concept mean in

11

these -- for these purposes, then?

12

legal, he made the payment, he had advice of counsel and

13

advice of accountants, he made the payment, in what sense is

14

he acting corruptly?
MR. DAY:

15

If he thought it was

Your Honor, if he acted with the intent to

16

cause a foreign official to act in his or his employer's

17

favor, that is inherently wrongful.
The F -- the FCPA is clear, congressional

18
19

history is clear on this, in Kay I, the 5th Circuit is clear

20

on this.

21

THE COURT:

So even if he thinks he's acting -- he's

22

acting lawfully, that's irrelevant.

23

any evidence on his belief that he was acting lawfully.

24
25

MR. DAY:

We don't need to hear

Your Honor, Stichting, I think, answers

this question, which Your Honor referred to extensively in

85

1

the motion to dismiss opinion.

2

intent statute.

The FCPA is not a specific

There is no requirement that the SEC prove that

3
4

a defendant knew he was violating the law.

5

belief, a mistaken belief that a very narrow exception

6

applies cannot excuse a quid pro quo payment to obtain a

7

discretionary benefit from a government official.
The prohibition under the FCPA is broad.

8
9
10

Conversely, a

intended to be broad, and the congressional history is clear
it is broad.
THE COURT:

11

You believe the permit extensions,

12

first, second, third, whatever, were -- were

13

nondiscretionary?

14

MR. DAY:

15

CEMA is clear.

16

clear.

17

It is

Or discretionary?
Discretionary, Your Honor.

Section 42 of

These are discretionary benefits.

PWC was

Discretionary benefits.
THE COURT:

What if the advice was not that this was

18

legal to do, but the advice these -- this was

19

nondiscretionary?

20

MR. DAY:

Would that -- would that change?
That might go to an actual element of an

21

FCPA violation if there is advice of counsel on full

22

information, the defendant gives the counsel full

23

information, "I am making payments in this amount under these

24

circumstances," so on and so forth, "and I need to know:

25

Does this individual who I'm paying money to have discretion

86

1

or not?"
THE COURT:

2

On your earlier -- on your earlier

3

explanation, I'm not sure why it would make a difference.

4

If -- if there's no requirement of specific intent, why does

5

it matter if the businessman asks:

6

discretionary?
MR. DAY:

7
8

FCPA.

9

exception.

Is this legal or is this

Specific intent goes to legality under the

Discretionary goes to the applicability of an

If -- if a defendant wants to take the risk --

10

THE COURT:

11

I'm assuming in both instances that the

12

advice is erroneous.

That the counsel says it's legal, when

13

it's not; counsel says it's not -- it's discretionary, when

14

it's not.

15

MR. DAY:

Your Honor, I think the Stichting case

16

goes exactly to this issue.

17

drew the distinction between advice that the payment was

18

lawful under the FCPA, which is irrelevant, because it is a

19

specific -- not a specific intent statute, versus advice,

20

that would go to the elements of an actual violation of the

21

law.

22

THE COURT:

23

MR. DAY:

24

THE COURT:

25

MR. DAY:

In Stichting, the 2nd Circuit

Even if mistaken.

Even if mistaken.

Even if mistaken, Your Honor.
Okay.

That's correct.

87

1

THE COURT:

2

MR. DAY:

Okay.

So the -- I want to move on from the

3

corrupt intent issue and briefly address the books and

4

records before coming back to the evidence of corrupt intent

5

with Mr. Ruehlen.

6

THE COURT:

7

MR. DAY:

All right.

Mr. Ruehlen devoted the bulk of his brief

8

to attacking the SEC's books and records and circumvention

9

claims, and in fact most of the argument today was on that

10
11

subject, as well.
In -- in his brief, and particularly in his

12

reply brief, Mr. Ruehlen conflates the applicable standards

13

and attempts to read the higher state of mind requirements

14

into the applicable statutes.

15

Most importantly, the bulk of Ruehlen's

16

arguments were already rejected by this Court in ruling on

17

the defendant's motions to dismiss.

18

For the sake of brevity, I'm not going to

19

rehash everything in the briefing.

Again, I think the page

20

limits in this case were more than sufficient to lay out all

21

of these issues, but I do want to set the record straight on

22

the applicable standards.

23

Could you put up slide 20?

24

Rule 13b2-1 prohibits directly or indirectly

25

falsifying or causing the falsification of an account.

88

There's no materiality requirement.

1

Conduct is

2

assessed under a reasonableness standard; i.e., was the

3

defendant negligent.

4

is not required.

Proof of scienter, a fraudulent intent,

Under rule -- Exchange Act Section 13(b)(5)

5
6

there's also there no materiality requirement.

7

prohibition is on knowing falsification of accounts.

8

defendant acts knowingly when his conduct is volitional,

9

i.e., not the product of inadvertence or mistake, and

10

The
A

knowledge may be established by proof of conscious avoidance.

11

Proof of scienter is not required.

12

The aiding and abetting claim requires proof of

13

a primary violation.

General awareness of the primary

14

violation, meaning knowledge that the defendant was

15

participating in or contributing to an activity that was

16

improper and substantial assistance and act in furtherance.
As to each of these claims, this Court already

17
18

held that recording payments as facilitating payments is

19

false if the payments don't fall within the statutory

20

exception.

21

The SEC need not show that Mr. Ruehlen was

22

personally involved in deciding how transactions were booked.

23

In fact, the Ravelli case that Mr. Hanna referred to makes

24

that very point.

25

And I'll pause on Ravelli for a moment.

The

89

1

other issue there was that the -- my understanding of that

2

case is that the side agreement that led to the improper

3

booking was generated by individuals other than defendant, so

4

there's even a further attenuation of the conduct that led to

5

the falsified books or record from the defendant.
This Court held --

6
7

THE COURT:

Do you think Congress -- I mean, let's

8

put aside for the moment what I held.

9

hope, in 18 months, I may have learned something, so let's

10

Presumably, I'm -- I

leave that alone for a minute.

11

MR. DAY:

Sure.

12

THE COURT:

Is it fair -- as a matter of policy, did

13

Congress mean to put on an operations guy responsibility for

14

correct accounting records?

15

MR. DAY:

If, as this Court observed, and -- and at

16

the risk of going back to your motion to dismiss opinion, if

17

as this Court observed it is a reasonable inference that an

18

operations person -- and this is -- this is supported by our

19

expert, Jeff Harfenist -- if it is a reasonable inference

20

that an operations person would know that an expenditure that

21

he approved was going to be booked as a legitimate operating

22

expense when, in fact, it is not, either through negligence

23

or knowing conduct, it is not a legitimate operating

24

expense --

25

THE COURT:

Well, if that's the test here, then

90

1

Mr. Ruehlen wouldn't be liable, because there was no evidence

2

he did know that.

3

conclusion that it was okay to do that.

4

counsel, Price Waterhouse, outside counsel.

I mean, legal

I mean, what's the evidence he did know that

5
6

What he did know was -- tended to the

was improper?
MR. DAY:

7

Your Honor, I want to clarify one

8

misconception that I think may be creeping into the argument

9

here.
There is no evidence in this case, no evidence

10
11

at all, that PWC, Thompson & Knight, General Counsel

12

Campbell, or anybody else, weighed in on the propriety of the

13

payments that the SEC has brought this action challenging.
Nobody, internal to Noble or external to Noble,

14
15

said, "These payments are okay.

16

payments."

17

THE COURT:

18

MR. DAY:

19

They're facilitating

Not even Ms. Onodugo?

Not Ms. Onodugo.

In fact, on the

Ms. Onodugo point, this is a -- bear with me for one --

20

THE COURT:

21

MR. DAY:

No, I need help.

I need help.

-- brief jog into the Onodugo issue,

22

Mr. Ruehlen admitted in his deposition that he never told

23

Ms. Onodugo that payments were being made to Nigerian

24

government officials in connection with obtaining TIPs or TIP

25

extensions.

91

This goes, in part, Your Honor, to our argument

1
2

that this advice to the extent it was given -- and we very

3

much dispute that it was given -- but to the extent it was

4

given, was not on full information to counsel.

5

what she would have said about the false paper process had

6

she known that it was purchased from government officials.
Because Mr. Ruehlen admits that he didn't tell

7
8

We don't know

her that.
THE COURT:

9
10

MR. DAY:

11

THE COURT:

Let's see --

Okay.

Back to the books and records.

Let's leave aside for the moment,

12

whether Thompson & Knight, PWC, or anyone above Mr. Ruehlen

13

said this was appropriate.

14

anyway, right.

15

wouldn't matter because specific intent is not required.

17

Even if they had said it was appropriate it

MR. DAY:

16

In your view, it doesn't matter

Well, are you talking about an antibribery

violation or are you talking -THE COURT:

18

I think it goes to both points.

Whether

19

we're talking about bribery or whether we're talking about an

20

error in books and records, I think what you're saying is,

21

nobody could have blessed that and made it immune from SEC

22

action.

23

MR. DAY:

Well, okay.

I'm -- I want to make sure

24

that I understand your question, and the hypothetical you're

25

positing.

92

With respect to a violation of Section 38, the

1
2

antibribery provision --

3

THE COURT:

4

MR. DAY:

Right.

-- as we discussed, not a specific intent

5

statute.

6

it wasn't in this case, that the particular payments -THE COURT:

7
8

I'm asking you to address a

hypothetical, though.
MR. DAY:

9
10

So advice, to the extent it was ever given, which

Right.

payments, irrelevant.

11

THE COURT:

12

MR. DAY:

Advice that these are facilitating

That's the Stichting case.

Okay.

Okay.

All right.

With respect to the accounting

13

treatment, if somebody on full information had told

14

Mr. Ruehlen that these were facilitating payments and they

15

were booked as facilitating payments, maybe -- maybe that

16

would support a lack of unreasonableness in the booking.

17

THE COURT:

18

MR. DAY:

19

THE COURT:

20
21

case.

Okay.

All right.

However, that's contrary to the facts -Fact of this case.

I understand your point.
MR. DAY:

That's not this

Yeah.

The common sense position that the SEC

22

takes here is that the jury is free to conclude that the

23

defendants understood that the payments they authorized would

24

be recorded as legitimate operating expenses while at the

25

same time understanding that these were not legitimate

93

1

operating expenses.

2

records provisions of the securities laws to establish

3

liability.
I want to address briefly the circumvention

4
5

claim.

6

to the --

The arguments are going rather long and I'm sensitive

7

THE COURT:

8

MR. DAY:

9

That is enough under the books and

What time are your flights?

We have flights, I think, ranging from

7:00 to 8:00 p.m., in that neck of the woods.

10

THE COURT:

How about --

11

MR. HANNA:

We're not leaving till tomorrow, Your

12

Honor.

We're staying over, Your Honor.

13

THE COURT:

14

MR. DAY:

Okay.

Your Honor, the circumvention, the -- the

15

crux of the SEC's circumvention claim is that Mr. Ruehlen

16

failed to obtain CFO approval before he authorized corrupt

17

payments to government officials made on behalf of Noble.

18

The defendants tried to minimize this key internal control.

19

THE COURT:

20

MR. DAY:

Yeah, yeah.

The point of the internal control is to

21

stop the violation before it happens.

It's not a compliance

22

with that internal control to come after the agent is already

23

in the process of making payments to government officials and

24

say, "Oh, now, we've got to reimburse them, is it okay to

25

reimburse them?"

That totally defeats the purpose of this

94

1

key internal control.

2

Our expert, Jeff Harfenist, an expert in FCPA

3

compliance, will explain that this is called a preventative

4

control.

5

at Noble intended to prevent misuse of corporate assets and

6

improper disposition of corporate assets.

7

after the fact, until the violation has already happened,

8

until FCPA liability may have accrued, that control was

9

rendered meaningless.

It was the main, if not the sole control in place

By waiting until

That, Your Honor, in the context of a

10
11

circumvention of internal controls which requires only

12

volitional conduct, has no materiality requirement, that is

13

enough to establish liability.

14

THE COURT:

15

MR. DAY:

Okay.

All right.

Your Honor, with respect to -- I want to

16

touch briefly on, again, on the purported advice from

17

Ms. Onodugo.

18

As I already mentioned, Mr. Ruehlen admitted in

19

his deposition that he never told her about payments to

20

government officials made in connection with obtaining TIPs

21

and TIP extensions.

22

Your Honor, we submit that that means she was

23

not providing advice, to the extent she provided advice at

24

all, on full information.

25

Secondly, in contemporaneous writings, it's not

95

1

just that there's no evidence reflecting a conversation or

2

advice from Ms. Onodugo, but the contemporaneous writings,

3

Mr. Ruehlen's own words, are actually inconsistent with his

4

claim that he received legal advice from Ms. Onodugo on the

5

propriety of the false paper process.

6

In March of 2005 and again in May of 2005 when

7

he seeks approval to reimburse the agent for payments that

8

have already been made in connection with the false paper

9

process, the reason he gives for the use of the false paper

10

process instead of physically exporting rigs to the free

11

trade zone, the reason he gives is that it would be too

12

disruptive to the company's contracts and that the operators,

13

the customers, could have the option to cancel the contracts.

14

That's the reason he gives for the decision to

15

break Nigerian law, to obtain new TIPs.

16

Nigerian counsel said it was okay.

17

THE COURT:

18

MR. DAY:

Okay.

It's not because

Okay.

Your Honor, we cited in our brief, also, a

19

line of cases from the 11th Circuit, including Condon and

20

Johnson, that stand for the proposition that it's

21

unreasonable, as a matter of law, to rely on advice that

22

purports to counsel dishonesty.

23

reason not to put this evidence before the jury.

24
25

So there's yet further

Further, the -- the issue of whether the paper
process was legal in some sense in Nigeria doesn't negate

96

1
2

corrupt intent with respect to the false paper process TIPs.
The reason is that the grant of a TIP is

3

discretionary, irrespective of whether it was obtained in

4

connection with a physical import of a rig or a hypothetical,

5

fictitious import of a rig.

6

It's discretionary.

And as we talked about before, if you pay money

7

to government officials to obtain a discretionary benefit,

8

you violate the FCPA.

9
10

THE COURT:
MR. DAY:

Yeah.

Okay.

Your Honor, I think given the late hour,

11

I'm not going to dwell long on the evidence of corrupt intent

12

that we have briefed extensively in our briefs.

13

THE COURT:

14

MR. DAY:

It has been covered, yeah.

Okay.

I will say that implicit in

15

Mr. Ruehlen's opposition and in his summary judgment motion

16

and his reply is, you know, really not an effort to grapple

17

with all of the factual disputes that are all over this case

18

with respect to corrupt intent.

19

discussed in connection with Mr. Jackson's motion, this is a

20

jury question, it involves credibility, fact disputes, jury

21

has to sort it out.

22

THE COURT:

23

MR. DAY:

24

THE COURT:

25

(Recess taken from 3:54 p.m.

Okay.

For all the reasons we've

Thank you.

Thank you, Your Honor.
We'll take another five-minute break.
to 4:02 p.m.)

97

1

THE COURT:

2

MR. DAY:

3

THE COURT:

4

MR. DAY:

All right.

Who's next up?

Your Honor, before we -Yes, sir.

-- go to the next motion, just as a

5

housekeeping matter for travel purposes, we were wondering

6

how late the Court intends to go.
THE COURT:

7
8

I don't want to cause you to miss your

flight.
Peggy, are you okay for a while?

9
10

THE REPORTER:

11

THE WITNESS:

If we broke at 6:00, will that be

12

okay?

13

getting everybody's spouse mad at me.

14

5:45.

Yes.

What -- I don't want to be responsible for

MR. DAY:

We can rebook our flight, it's really not

15

a problem, Your Honor, so we're happy to go as long as the

16

Court is willing to hear from us.

17

THE COURT:

Stephanie?

18

MS. LOEWE:

Okay.

19

THE COURT:

I'll keep going.

20
21
22
23
24
25

You don't have to

adjourn because of me.
MR. KRAKOFF:

Your Honor, we're happy to come back

tomorrow if the Court would like to.
THE COURT:

I don't know.

What's our schedule like

tomorrow?
Yeah, we have -- I'll need to take some guilty

98

1

pleas at 10:30, but that wouldn't take long, so we could come

2

back at 9:00 if you want.

3

okay.

4

y'all need me.

5

But don't worry about me.

I mean, I -- this is my job.

MR. DAY:

I'm

I'm here for as long as

Your Honor, if I may, I think we've

6

covered many of the issues with respect to the defendants'

7

summary judgment motions and, in fact, many of the issues.

8
9

THE COURT:
been very helpful.

We've covered a lot of ground and it's
Let me just say it's a real treat for me

10

to have such able lawyers on both sides.

11

always that way, but I've really been impressed with the

12

lawyering in this case.

13

MR. DAY:

14

THE COURT:

I wish it were

Thank you, Your Honor.
If any of you ever need -- I've probably

15

said this before, but I mean it.

16

recommendation for American College of Trial Lawyers or

17

anything, I'd be happy to serve as a reference.

18

MR. DAY:

Thank you, Your Honor.

19

Mr. Chung was intending to --

20

THE COURT:

21
22
23

Mr. Chung, yes.

If any of you ever need a

Well, I think

I thought we were going to hear from

You up for it?

MR. CHUNG:

Yes, Your Honor.

I want to address, Your Honor, the SEC's

24

position with respect to the applicability, generally and to

25

this case, of the facilitating payments exception.

99

And Your Honor had mentioned in an earlier

1
2

argument that this is an area of -- of concern for you.

3

THE COURT:

Yeah, it is.

It is.

4

MR. CHUNG:

It's a difficult area to understand,

5

largely because of the wording of the exception and the

6

statute overall.
This is how we conceptualize it.

7

And I think

8

it's -- and it's clearly evidenced and its manifest in the

9

words of the statute and the exception.
Now, the facilitating payments exception is

10
11

exactly that.

12

are routinely or ordinarily carried out.

13

the -- in the exception itself, a number of examples that

14

Congress set out as -- as possible facilitating payment --

15

facilitating payments and government -- routine government

16

actions.

And you'll see in

Now --

17
18

It's an exception for government actions that

THE COURT:

In your mind, does "routine" mean

19

frequent or does "routine" mean automatic or does "routine"

20

mean both?

21

MR. CHUNG:

I think that's a fact issue, Your Honor.

22

I think there could be situations where a routine

23

governmental action can be something automatic.

24

there can be situations where a -- a routine governmental

25

action is something that is issued or granted by a government

I think

100

1

entity or official routinely, so frequently, or without

2

exception.

3

THE COURT:

Well, I'm trying to identify which of

4

those things.

5

consistent; or automatic but not routine, it only happened

6

once every five years?

7

I mean, what if it were routine but not

MR. CHUNG:

--

Well, let's take the example of -- of

8

this case.

The -- the government actions here are the

9

issuance of temporary import authorizations.
Now, what's important here is that the SEC

10
11

posits whether a particular action is a routine governmental

12

action is an objective inquiry.

13

Nigerian law that governs this particular action.

14

Nigerian law says that it's nondiscretionary, that's the end

15

of the inquiry.

16

THE COURT:

You just take a look at the
If the

Well, that's what I'm trying to

17

identify.

The fact that it's nondiscretionary.

18

think -- do you agree with that?

Do you

19

MR. CHUNG:

No, Your Honor.

20

THE COURT:

Tell me what the lynchpin is.

21

MR. CHUNG:

The lynchpin is, again, it's a

22

fact-intensive inquiry.

What did the defendants -- all

23

right -- what did the defendants believe was the action here?

24

And the action here was in -- again, tying to

25

the specific -- specific facts of this case, the action was

101

1

applying for temporary import authorizations that had, prior

2

to the relevant period in this case, had been routinely

3

granted.

4

THE COURT:

Meaning -- meaning consistently?

5

MR. CHUNG:

Consistently, to our -- to our

6

knowledge, without exception.

7

THE COURT:

Consistently and frequently?

8

MR. CHUNG:

Yes.

9

THE COURT:

Okay.

10

MR. CHUNG:

Every -- every time an application was

11
12

put in, they received the authorization.
THE COURT:

And those -- to the best of your

13

knowledge, were those applications put in without -- without

14

any further monetary inducement or were they accompanied by

15

monetary inducement?

16

MR. CHUNG:

Accompanied by monetary inducement;

17

hence, the payment itself, the facilitating payment, for a

18

government action that was routinely rendered.

19
20
21

THE COURT:

So the government would grant these

routinely if it was paid?
MR. CHUNG:

Well, Your Honor, we don't know

22

whether -- we don't necessarily know whether they were --

23

whether they would have been granted if -- if a payment

24

had -- payment had not been made, but what -- what matters

25

here is that payments were made --

102

1

THE COURT:

Isn't that a big difference, though?

2

it would have been granted anyway, without a payment being

3

made, isn't that significant?

4

MR. CHUNG:

I don't think so, Your Honor.

5

THE COURT:

Okay.

6

MR. CHUNG:

And I don't think so because the -- I

If

7

mean, that's the whole purpose of the facilitating payments

8

exception.

9

ordinarily granted by the government, and facilitating

There are actions that are routinely and

10

payments are payments that are made to the government or the

11

government -- government official to secure or expedite that

12

action that is ordinarily or routinely granted.
Now, I want to go back just to the construction

13
14

of how we arrive at whether a particular action is a routine

15

governmental action and, hence, whether a payment for that

16

routine governmental action is a facilitating payment.
The -- the routine governmental action, the

17
18

exception itself states that the purpose of a particular

19

payment must be for a routine -- for an action that is

20

ordinarily or routinely granted.
The purpose of is, directly, explicitly, means

21
22

that we have to consider the intent -- what -- what the

23

defendants themselves thought the payment was meant -- was

24

meant for.

25

And the facts are -- we've -- we've gone

103

1

through this a number of times, a number of lawyers have come

2

up and sort of catalogued the facts here, but the facts here

3

are that the defendants had believed that they were entitled

4

to the temporary import authorizations, not only through a

5

pattern of practice, but through advice from counsel, from

6

PWC's counsel, PWC's advice, the fact that their contracts

7

were multi-year contracts that extended -- that went from

8

period to period and that it was their understanding that the

9

Nigerian government, the NNPC, the national oil company,

10

wanted the rigs there, wanted to keep them -- continue --

11

wanted the rigs to continue drilling for oil.
THE COURT:

12
13

Well, let me just press you a little bit

on that.

14

Is it your position that Thompson & Knight knew

15

that money was being paid to obtain these permits and said it

16

was okay?
MR. CHUNG:

They never said -- they knew, Your

19

THE COURT:

Yeah, they said it was okay.

20

MR. CHUNG:

Mr. Krakoff put up a spreadsheet that

17
18

Honor.

21

was given to, that was put in front of Thompson & Knight that

22

outlined the various TIPs for the various rigs, dates and the

23

very amounts we're talking about.
THE COURT:

24
25

okay?

And Thompson & Knight said that was

104

MR. CHUNG:

1

They -- they didn't -- they never said

2

it was okay.

3

spreadsheet that outlined all of these payments.

4

knew that these payments were -- that the company had

5

designated them as facilitating payments.
THE COURT:

6
7

10

And they

Just remind me, in -- in the face of

that, what did Thompson & Knight say?
MR. CHUNG:

8
9

But they were given -- they were given this

Well, I think the SEC's -- the SEC's

position is that they didn't -- they didn't say anything,
that they were --

11

THE COURT:

Okay.

Is that your position, too?

12

MR. CHUNG:

Our position is that they looked -- they

13

saw that spreadsheet, they knew that they were facilitating

14

payments, they did not see them as -- and that they did not

15

see them as FCPA issues.
THE COURT:

16

And, likewise, with Price Waterhouse?

I

17

mean, I -- I have to say, this is -- this would all be in the

18

wake of Enron and I would have thought an accounting firm

19

would be very nervous about something like this, but your

20

position is PWC knew about the payments and thought it was

21

fine?

22
23

MR. CHUNG:

Well, Your Honor, I think P -- this is

PW C Nigeria so --

24

THE COURT:

I understand.

25

MR. CHUNG:

-- the Nigerian arm of the accounting

105

1

firm.

Their -- I think their advice and their observation

2

was that the -- that the company was basically entitled to

3

these -- to these permits and that the payments being made

4

with respect to those -- with respect to those permits

5

were -- were fine, were legal.

6

THE COURT:

They did bless it, then?

7

MR. CHUNG:

I wouldn't say that they blessed it.

8

Again, we've got the same situation with respect to Thompson

9

& Knight.

10

THE COURT:

Well, what if -- what if the payments

11

had shown, instead of the figures that they show, ten times

12

that amount?

13

Waterhouse would have accepted that as not worthy of comment?

14
15
16

Do you think Thompson & Knight and Price

MR. CHUNG:

I mean, that's -- that's a difficult

hypothetical to speak to.
THE COURT:

I think that --

I'm just trying to understand what their

17

thinking was in not raising a red flag; that it was okay

18

because the amounts were not large, or it was okay because

19

everybody else was doing it, or it was okay because the

20

jurisdiction is not systematic about enforcing its laws?

21

just -- I just -- I mean, to me it just -- it's very hard to

22

get my arms around a well-respected American law firm and

23

accounting firm seeing this and not documenting some concern

24

about it.

25

MR. CHUNG:

Well, I -- I cannot say that sitting

I

106

1

here today, several years later, that that's -- I think

2

that -- that's a reasonable thought or concern to have.

3

But the fact is, Your Honor, at that time, when

4

they were presented with this spreadsheet, again, Mr. Krakoff

5

put it up on the screen, detailing all the payments,

6

detailing the authorizations that those payments were for,

7

they -- they knew exactly what it was for.

8

were payments that the company viewed to be facilitating

9

payments for -- for -- and that they were -- they saw exactly

10

They were -- they

what it was.

11

THE COURT:

Okay.

12

MR. CHUNG:

Now, Your Honor, going back to --

13

ultimately, and Mr. Day, in a prior argument, really hit the

14

nail on the head on this.
Whether the -- whether these particular

15
16

payments were facilitating -- were facilitating payments is a

17

jury issue.

18

issue.

19

of what the defendants believed these payments were for and

20

then taking that, making fact findings with respect to what

21

the defendants believed the payments were for; then,

22

conducting an objective inquiry of:

23

thought objectively a routine government action and, hence,

24

objectively a facilitating payment under the statute itself.

25

Why is it a jury issue?

It's a fact-intensive

It's an issue that depends on the jury's assessment

Was what the defendants'

Now, that involves a number of different

107

1

factual issues, some of which Your Honor hit on already.
First, what did the defendants believe?

2

We've

3

established that, that the defendants believed that they were

4

in -- the company was entitled to these temporary import

5

authorizations, that -- and that these payments were designed

6

to secure them, to expedite them.
Now, the objective inquiry is, you take that,

7
8

and the jury has to -- has to decide, well, first of all, do

9

we believe the defendants, that that's what they thought,

10

and, then, second, what they thought, was it objectively a

11

routine governmental action?
That can depend on a number of different

12
13

factual issues.

14

payment.

15

already, the size of the payment.

16

compare to other payments that the company or other companies

17

have made to government officials in different contexts in

18

this country?

19

payment is for?

20

It can depend on whether -- the size of the

That's something that has come up at this hearing
How does the payment

What is the value or the size of what the

All right.

So there are a number of factors

21

the jury can look at on deciding whether what the defendants

22

thought what was the payment here was

23

objectively facilitation.

24
25

THE COURT:

Is one of the considerations whether the

payment was made overtly or covertly?

108

1

MR. CHUNG:

I think that's another -- that is a very

2

important factor.

3

Honor, that goes to both the subjective and the objective

4

components of this inquiry.

5

overtly, as they definitely were in this -- in this case --

6

That's a very important factor, Your

THE COURT:

So if the payments are made

Well, they weren't labeled that on the

7

accounting records, though, quite, were they?

8

labeled "payments to government officials for governmental

9

preference" or anything like that, were they?

10
11

MR. CHUNG:

They weren't

Well, Your Honor, they were -- they were

booked -- they were accounted for --

12

THE COURT:

Facilitating payments.

13

MR. CHUNG:

-- as facilitating payments, which by

14

definition are payments to government officials or government

15

entities to secure a particular routine governmental action.

16

I mean, that's -- that's as overt, I think, as you can get,

17

and anyone who looked at that facilitating payments account,

18

the 799 account, could inquire, right, if they wanted to look

19

deeper, what government entity was involved here?

20

was the payment?

21

that -- that Thompson & Knight went through when they were

22

shown the spreadsheet with the details of the payments.

23

How much

Much -- much the same kind of exercise

THE COURT:

Well, Thompson & Knight, when they were

24

shown those details, they didn't go out and start asking

25

questions of Exxon or -- or BP and say, "How much are you

109

1

paying for these permits?"

Or "How often are you having to

2

pay it," or, "What are you getting in return for your

3

payment?"

They didn't do any of that, did they?

4

MR. CHUNG:

We're not aware of whether --

5

THE COURT:

How would they know -- how would they

6

know, then, whether these payments were appropriate -- if the

7

amount is relevant, how would Thompson & Knight be in a

8

position to know whether the size of the payment was unduly

9

large or a real bargain or anything else?

I mean, how would

10

they be able to express a professional opinion on its

11

acceptability or not?

12

MR. CHUNG:

Well, I think it's the same -- it's the

13

same inquiry that the jury is going to face in this case,

14

when they're presented with:

15

facilitating payments?

16

What -- were these payments

Those are -- those are some of the questions

17

that I think will be teased out at trial and that go to,

18

first, whether the defendant's subjective belief or, sort of,

19

concept of what the payments were for, first of all,

20

assessing that subjective belief, and then taking that

21

subjective belief and seeing whether that concept was -- was

22

objectively a routine government action.

23

THE COURT:

Well, what if a government official had

24

said, "Yeah, we do this routinely and I can give you your

25

permit in six months if you pay me $10,000, I'll give you the

110

1

permit in three months if you pay me $20,000, and I'll give

2

you the permit tomorrow if you pay me $50,000"?

3

the $50,000 payment was made.

4

okay?

And assume

Would that -- would that be

5

MR. CHUNG:

So payments after --

6

THE COURT:

The more -- the quicker the permit, the

7
8

more it's going to cost the company.
MR. CHUNG:

Well, I think that -- again, there are a

9

number of factors involved here, but if the purpose of the

10

payment is to secure a temporary import authorization that

11

the defendants thought the company was entitled to; right?

12
13
14

THE COURT:

But it may have been entitled to it, but

it may not be entitled to it tomorrow.
MR. CHUNG:

Well, I think that the -- in terms of

15

the temporary import authorizations, all right, they're based

16

on a schedule; right?
So in order to -- in order, for example, to get

17
18

an extension of a temporary import authorization, they would

19

need to get that authorization by a particular time in order

20

for it to be an actual extension.

21

THE COURT:

What if the government official said,

22

"You don't have to pay me anything, I'll give you the permit

23

tomorrow, but I do want you to contribute a hundred thousand

24

dollars to this charity," and that payment was made.

25

that be okay?

Would

111

1
2
3

MR. CHUNG:
obviously not -THE COURT:

4

what are the bounds?

5

acceptable?

6

Well, that's obviously, I mean,

I'm just wondering, I'm just wondering,
What's -- what are the bounds of what's

What are the bounds of a facilitating payment?

MR. CHUNG:

I think the bounds -- the bounds, Your

7

Honor, are, first of all, is the government action that the

8

payment is meant to secure to expedite a routine governmental

9

action, is it ordinarily and routinely granted?
And then we look at the -- we look at the

10
11

payment itself.

Is the payment itself designed -- is it

12

meant to secure or expedite obtaining that particular -- that

13

particular action?
Now, the -- we can, in terms of the size of the

14
15

payment or when the particular payment is made, with respect

16

to the action, Your Honor, I can't say right now what the

17

bounds are.

18

THE COURT:

Jury question.

19

MR. CHUNG:

Jury question.

20

THE COURT:

Okay.

21

MR. CHUNG:

Now, Your Honor, I'm going to address

22

Exactly.

All right.

the Rule 44.1 --

23

THE COURT:

Okay.

24

MR. CHUNG:

-- motion because I think it's in many

25

All right.

ways tied to the SEC's partial summary judgment motion on

112

1

facilitating payments exception.
Now, the -- this is -- the 44.1 findings that

2
3

the SEC is asking Your Honor to make are findings of Nigerian

4

law that are just -- that are irrelevant to whether -- to

5

whether the defendants here are liable under the FCPA.
Each of the findings that they're asking Your

6
7

Honor to make go to questions of what the -- what the

8

Nigerian officials' duties and responsibilities were.

9

whether those duties and responsibilities were breached in

10
11

And

some way.
What matters for purposes of the FCPA, Your

12

Honor, for the antibribery provisions, is:

What did the --

13

what did the defendants intend to do?

14

that these payments were designed to achieve?

What did they think

15

THE COURT:

Are we on 44.1 now?

16

MR. CHUNG:

We are.

17

THE COURT:

Okay.

18

MR. CHUNG:

So, first of all, let's take the -- the

All right.

19

44.1 finding that -- the Nigerian law finding regarding the

20

duration of -- of the TIP extensions.

21

THE COURT:

Okay.

22

MR. CHUNG:

Now, I think first and foremost, that's

23

a finding that the SEC has not come close to establishing

24

under any standard, certainly not to a reasonable certainty.

25

They are relying on the testimony of their

113

1

proffered expert, Kofo Olugbesan, on the former Nigerian

2

customs officer.

3

touched on this earlier, a document that is marked

4

confidential and marked for NCS customs, for customs use

5

only, there's no proof, no -- no allegation that any party in

6

this case knew that this TI code existed, and this TI code

7

stands for the proposition that -- that a temporary import

8

authorization, the duration of it, is limited to one year,

9

the initial authorization, and only one extension of one year

10

Her testimony that a TI code, and Mr. Hanna

beyond that, so a total of 24 months.
Now, through discovery, Your Honor, by my last

11
12

count, we have at least five different versions of what the

13

right TIP duration is.

14

And they all conflict.

15

We have -- we have Ms. --

16
17
18

THE COURT:

Let's assume that's true, then.

What do

you want me to do about the foreign law question?
MR. CHUNG:

With respect to the foreign law

19

question, Your Honor, I don't think -- we don't think you

20

have to decide it at all.

21
22
23

THE COURT:

Just put all these experts in front of

the jury?
MR. CHUNG:

Well, Your Honor, if -- if you don't

24

decide the 44.1 motion at all, then the findings of Nigerian

25

law that the SEC is offering Ms. Olugbesan for, right,

114

1

Ms. Olugbesan doesn't -- it seems that she doesn't testify as

2

to about 90 percent of what's in her report.
THE COURT:

3
4
5

ahead.

I understand.

I understand.

Okay.

Go

Go ahead.
MR. CHUNG:

Now, with respect to the other experts,

6

Your Honor, I think particularly our experts, Ambassador

7

Campbell, Mr. Sayne, in particular, they are -- they are

8

definitely and still relevant, even if you don't make the

9

Nigerian law findings.
They're not opining -- their expert opinions

10
11

aren't -- don't relate to -- they're not opining on

12

interpretations of Nigerian law.

13

to the various contexts that relate to this particular case.

14

The political context in Nigeria, the economic context in

15

Nigeria, the context of the oil and gas industry.

Their -- their opinions go

So those expert opinions of the Ambassador and

16
17

Aaron Sayne are separate and apart from any issues of

18

Nigerian law.
So those basically are untouched.

19
20
21
22

THE COURT:

Okay.

Anything further you want to say

about 44.1?
MR. CHUNG:

No, Your Honor, I think just -- just to

23

sort of put it in a nutshell, they're just not -- you don't

24

need to decide them because they're just irrelevant to the

25

case, whether it's the duration of the TI -- first of all,

115

1

the duration of the TI code is hotly contested, like I said

2

there are at least five or six versions of what the right

3

duration is.
THE COURT:

4
5

You say despite the contested positions,

it's totally irrelevant.

6

MR. CHUNG:

Totally irrelevant, Your Honor.

7

THE COURT:

Okay.

8

MR. CHUNG:

Whether the -- there -- the requested

9

finding with respect to Nigeria's antibribery laws, again,

10

totally irrelevant.

The defendants are charged with a

11

violation of the U.S. antibribery laws.

12

THE COURT:

Yeah.

13

MR. CHUNG:

So, for those reasons, Your Honor, while

14

Your Honor can decide a partial summary judgment motion and

15

we submit that it should be denied, because it is at base a

16

jury issue, I mean, one thing we've learned, I think, over

17

the last three hours is that there's so many different

18

factual issues going toward the defendants' intent as well as

19

to what exactly these payments were for, it's imminently

20

for -- for the jury, but none of the 44.1 findings that the

21

commission is asking you to make go to -- go to any of those

22

issues.

23

THE COURT:

Okay.

All right.

24

(Discussion off the record.)

25

THE COURT:

All right.

Thank you.

Yes, sir.

Yes, sir.

116

1

MR. DAY:

Thank you, Your Honor, I will try to keep

2

this as brief as possible.

3

Court's patience at this point.

I know we're probably trying the

4

Took two things away from that argument.

5

One, it sounds like we're having a trial.

6

Second is that the -- Mr. Chung repeatedly that the

7

definition of a "routine government action" is an objective

8

inquiry.

We agree.

It is an objective inquiry.

And the facts are not in dispute on our motion

9
10

for partial summary judgment.

There are two separate facts.

11

One is Nigerian law.

12

decide.

13

the particular type of government act that's implicated by

14

the Nigerian law.

That's a matter for the Court to

The other is whether these payments were aimed at

15

The defendants have offered nothing other than

16

an attack on Ms. Olugbesan's credibility that Mr. Bryan will

17

address in the context of the Daubert motion, rebutting these

18

clear and just uncontested provisions of Nigerian law.

19

Our view is that the facilitating payment

20

exception -- we've talked about this already today, I don't

21

want to belabor the point.

22

definition in the statute of what constitutes a routine

23

government action.

24

commonly performed.

25

Court's prior opinion is clear, that if the act is committed

But our view is that there is a

It's something that is ordinarily and
And the legislative history, and this

117

1

to the discretion of the government official by law, it is

2

not ordinarily and commonly performed, it is not a routine

3

government action.
Therefore, in this case, there is no dispute as

4
5

to any material fact and we're entitled to partial summary

6

judgment that the routine government action exception does

7

not apply in this case.
With respect to the 44.1 motion, the law is

8
9

clear that even when foreign law doesn't provide the rule of

10

decision in a case, the determination of what foreign law is,

11

is committed to the Court, not the jury.
These determinations that we've requested in

12
13

our motion are necessary and appropriate to be decided by the

14

Court at this point.
THE COURT:

15

Yeah, I do believe that's a question for

16

me.

17

we're arguing about U.S. law, but I think it's a question for

18

me even with foreign law.

19

I mean, it would definitely be a question for me if

That seems like a very unwieldy trial where

20

we'd have experts testify about Nigerian law and ask the jury

21

to decide what it is.

22
23

But I'll continue to think about that.
MR. DAY:

Your Honor, even if it were a jury

24

question, we submit that the evidence is appropriate for

25

summary judgment.

118

We think it is a matter of law for the Court to

1
2

decide, but given the state of the record, we've put in an

3

expert whose qualifications are really, in substance,

4

uncontested, which, again, Mr. Bryan will address, but we've

5

put in an expert to opine as to what the law is.

6

in the relevant provisions of law.

7

with advice from PWC and Noble's Nigerian lawyers.

8

ample evidence to conclude that even if this were somehow a

9

fact question for the jury, there is no dispute.

10

THE COURT:

11

MR. DAY:

12

We've put

The law is consistent
There's

Okay.

Your Honor, I do want to touch briefly on

this Thompson & Knight issue that keeps coming up.
I've said it a couple of times, but I think it

13
14

bears repeating.

15

evidence at all, that either Thompson & Knight or PWC or

16

anybody else blessed the payments that these defendants

17

authorized for the TIPs and TIP extensions that are at issue

18

in this case.

19
20
21

There is no evidence in this case, no

THE COURT:

Do you acknowledge they were aware of

the payments?
MR. DAY:

We do not acknowledge that they were aware

22

of the payments.

The spreadsheet that Mr. Krakoff put up on

23

the -- on the projector earlier has to be viewed in context.

24

It has to be viewed in context by the jury, but for the

25

Court's edification, the history of that spreadsheet is,

119

1

there were payments made to IC Network, the agent in Nigeria,

2

in 2003, for which there was no supporting documentation.

3

Noble didn't know what those payments were for.

4

It wasn't that there was some great understanding that, oh,

5

these were payments to government officials.

6

know what they were for.

7

They didn't

So the Nigeria operations people in an

8

abundance of caution put these into the facilitating payments

9

account so it could be determined whether they were, in fact,

10

payments to government officials or not and appropriate

11

scrutiny could be brought to bear.

12

There was never backup documentation found for

13

the payments that you saw on the screen earlier today.

14

was never a determination that they were, in fact, payments

15

to government officials or that they were appropriate.

16

There

With respect to Thompson & Knight, Dallas

17

Parker, long-time partner at Thompson & Knight, submitted a

18

declaration in this case.

19

that looked into the payments to the labor official, Mrs. O,

20

as she's come to be known in this case.

21

He was in charge of the engagement

In paragraph 7 of his declaration, he states,

22

"Neither I, nor anyone working at my direction, was asked to

23

evaluate transactions reflected in the facilitating payments

24

account referenced in tab D to the report" -- that's a

25

reference to the audit, 2004, West Africa Division audit

120

1

report -- "nor did we have the factual information to conduct

2

such an evaluation."
You have it right here, from the mouth of the

3
4

lawyer in charge, an FCPA practitioner, that he didn't do an

5

analysis and he didn't have sufficient information to conduct

6

an analysis.
The notion that Thompson & Knight somehow

7
8

blessed payments in 2005, in late 2004, to government

9

officials, is plainly contradicted by the evidence in this

10
11

case.
Your Honor, the only other thing, just very

12

briefly, on the other matters of Nigerian law that Mr. Chung

13

characterized as irrelevant, we submit they are relevant.

14

We have a defendant in this case claiming that

15

he received legal advice from a competent Nigerian lawyer

16

telling him that it was okay to submit falsified documents to

17

the Nigerian government to get new TIPs.

18

We've put in unrebutted evidence that it is

19

unlawful in Nigeria to submit any documents to the Nigeria

20

Customs Service that misrepresent a material fact.

21

to the credibility of the claim that a Nigeria -- Nigerian

22

lawyer would have so advised.

23

That goes

Similarly, the payment issue, plainly unlawful

24

under Nigerian law to pay any money to Nigerian government

25

officials under any circumstances.

121

Again, this goes to the issue of the omission

1
2

to tell Ms. Onodugo that there were payments being made to

3

Nigerian customs officials.

4

which is undisputed, it is not credible to argue to the jury

5

that she would have given the same advice, to the extent she

6

gave any advice at all, had she known about payments to

7

government officials.
Finally, Your Honor, with respect to the

8
9

Under prevailing Nigerian law,

hypothetical that you posed about large payments to expedite

10

an act of a government official, again, I go back to the text

11

of the statute.

12

government official to induce any act in the government

13

official's capacity unless --

14

THE COURT:

15
16

It is unlawful to make a payment to a

That'd be the height of discretion,

wouldn't it be, as to when the permit should be issued?
MR. DAY:

Exactly, Your Honor.

If by objective

17

evidence a defendant could show that there was no discretion

18

but to expedite a decision on some basis in exchange for some

19

payment, you might arguably fall within the routine

20

government action exception, but absent that objective

21

evidence that that official has to act under all

22

circumstances, has no discretion, that's a bribe and it's

23

prohibited.

24
25

THE COURT:

Or it could have been the timing.

couldn't be no discretion.

I mean, we're talking about

It

122

1

different times.

I mean, under my scenario, six months,

2

three months, or one day, nobody's claiming that there's that

3

kind of lack of discretion.

4

MR. DAY:

Let -- let me see if I follow.

So what

5

Your Honor is saying is that the official has discretion

6

about how much to expedite the decision?

7

THE COURT:

8

MR. DAY:

9
10

Yeah.

Right.

I think he does.
And payment in exchange for a

discretionary act is unlawful under the FCPA.
THE COURT:

How about another payment?

Is the FCPA

11

just as concerned about a payment to a third-party charity as

12

a payment to a government officer?

13

MR. DAY:

Your Honor, I -- I believe there's a

14

gratuities exception, although I may be conflating this with

15

the domestic bribery statute.

16

turn on that issue.

17

THE COURT:

18

MR. DAY:

I don't want to speak out of

It's not this case, but --

The -- I would also direct Your Honor to

19

Defendant Ruehlen's own expert and former Ambassador

20

Campbell, who I think had a very sensible view of what

21

constitutes a routine government action.

22

deposition that his understanding was that things like TIPs

23

and TIP extensions, those aren't routine government actions

24

because they're unusual, they're big, big deal things that

25

companies get.

He testified in

It's a big deal to get an exemption --

123

1

THE COURT:

2

MR. DAY:

3

They're not routine.

-- from an import duty.

They're not routine.

This was just, you know,

4

extemporaneously.

5

right or anything.

6

say was in his mind, as the former Ambassador to Nigeria --

7

to Nigeria, that the routine government action exception is

8

aimed at things like getting a driver's license, something

9

that's applicable broadly, to wide swaths of the population.

10

It's not something that applies in very narrow circumstances

11

with very high value transactions.

12
13

We're not saying, you know, he got the law
But this was just his view.

THE COURT:

MR. DAY:

15

THE COURT:

17
18
19
20
21

He doesn't have any legal training,

anyway, does he?

14

16

What he did

He does not, Your Honor.
Okay.

Thank you very much.

Yes, sir.
MR. HANNA:

Your Honor, Mr. Chung had to step out.

He has a potential family emergency issue.
THE COURT:

I'm sorry.

He's certainly excused.

He's certainly excused.
MR. HANNA:

Thank you, Your Honor.

I would like to

22

just address a couple of points if I could in his -- I

23

probably won't say them as articulately as him, but I would

24

like to address a few points.

25

THE COURT:

Okay.

124

MR. HANNA:

1

Number one, I don't think I remember

2

hearing Mr. Chung say it was a solely objective issue.

3

was a mixed issue.

4

when they characterized his statements.

So I don't think counsel got it right

As to facts of Nigerian law, they said the

5
6

facts are not in dispute.

7

Mr. -THE COURT:

8
9

12
13
14

They're hotly in dispute.

As

The facts of the Nigerian law, you mean

what the law is?

10
11

It

MR. HANNA:

What the law is, in Nigeria, is hotly in

THE COURT:

Is it a legal question, though, or a

dispute.

factual question?
MR. HANNA:

I think it's a factual question, and the

15

Court in your motion to dismiss said it was a factual issue,

16

but I think it's a factual issue.

17

at least five different versions of what the law in -- laws

18

in Nigeria.

19
20
21

THE COURT:

As Mr. Chung said, there's

Yeah, are you suggesting that I put that

in front of the jury?
MR. HANNA:

Well, Your Honor, I think they're asking

22

you to make a decision, they're asking you to make a

23

decision, as, you know:

24
25

This is the law in Nigeria.

I think the answer is, quite, frankly, you have
to do -- you have to have reasonable certainty.

And I think

125

1

the answer is, there is no reasonable certainty.

2
3

8
9
10
11
12

MR. HANNA:

Well, I don't think the Court can just

guess, and that's what they're asking you to do.

6
7

But a jury won't get there either, will

it?

4
5

THE COURT:

THE COURT:

No, but what are we asking the jury to

MR. HANNA:

I think the jury, I think we put the

do?

evidence on -THE COURT:

Why am I guessing and on the same

evidence the jury is not guessing?
MR. HANNA:

Because it's a credibility issue as to

13

their witness, frankly.

14

have to put on Ms. Olugbesan in front of this jury.

15

Exhibit A for Nigeria.

16

secret document that no one has, that she had and only she

17

had, as far as we can tell, is the law of Nigeria.

18

should have to put her on.

19

They're going to call -- they should
She's

She should have to testify that this

They

Their own complaint, Your Honor, and we point

20

this out, says you can get three extensions.

21

investigation, the SEC said you can get three extensions.

22

Now they have a witness who says, one extension.

23

that answer better, and so they want to go with that answer.

24
25

After years of

They like

And, of course, there's no evidence that any of
our -- any of the defendants saw that TI code, knew it

126

1

existed.

It's marked right on it, "Confidential, not for

2

publication."

3

recognize.

4

guideline for NCS.

It's not any kind of law that you or I would

It's an internal -- appears to be an internal

She's going to testify with zero personal

5
6

knowledge that this document was the guidance for Nigerian

7

Customs Service and was in effect at that time, and I think a

8

jury should have to make a decision as to whether they

9

believe her or not, because it -- it's -- it's an important

10

question.
And I don't think that the Court on the papers

11
12

can just say, "Well, she says it" --

13

THE COURT:

Yeah.

14

MR. HANNA:

-- "therefore, that must be it,"

15

especially given all the conflicts.

16

THE COURT:

Okay.

17

MR. HANNA:

Two -- a few other points of

18

Counsel said, and I was surprised by this, that
Thompson & Knight didn't know.
They helped draft the IC Network agreement that

21
22

called for special handling fees.

23

FCPA.

24
25

I think I got you.

clarification.

19
20

All right.

They're experts in the

They gave the training.
THE COURT:

Explain that affidavit to me, the

declaration that was --

127

1

MR. HANNA:

What Mr. Parker, who was not deposed,

2

who just gave them a declaration, seems to be saying is:

3

Nobody specifically asked me to give -- render an opinion on

4

that spreadsheet.

5

He doesn't say he didn't -- they didn't get it,

6

because the evidence is they did get it.

7

anything about the IC Network contract.

8

anything about the facilitating -- the facilitating payments

9

account other than:

10
11
12
13
14

He doesn't say
He doesn't say

I was not specifically asked.

These are basically, Your Honor, the lawyers
are running away.
Mr. Campbell says the same thing:

We got it.

But I didn't ask anybody to analyze it.
These are FCPA experts.

You see a document

15

that shows $670,000 in facilitating payments in Nigeria, if

16

you call yourself an FCPA expert, you would ask questions.

17

And the fact that they didn't ask questions means they didn't

18

think there was a problem with it.

19

And -- and I think, frankly, you know, if --

20

I'm surprised that the SEC is taking the position that

21

lawyers get a document that on its face would trigger an FCPA

22

expert to ask questions and they'd let them off the hook, is

23

surprising to me.

I don't think they did that.

24

THE COURT:

Anybody depose Mr. Parker?

25

MR. HANNA:

Mr. Parker was not deposed.

We -- we

128

1

reached out to him and tried to contact him and we were never

2

able to do that, but -- he was not deposed by anybody.
THE COURT:

3

So your view, I just want to make sure,

4

because I -- lawyers' conduct is maybe something I understand

5

better than some other parts of this case.

6

Thompson & Knight knew about these payments and chose to

7

remain silent?
MR. HANNA:

8
9

Exactly.

Your position is

And -- and the defendants,

Mr. O'Rourke testified, he's the head of internal audit, he

10

says -- I'll try to get his testimony right.

11

sent it to them.

12

problem, they would have said something.

We

I expected that if they thought there was a

That was their job.

13

He says:

To say something.

That's

14

what lawyers do.

15

something and you notice that you think there's a risk there,

16

your job is to tell them.

17

asked.

18
19

If you have a client and they send you

You don't have to wait to be

The job of the lawyer is to tell them.
THE COURT:

No, I agree.

My response would not have

20

been silence, but I just -- on the other hand, if I were

21

the -- if I were a businessman, I would not accept a response

22

of silence as a sufficient authorization for me to go ahead.

23

MR. HANNA:

Except, Your Honor, if you -- if you

24

knew your lawyers were heavily involved in the issue, you

25

knew your lawyers had conducted an internal investigation for

129

1

you on FCPA issues in Nigeria, you knew that they had written

2

a report, you knew they had done your training, you knew --

3

you knew that these guys, with your general counsel, were

4

heavily involved in the FCPA issues with respect to this

5

company, and you knew that your people were sending them

6

documents relating to the facilitating payments account, I

7

think that as a businessman, you could take great comfort in

8

that, because you know that you've got experts in the

9

situation looking at the issue.
Now, you could say, "For every issue facing a

10
11

company, you need to get a written legal opinion from

12

counsel," but that's just not the way it works, as the Court

13

knows.
You know --

14

THE COURT:

15

No, not for every issue, but for a

16

payment made to a government official, well, I -- it doesn't

17

matter what I would have done.

18

understand your point.

Okay, I understand your -- I

19

MR. HANNA:

And PWC knew about the account as well.

20

THE COURT:

And they just chose to remain silent,

21

didn't express an opinion, pro or con?
MR. HANNA:

22

There's nothing in the record that we

23

can see.

24

Hey, this might be a problem."

25

They certainly didn't say, "Problem here, guys.

And there's -- so there's nothing in the record

130

1

that I can see that they said, this was fine, same with

2

Thompson & Knight, but they knew about it, which is

3

important.

4

you're a defendant, especially Mr. Ruehlen's position, if you

5

believe PWC knows about it, you know for sure the head of

6

internal audit knows about it.

And for the state of mind of the defendants, if

7

THE COURT:

Have you ever advised accounting firms?

8

MR. HANNA:

Not personally, no, Your Honor.

9

THE COURT:

Would you have advised PWC to say

MR. HANNA:

I think, if PWC saw it and thought it

10
11

nothing?

12

was an issue, they should have raised it.

13

didn't think it was an issue, they didn't raise it, suggests

14

they didn't think it was an issue.
Same with Thompson & Knight.

15
16

The fact that they

THE COURT:

So that -- so, okay, so that meant that

17

PWC and Thompson & Knight must have known something about

18

Nigerian law.

19

MR. HANNA:

Your Honor, I think -- I think they

20

would know enough that if they saw payments going in an

21

account marked "facilitating payments" in the amounts that

22

their -- that are stated that the SEC says are just big red

23

flags, that they were expert enough to ask questions and

24

drill down.

25

And that the accounts, as Mr. Middleton

131

1

testified, were clear as day -THE COURT:

2
3

Did they -- did they drill down and then

chose to remain silent?
MR. HANNA:

4

Well, I don't know that they -- they

5

didn't -- I don't know -- I can't represent that PWC drilled

6

down on the account.
THE COURT:

7

I know they knew about the account.
But, there's no question in your mind

8

that if similar payments had been made to United States

9

government officials, neither PWC nor Thompson & Knight would

10

have been silent?
MR. HANNA:

11
12

I think that if they thought there was a

problem, they would ask questions.
THE COURT:

13

I'm just asking, do you really think

14

any -- any publicly traded company could make payments to a

15

government official for him or her to take action?
MR. HANNA:

16

I think if -- if they did -- if those

17

payments were on the books and PWC saw payments to government

18

officials in the United States directly, I think they would

19

ask questions.

20

questions.

I think Thompson & Knight would ask

THE COURT:

21

So that must mean that they knew

22

something about Nigerian law that made it different from U.S.

23

law.

24
25

MR. HANNA:

No, I think they would be thinking FCPA.

Thompson & Knight, they're experts in the FCPA.

They know

132

1

there's an exception for facilitating payments.

2

presumably understand that --

3

THE COURT:

That exception is not self-executing, is

4

it?

5

whether it's a facilitating payment?

6

They

Don't you need to know something about the law to know

MR. HANNA:

I think that's right.

You do.

And I

7

think that -- all I'm saying is I think Thompson & Knight was

8

equipped to ask the questions and find out.

9

would be something that they would ask the questions on.

And at least it
In

10

the case of Mr. Ruehlen, Mr. Ruehlen didn't know what the law

11

of Nigeria was.

12

THE COURT:

13

very difficult circumstance.

I agree with that.

I understand that.

14
15

No, I -- Mr. Ruehlen, I agree, is in a

MR. HANNA:

And the last point, you know, Your

16

Honor, I wanted to make was, we keep talking about

17

discretion.

18

I think it's fair to say -- it's hard to think,

19

for me to even fathom a government action that doesn't have

20

some element of discretion in it.

21

out, the discretion to move something quicker.

22

that's the essence of a facilitating payment, to expedite.

23

So clearly, the government employee can either give it to you

24

today or tomorrow, so there's some discretion in there.

25

it can't be if there's any discretion, as Mr. Day said, any

Even, as the Court pointed
I mean,

So

133

1

discretion at all for anything, all of a sudden it's outside

2

the bounds of this.

3

THE COURT:

All right.

4

MR. HANNA:

Thank you, Your Honor.

5

THE COURT:

Let me get a head count.

6

to speak who has not yet spoken?

Who all wants

You do.

7

MR. BRYAN:

Well, Your Honor, we have --

8

THE COURT:

I'm not criticizing.

9
10

I'm not trying to

silence you.
MR. BRYAN:

Your Honor, we're ready to argue

11

whatever nondispositive motions that the Court wants to hear

12

argument on.

13

THE COURT:

Okay.

14

MR. BRYAN:

In terms of -- our view is the

15

defendants' experts can be grouped and -- by subject matter,

16

because there's a lot of issues that cross over.

17
18
19
20

THE COURT:

MR. KRAKOFF:

22

other -- all right.

25

Well, Your Honor, you mentioned

earlier that we have a little time to go back -THE COURT:

24

Mr. Krakoff, you have something

further you want to say?

21

23

Okay.

You want to go back over some of the

MR. KRAKOFF:

I do want to rebut some of the points

on the dispositive motion.
THE COURT:

All right.

Ms. Randell, you want to

134

1

speak.
MS. RANDELL:

2

Yes, Your Honor, as to the Daubert

3

motions, the defendants also have Daubert motions as to the

4

SEC's three experts.
As to the experts overall, while we -- I think

5
6

that we can group experts as far as starting with, for

7

example, a Nigerian expert and going to another Nigerian

8

expert, we do disagree with the SEC's idea that they can

9

argue four Daubert motions at the same time.

10

THE COURT:

11

MS. RANDELL:

12

THE COURT:

13

you want.

14

going to need.

Yeah, okay.

Okay.

MS. RANDELL:

16

THE COURT:

17

MR. KHALIL:

18

THE COURT:

20

You-all can have as much time as

I'm just trying to ballpark how much time we're

15

19

And then go to our --

Thank you, Your Honor.

Who else wants to speak?
I do, Your Honor.
Mr. Khalil, what do you want to talk

about?
MR. KHALIL:

It goes to our motion to strike

21

Onodugo's statements on the basis of a hearsay statement.

22

Thank you very much.

23

THE COURT:

24

MR. HEWETT:

25

Okay.
Your Honor, I'm Martin Hewett.

I'd be

addressing two of the SEC's Daubert motions on experts.

135

1
2

Very well.

Mr. Bryan, I guess you're up

MR. BRYAN:

Your Honor, if I could defer to my

next.

3
4

THE COURT:

colleague, I think he needed to respond to -MR. HANNA:

5

Your Honor, I'm sorry, I was going to

6

address Mr. Bell, who was our accounting expert when we get

7

to that point.

8

THE COURT:

Okay.

9

MR. HANNA:

We broke it up.

10

issues.

We did it by individual.

11

THE COURT:

12

MR. MILLER:

13

Okay.

That's fine.

Your Honor, excuse me, Adam Miller, I

also have two of the Daubert motions.

14

THE COURT:

15

MR. DAY:

16

THE COURT:

17

morning?

18

you want to do.

19

We didn't group them by

Very well.

Thank you.

Okay.

Sounds like a late evening, Your Honor.
Well, would you rather come back in the

Would you rather come back next week?

Tell me what

I --

MR. KRAKOFF:

Rather come back in the morning, Your

20

Honor, you know, whenever the Court -- we'll go as long as

21

the Court wants to go, but we'd rather continue tomorrow.

22
23
24
25

THE COURT:

Well, you guys probably haven't packed

for tomorrow, have you?
MR. BRYAN:

We can certainly come back tomorrow.

understand with the Court's schedule --

I

136

1

THE COURT:

Don't worry about the Court.

I'm here

2

and this is my job and I'll stay here as long as you want me,

3

but I know this is an exhausting enterprise and it's harder

4

for you guys than it is for me.

5

to -- I'm just want you guys to pace yourselves as you wish.

6

We're not -- I'm not trying to wear anybody down.

7
8
9

MR. BRYAN:

I know that.

Thank you, Your Honor.

So I just want

I'm sure my

colleague needs a break, but I'm happy -THE COURT:

Here's what you guys do.

Why don't

10

you -- let's take a short break, you guys confer as to

11

whether you want to stay over tomorrow and go -- go buy a

12

change of clothes or whatever, or whether you want to come

13

back or you just want to stay late tonight.

14

MR. DAY:

Okay.

Thank you, Your Honor.

15

THE COURT:

16

(Recess taken from 4:55 p.m. to 5:05 p.m.)

17

THE COURT:

18

MR. DAY:

I'll do whatever the consensus is.

Okay.

What say you?

We had certainly varying proposals from

19

the defendants.

The SEC's preference would be to get through

20

some of the Daubert motions this evening and then perhaps

21

take a break and come back tomorrow and finish up.
I think there's a little bit more rebuttal on

22
23

the dispositive motions from Mr. Krakoff, as well, and I had

24

a few words to say on the motion for partial summary

25

judgment.

137

MR. KRAKOFF:

1

Your Honor, I'd suggest, if we're not

2

going to do everything tonight that at least we get finished

3

with the dispositive motion.

4

say in rebuttal.

I've just got a little bit to

5

We thought that there's also the motion to

6

strike, which goes to the lawyer, Jo -- Jo Onodugo, that

7

Mr. Khalil is going to be arguing.

8

the way, as well.
THE COURT:

9

We could get that out of

Well, if you say something more on

10

dispositive motions, I dare say the SEC may want to say

11

something more.

12

MR. DAY:

Could happen.

13

THE COURT:

Just a guess.

I will say this.

14

Yeah.

In my going through the

15

papers, I thought the Daubert was the least exceptional.

16

think Daubert motions were application of familiar principles

17

to familiar issues.
The case in chief, the dispositive motion, to

18
19

me, is a more vexing matter.

20

papers, I think I could do okay.

If I had to take Daubert on the

I'm not -- I'm not prejudging.

21
22

will change my mind completely.

23

okay.

24

up with MSJs.

25

I

Maybe y'all

It's happened before, but --

Well, let's go -- let's finish up with -- let's finish

Problem?

138

MR. DAY:

1
2

I would like to say a few more words on

the partial summary judgment motion.

3

THE COURT:

4

MR. DAY:

I'm sorry.

We'll let do you that then.

Your Honor, we've been going round and

5

round about Thompson & Knight and PWC and just a few more

6

words on Thompson & Knight.
I think it's hard to overstate how much the

7
8

defendants are trying to make from so little, with Thompson &

9

Knight.

The affidavit that I read from earlier from Dallas

10

Parker covers quite a bit more material than the one portion

11

that I read to you.

12

One portion I read to you very unequivocally

13

states that Mr. Parker was not asked to and did not perform

14

any review of transactions -- apparently, the 799 account --

15

for transactions in 2003, so -- and that's something I want

16

to be very clear on.

17

potentially subject to review but were not, in fact, reviewed

18

were 2003 transactions.

19
20
21

These transactions that were

The notion that Thompson & Knight didn't
recognize risk is also contradicted by the record.
The Thompson & Knight report on the payments to

22

the labor official in mid-2004 acknowledges that there was

23

risk associated with the transactions appearing in the

24

facilitating payment account for 2003.

25

risk and, indeed, Thompson & Knight was informed that

It acknowledges that

139

1

management, Noble management, was responding to that risk.

2

There's an appendix to the audit committee report that -- or

3

to Thompson & Knight's report that lays out the steps that

4

management was going to undertake to evaluate whether there

5

were any suspect transactions in that account or not, and the

6

onus was very much on Noble's management to do that.
Thompson & Knight said that it concurred with

7
8

the steps proposed by management, precisely because these

9

kind of transactions do present FCPA risk, but management was

10

clear that it was looking at that issue.

11

was not asked to and did not.

Thompson & Knight

So the notion that Thompson & Knight -- this

12
13

started to sound almost like a legal malpractice case for a

14

minute there, but the notion that --

15

THE COURT:

Well, I think it probably does have some

16

edge of that.

17

position that Mr. Parker is in and it's not totally

18

surprising that they'd say, "I didn't -- I wasn't asked to

19

look at that."

20

Mr. Parker, but that's what lawyers do.

21

I mean, I've seen lots of lawyers in the

I mean, that's -- no reflection on

MR. DAY:

With respect to Mr. Parker's testimony as

22

well, Mr. Parker was listed in our Rule 26 disclosures.

We

23

chose not to take his deposition, but he was certainly

24

identified as a witness with knowledge of facts material to

25

this litigation.

Defendants absolutely could have taken his

140

1

deposition.
We did procure an affidavit from him.

2

The

3

affidavit is clear, comprehensive, and speaks for itself.

4

Frankly, Your Honor, we intend to, if necessary, call him at

5

trial and the jury can assess his credibility at that time.

6

THE COURT:

Okay.

7

MR. DAY:

8

THE COURT:

9

MR. KRAKOFF:

Thank you.

Thank you.
Mr. Krakoff.

10

THE COURT:

11

MR. KRAKOFF:

Your Honor.

Yes.
Good afternoon again.

First thing I

12

want to talk about is just for a moment, a total abuse of the

13

record in this case that was -- just came from the SEC.

14

total mischaracterization and misrepresentation basically

15

about -- about Thompson & Knight.

A

Mr. Day just said that Thompson & Knight

16
17

actually found that there was significant risk from this --

18

facilitating payments account.

19

defendants.
Absolutely not.

20

And that that went to the

Absolutely not.

Matter of

21

fact, what happened was, to be -- to be clear about the facts

22

in this case, which I'm frankly appalled that they made this

23

argument.

24

a draft report and in that report they say, "Well, there's

25

some significant risk regarding this -- these 799 accounts,

Thompson & Knight wrote a draft report, they wrote

141

1

facilitating payments accounts."
And you know what happened, Your Honor?

2
3

Mr. Campbell took it out.

4

Removed it.

He took it out of the draft.

And we have -- we have his edit.

5
6

lawyers -- we've got all the records.

7

documents.

8

out.

9
10

You know,

We've got all the

We've been through full discovery.

He took it

That didn't go to Mark Jackson.
But Mr. Day repeated something before the Court

that they put into their papers that's false.

11

So that's not what happened.

Number one.

12

Number two, as to -- as to Thompson & Knight,

13

we have -- and I tried to be very careful and very clear

14

about this, Your Honor, in my opening argument.

15

We are not claiming in any way, shape or

16

fashion, that they issued a -- an opinion as we lawyers know,

17

a legal opinion, regarding the facilitating payments through

18

IC Network to the Nigerian Customs Service.

19
20
21
22

We don't take -THE COURT:

Tell me what they did.

Tell me what

Thompson & Knight did.
MR. KRAKOFF:

What they did, Your Honor, is that

23

they were hired to do an investigation of what was identified

24

as a clear FCPA potential risk and that was $18,000, very

25

similar to the amount of the payments to -- for the TIPs and

142

1

for the extensions, $18,000 to the labor official.
And they did what law firms do.

2
3

full investigation.

4

the audit committee about that issue.

They mounted a

Interviews, documents, 40-page report to

Part of their report was -- and they were asked

5
6

by Mr. O'Rourke -- excuse me.

7

Mr. Campbell to look at the spreadsheet I showed you.
Now, that spreadsheet was from the -- was of

8
9
10

They were asked by Mr. --

the facilitating payments account.

The payment -- payments

to the labor official, they were in that account.
But additionally in that account, which went to

11
12

the lawyers, were the ten payments to IC Network and it was

13

very explicit.

14

TIPs, for extensions, and the amounts.

15

They got that.

16

their draft report.

17

general counsel of the company, and the former president of

18

the company, and he excised it.

We saw that, Your Honor.

Substantial amounts.

They -- they included a reference to it in
They gave it to Mr. Campbell, the

So they looked at it.

19

Very explicit, for

We know that.

And they

20

didn't raise their hand.

21

they're on the eve of trial, eve of trial and they get an

22

affidavit.

They didn't depose this guy.

23

THE COURT:

24

MR. KRAKOFF:

25

And now, the SEC comes in here,

wouldn't respond.

You didn't either, though, right?
We didn't either.

We called him, he

Yes, we could have issued a subpoena, we

143

1

could have, but -- and we didn't.

2

come in here on the eve of trial, after we have filed our

3

motions and they get an affidavit from him and not

4

surprisingly, he says, you know:

5

asked about -THE COURT:

6
7
8
9

MR. KRAKOFF:

11

we're arguing.

14
15

Wasn't

That is a tendency of lawyers

And that's fine.

Our point, our sole

point with regard to -- to Thompson & Knight is not that they
gave an opinion.

13

I wasn't asked.

when --

10

12

I know.

But the point is, they

They tried to make it look like that's what

We're not.

THE COURT:

It was one of a variety of --

I know.

It's on a continuum.

I

understand.
MR. KRAKOFF:

That affected Mark Jackson's state of

mind, and appropriately so.

16

THE COURT:

17

MR. KRAKOFF:

18

(Discussion off the record.)

19

MR. KRAKOFF:

20

address that point.

21

THE COURT:

Hold on just one second.
Yes.

So that's what I -- I wanted to really

So I just want to -- this does -- this

22

does puzzle me.

So your position is, Thompson & Knight knew

23

about these payments to government officials and thought

24

there was nothing that required them to inquire about

25

Nigerian law?

144

Your Honor, honestly, I can't even wade in -- I don't

1

A

2

like to dodge Courts' questions, but I can't answer that,

3

because they -- if I were them, I can only -- I can only tell

4

you what I would have done.

5

THE COURT:

6

MR. KRAKOFF:

7

Yeah.

to --

8

THE COURT:

9

MR. KRAKOFF:

10

And I don't know that that's relevant

THE COURT:

But I mean if -I mean, I've done a lot of --

If Thompson & Knight saw that Noble was

11

going to pay Ellison $10,000 for favorable action, I dare say

12

they would have said there's something wrong with that.

13

And we have the same paradigm in Nigeria and

14

they're not suggesting anything's wrong with that, which must

15

mean somebody did a review of Nigerian law or had preexisting

16

information about Nigerian law or just assumed somebody else

17

was looking at it.

18

MR. KRAKOFF:

I think, with all respect, I think

19

that the inquiry for them would not necessarily be into what

20

is Nigerian law.

21

If they are FCPA experts and we -- and they

22

served in that position for the -- for the company, then if

23

you see a payment to an agent that's given to a foreign

24

official for -- to obtain some benefit, you see evidence of

25

it, and you see an amount that -- in this case, the $10,000

145

1

we saw in the spreadsheet, we saw 14,000, we saw a lot more.

2

An FCPA expert in the United States, if they saw a problem

3

with that amount, they would say -THE COURT:

4

But one thing everybody seems to agree

5

on is the appropriate amount is a very fact-sensitive

6

question.

7

MR. KRAKOFF:

8

THE COURT:

9

It's a relative concept.

Yeah, so without knowing anything about

what other payments were being made, how could TK have looked

10

at that and said, "This is a problem," or, "This is not a

11

problem"?
MR. KRAKOFF:

12
13

Well, it's -- it's relative to what's

the size of the contract.

14

THE COURT:

Is it that or is it --

15

MR. KRAKOFF:

And it's really about -- again, it's

16

about -- really about Mark Jackson's state of mind, simply

17

that.

18

THE COURT:

Okay.

19

question of:

20

in Mr. Jackson's mind?

So now we've moved way off the

What's an appropriate payment?

It's what was

21

MR. KRAKOFF:

22

about corrupt intent.

23

want to write it out of the statute, but it's all about

24

corrupt intent.

25

Mark Jackson could -- this is all
I'll get to that in a minute, they

That's -- that's --

THE COURT:

I know, but I don't see how Thompson &

146

1

Knight is of any use whatsoever if they didn't do some

2

investigation as to what goes on in Nigeria.

3

MR. KRAKOFF:

Mark Jackson wouldn't know whether

4

they did or not.

All Mark Jackson knows is that a

5

spreadsheet with payments to Nigerian customs officials went

6

to the general counsel of the company, went to the outside

7

counsel of the company, which is looking at FCPA issues,

8

knows that, and they -- neither of them said, you know, we

9

need to investigate that further.

Actually, that's exactly

10

what Thompson & Knight wrote in the draft.

11

investigated further.

12

That's what Mr. Campbell X'd out.

13

THE COURT:

14

MR. KRAKOFF:

15

That ought to be

Okay.
And so all we can -- and I really am

not trying to overplay my hand with the Court --

16

THE COURT:

I'm not suggesting that you are.

17

MR. KRAKOFF:

-- on what Mark Jackson's, on this

18

state of mind issue.

19

what he knew was simply, not that there's a legal opinion,

20

only that this -- that the -- the law firm, the lawyers, had

21

this information and nobody said anything.

22

He can only go on what he knew, and

So when he gets to the point where he's being

23

asked to approve an extension, no paper process, no false

24

documents, that's -- that's affecting his state of mind.

25

could not -- he could not have the requisite corrupt intent,

He

147

1

evil motive, wrongful purpose, to influence an official to

2

misuse his position.
It's one of the many factors that go into how

3
4

he made up his mind, and that's all that we're trying to say

5

on that.
This is not a -- and, again, Your Honor, this

6
7

is not a mistake of law defense at all.

8

perhaps.
THE COURT:

9

A mistake of fact,

But Mr. Jackson, I think, would be a

10

pretty sophisticated consumer of legal and accounting advice,

11

and I'm just trying to figure out where Thompson & Knight

12

fits into that and where PWC fits into it to your point, to

13

your point as to what did Mr. Jackson know and when did he

14

know it.

15

my questions.

16

So that's -- that's the -- that's the direction of

MR. KRAKOFF:

Now, on the issue of corruptly,

17

corrupt intent element, no matter what Mr. Day tries to say,

18

their position is that corruptly is out of the statute.

19

have conflated and merged the purpose element with

20

"corruptly," and when they -- when their position is that all

21

we have to show is that they have purpose to influence any

22

act or decision, that means -- that renders the word

23

"corruptly," which Congress wrote into that statute.

24

THE COURT:

25

MR. KRAKOFF:

They

Yes, it did.
And it's right there for all of us to

148

1

see and for all of us FCPA lawyers to advise clients on.

2

It's read right out of the statute.

3

what they want.

4

It's a clever argument, Your Honor.

5

I'll grant them that.

6

the statutory construction is clear.

7

means something.

8
9

And that's -- that's

But it's a wrong argument.

I get -It's --

The word "corruptly"

You can't read it out of the document.

The legislative history is equally clear that
"corruptly" was intended, Your Honor, to distinguish exactly

10

what we're looking at right now, to distinguish between

11

payments that cause an official to exercise other than its

12

free will, on the one hand, or payments that move a matter to

13

an eventual end.

14

from the -- from the House report.

15

That's what the legislative history said

And so that's what "corruptly" is trying -- is

16

intended to achieve, and -- but they don't want -- they don't

17

want to have to prove that.

18

to have to prove it.

19

this case before you, but it's not right.

20

I understand why they don't want

Makes it a lot easier for the SEC in
It's not the law.

Also, and this is remarkable to me, Your Honor,

21

it's even contra -- their position is even contrary to their

22

own SEC guidance that they issued to the public in 2012.

23
24
25

So it's -- it's really -- their position is
just flatly wrong.
And no other Court has taken this position,

149

1

Your Honor.

In fact, the Court was very mindful of the -- of

2

what "corruptly" meant when -- when the Court wrote it --

3

the --

4

THE COURT:

Yeah.

5

MR. KRAKOFF:

-- its opinion and relied upon the

6

Stichting case in saying that it's about evil motive,

7

wrongful purpose, to influence a public government official

8

to -- to misuse his or her position.
THE COURT:

9

No, I got that, but it's just this --

10

it's -- the devil's in the details here and we have to figure

11

out what "misuse" is, what "corruptly" means, what other

12

people were doing.

13

inquiry, I fear.

It's just -- it's just a multi-sensory

MR. KRAKOFF:

14

Your Honor, the -- I thought that the

15

Court was actually farsighted -- probably didn't anticipate

16

the argument that the SEC was going to make today, but the

17

Court was far sighted when you wrote, with regard to what

18

would be corrupt intent, what -- when a -- when an

19

individual, Mr. Jackson, believes he's entitled to the

20

benefit, and you wrote that "The Court has difficulty

21

imagining that the SEC will be able to plead the defendants

22

had the bad purpose of influencing an official to misuse his

23

position if it does not first plead the defendants knew --

24

knew they were not entitled to extensions as a matter of

25

right."

150

1

And so this -- again, Your Honor, if

2

Mr. Jackson -- Mr. Jackson believed in good faith that the

3

company was entitled to these permits, he could not and did

4

not have the requisite intent.

5

THE COURT:

What if he knew the company was entitled

6

to it but was trying to get it three months earlier than it

7

otherwise would have been obtained?

8
9

MR. KRAKOFF:

That would not be a violation.

I

mean, Your Honor, remember, when you're -- you asked the

10

question about if you pay --

11

THE COURT:

12

MR. KRAKOFF:

Yeah, yeah.
-- 50 or 30 or 20 and you get it two

13

months or one month or -- you know, I don't know if it's true

14

here in Houston -- it probably is, we can do this in

15

Washington -- you can get a passport faster if you pay a

16

little more money.

I mean, that -- so --

17

THE COURT:

18

MR. KRAKOFF:

19

THE COURT:

20

MR. KRAKOFF:

21

Okay, just -- but that's not illegal.
It's not.

Okay.

All right.

It is not.

So another thing I want to remind the Court,

22

and I know the Court is aware of this, but the words to

23

obtain -- "to obtain a permit" is right in the statute.

24

THE COURT:

Yeah.

25

MR. KRAKOFF:

It's right there.

It means something.

151

1

There's also a catch-all, "for any other purpose."

2

right there in the statute.

3

of mind.

It's

Again, all of this goes to state

The -- on the issue of -- we heard Mr. Day say

4
5

a lot about the amount, "Well, these are high -- these are

6

high payments and basically anybody should have known that

7

these were -- this was wrongful or an illegal facilitating

8

payment -- or illegal bribe."
Well, Your Honor, the statute -- the statute

9
10

says that -- the FCPA says, to the public, "Don't go too

11

fast."

12

It's a relative concept.

13

of --

14

Doesn't say, "You can't exceed 65 miles an hour."

THE COURT:

And that -- and I -- it's kind

Isn't that why it's inappropriate for

15

summary judgment?

16

relativity is not decided on a cold record very well.

17

We've got to figure out -- I mean,

MR. KRAKOFF:

I would suggest it is -- it is -- it

18

is relevant for summary judgment and we -- and despite the

19

fact that we have some issues in consideration of the amount.

20
21
22

And the reason is because it's a relative
concept that goes to Mr. Jackson's state of mind.
THE COURT:

No, I agree, and why do you think that's

23

suitable for summary judgment?

24

genuine issue of material fact?

25

MR. KRAKOFF:

Why is that an absence of a

Because there's no rule that says you

152

1

can't go over 65.

2

statute, and it said, you can't get -- "You can't pay more

3

than a hundred dollars" -THE COURT:

4
5

If there were a rule, if it was in the

That would make an easier case for

summary judgment.

6

MR. KRAKOFF:

7

THE COURT:

8

MR. KRAKOFF:

It would.

Okay.

Yes, it would.

That's my point.

But the point is, again, it's -- when

9

Mark Jackson is asked to approve $10,000 or $20,000, he's not

10

looking at it, because the statute doesn't tell him to, as --

11

as a violation at all.
And what he knows, rather, is that Thompson &

12
13

Knight knows about these amounts, general counsel knows about

14

these amounts, it's been done before, other companies are

15

doing the same -- this is what he knows and we're not

16

overstating the facts.

17

evidence that anyone, anyone in this case, has testified,

18

that they thought that the -- that the payments were too big.

19

None.
So, again, talking about just keeping it to the

20
21

That's -- there is no contrary

facts established in discovery, no one testified to that.
THE COURT:

22

Is there any -- is there any evidence in

23

the record as to how much other companies were paying for the

24

TIPs?

25

MR. KRAKOFF:

No, Your Honor.

The -- other than

153

1

that the other companies were using the paper process.

2

THE COURT:

Okay.

3

MR. KRAKOFF:

The -- one other -- one other thing I

4

wanted to say, Your Honor, is that I know the Court asked,

5

well, what -- what about in other countries, asked that

6

question.
You know, actually -- actually, Mr. Jackson

7
8

knew this, several years earlier than -- than all these

9

events in 2004-2005.

Noble did use the paper process in

10

China and their lawyers were aware of it and their outside

11

accountants were aware of it.

12

THE COURT:

Which way does that cut, though?

He

13

should have been very sophisticated about the process, then;

14

right?
MR. KRAKOFF:

15

It cuts that his state of mind was

16

that when the paper process came to him, that it was not

17

unusual, the company -- it had been -- it had been reviewed

18

and looked at.
THE COURT:

19
20

Nigeria, can he?

21

be okay in Nigeria"?

He can't -- he can't transpose China to

Just say, "It was okay in China so it must

MR. KRAKOFF:

22

No, and forgive me, Your Honor, for

23

suggesting that.

It's just that, again, when he -- when he

24

looked at this -- their -- their suggestion is, well, paper

25

process.

False -- false documents.

He should have known

154

1
2

immediately.
Not -- and what I'm saying is simply, just that

3

the -- the small point that he was aware that this process

4

was used in another country with the knowledge of the

5

general -- of the then president, Robert Campbell, who became

6

the general counsel, and with the knowledge of the outside

7

law firm and with the knowledge of PWC.

8
9
10

And so he's not looking at this as -- in the
way that the SEC wants the Court to conclude.
unrebutted testimony in this case.

11

THE COURT:

12

MR. KRAKOFF:

13

issue of Ms. Onodugo.

14

That's

Okay.
Finally, Your Honor, there's this

Mr. Day goes to great lengths to say she really

15

didn't give that opinion.

16

say something, it wasn't really a legal opinion.

17

Or if she did give -- if she did

And while I disagree with Mr. Day as to his

18

rendition of the facts, what's important to Mark Jackson and

19

the only reason that we have cited to -- and the critical

20

issue here for Mark Jackson with regard to Jo Onodugo, which,

21

and this is unrebutted in discovery, is that he was told --

22

he was told, "Ms. Onodugo, our long-time lawyer, said that

23

this is legal."

24
25

You can question -- you can quarrel with, well,
why didn't he, say, get that in writing?

Maybe he should.

155

1

But that was the basis on which he made his decision.

2

THE COURT:

That's a very critical point, then.

3

MR. KRAKOFF:

4

THE COURT:

And this --

We need to understand exactly what

5

Ms. Onodugo said, when she said it, in what context, all the

6

rest.

7

MR. KRAKOFF:
I agree.

It is a -- it's an important point,

8

Your Honor.

9

his state of mind, going to his --

10

THE COURT:

11

MR. KRAKOFF:

12
13
14
15
16

It's important to -- it's important to

And it's --- whether or not he had the requisite

corrupt intent.
THE COURT:

And what she says is not hearsay,

because it's not for the truth of the matter?
MR. KRAKOFF:

It's not for the truth of the matter

asserted.

17

THE COURT:

All right.

18

MR. KRAKOFF:

But here's the point, the SEC, no one

19

disputes that he got that information.

20

she -- she could have given a bad opinion.

21

THE COURT:

important point then.

23

MR. KRAKOFF:

25

She could have --

That's what I say, it must be a very

22

24

Whether or not --

It is an important point to his state

of mind, and there is no question and no dispute about it.
THE COURT:

There again, it sounds like a fact

156

1

question.

I think Mr. Jackson needs to be sworn, take the

2

witness stand and say, "Because she told me X,Y,Z, then I did

3

A,B,C."
MR. KRAKOFF:

4

Well, I would say, Your Honor, that,

5

again, our summary judgment motion really comes down to his

6

belief that they were entitled.

7

indulgence, I've got about two minutes of his testimony on

8

that very point.
THE COURT:

9

And with the -- the Court's

That's fine if you want to play it.

10

MR. KRAKOFF:

Then I'll sit down.

11

THE COURT:

12

(Video playing.)

Okay.

That's fine.

It is my understanding that again it's pretty

13

A

14

straightforward.

15

venture that the Nigerian's owned 60 percent of, if we had a

16

valid contract, we were entitled to our temporary permits.

17

Q

Who told you that?

18

A

I was told that by, gosh, Bill Rose, as I recall, PWC,

19

and their comments on -- in a -- the West Africa audit report

20

stated the same thing.

21

other than that.

22

it was -- it was perfectly logical.

23

be a normal operating procedure.

24
25

As long as we had a contract with the joint

I never had anyone tell me anything

And to me it was logical.

It was -- to me,

It seemed like it would

And then it was explained to me that, you know,
"Mark, as you recall, we were going to use the free trade

157

1

zone."

2

Q

Uh-huh.

3

A

But when we checked into it, when we checked into it and

4

talked to the parties, i.e., the Nigerians, they wouldn't let

5

us do it.

6

Q

Uh-huh.

7

A

Okay.

8

country if it's on contract," okay?

9

Q

Who's they?

10

A

I don't recall if it was Tom O'Rourke or Jim Ruehlen,

11

okay, but I had a -- a conversation that they explained to me

12

what was recommended didn't work.

13

then -- then we had discussions on that as to why -- why it

14

wouldn't work and then when it was explained to me it made

15

perfect sense that it wasn't going to work, that it was, you

16

know, that the -- the option that was presented was undoable,

17

okay?

18

Q

Uh-huh.

19

A

I mean, there was -- there was no question in my mind

20

that what I was being told was correct, because I could not

21

see the Nigerians pulling a rig off the drilling operations

22

and sending it out.

23

money to do that.

24
25

They said, "You will not take the rig out of the

Who told you that?

Okay?

Okay.

And then -- and

It would cost them way too much

Okay?

And then -- and then it dawned on me that the
issue was whether or not the process was legal or illegal.

158

1

Q

Okay.

2

A

Okay?

3

it was Tom or Jim, I said, "The issue here was -- is this --

4

is this -- is this process legal or legal in Nigeria?"

5

"Has anybody talked to Jo about this?"

6

Q

Who's Jo?

7

A

Jo Onodugo, but I remember the -- the conversation fairly

8

clearly, because I was -- I was upset.

9

Q

Uh-huh.

10

A

I mean, I couldn't believe, number one -- by the way, to

11

answer the question, they had talked to Jo, she said, "Yes,

12

it is legal," okay.

13

conversation she had with Jim Ruehlen, Jim had asked her, and

14

then I don't recall if Jim called me or if he told Tom and

15

Tom came into my -- I don't know, but I was told what I

16

wanted to know was, "Did Jo look at it?"

17

And the answer was, "Yes."

18

And I said, "Is this legal?"

19

"Yes."

20

Which only irritated me more.

And I -- and I -- and I forgot who I talked to, if

I go,

It was my understanding that was a

Okay.

In other words,

21

I didn't understand why we didn't, you know, a year ago, just

22

ask -- ask the simple question, but we didn't and I can't

23

answer why.

24
25

So in my mind, that was the issue.

Okay?

If -- so if we were told by a -- our Nigerian counsel that

159

1

this process was legal, then I had no reason to -- to doubt

2

that.

3

(Video ended.)

4

MR. KRAKOFF:

5

Your Honor, I just have one last

comment to make and that is this.
That the -- and I'm going to take you back to

6
7

where I -- I started my argument.

That is the -- or close to

8

the start of my argument and that is the paper process which

9

he just commented about, asking whether or not it was legal

10

or not, and the answer to him was, "Yes, it is legal," has

11

nothing to do with the extensions.

12

for the extensions.

13

approved were for extensions.

14

extensions.

Paper process wasn't used

Eight out of the ten payments that he
The first five were for

He didn't have that critical -- that critical

15
16

lynchpin fact in his head of falsity that the -- that the SEC

17

has pointed to.

18

whole facilitating payment process, didn't have that in his

19

head.

20

When he -- when he was introduced to this

And so, again, for all of those reasons, Your

21

Honor, in our view, no reasonable jury could find that he had

22

the requisite corrupt intent.

23

THE COURT:

24
25

Thank you.

Thanks very much.

Mr. Day.
MR. DAY:

Thank you, Your Honor.

We think the jury

160

1

should be able to assess testimony from Mr. Jackson, assess

2

in light of all the facts and circumstances in this case,

3

assess it in light of his own words and the information that

4

was provided to him at the time that he approved these

5

payments.

6

saw on the screen is credible or not.

7

trial in this case.

The jury has to determine whether what you just

Your Honor, I seem to have struck a nerve with

8
9

That's why we need a

the Thompson & Knight issue, and that certainly wasn't my

10

intent and I certainly did not intend to mischaracterize the

11

record.
THE COURT:

12
13
14

Well, give me your explanation of the

record.
MR. DAY:

Thompson & Knight.

We've already talked

15

about this to -- at great length, Your Honor, but Thompson &

16

Knight in the report of its findings about the payments to

17

the Nigerian labor official wrote this.

18

this is a -- a lengthy paragraph, but I think it gives the

19

context for --

20
21

THE COURT:

Read slowly for the court

reporter.

22

MR. DAY:

23

THE COURT:

24

MR. DAY:

25

Okay.

And I apologize,

-- for what Thompson & Knight was doing.
Read slowly.

"In the course of our investigation of the

payments, we became aware that the facilitating payments

161

1

account for Noble Nigeria for the fiscal year 2003 indicates

2

total," quote, unquote, "'facilitating payments' which are

3

defined and described elsewhere in this report in an amount

4

in excess of $600,000.
"As discussed in tab D, Noble's management has

5
6

advised us that many of the payments recorded to that account

7

are not properly classified as," quote, unquote,

8

"'facilitating payments,' but that the amounts were placed in

9

that account by personnel in Nigeria in an overabundance of

10
11

caution.
"The FCPA not only deals with the -- with

12

improper payments, it also requires accurate books and

13

records of account relating to such payments and otherwise.

14

"Management, as mentioned above, has further

15

reviewed the items in the account and has proposed further

16

protective measures.

17

our view, to correct the entries in the account and determine

18

the propriety of payments included therein under the

19

company's policies.

20

These procedures should be adequate, in

"We concur with these procedures and suggest

21

that management provide a concluding report to the audit

22

committee once the additional measures have been undertaken."

23

THE COURT:

24

MR. DAY:

25

I see.

Nothing in this paragraph, which was in a

report that was provided to Mr. Jackson, suggests that

162

1

Thompson & Knight was provided sufficient information or, in

2

fact, conducted any review of the payments in this account.

3
4

THE COURT:

There's nothing to suggest they looked

at Nigerian law or practice; right?

5

MR. DAY:

Absolutely nothing whatsoever, Your Honor.

6

THE COURT:

I don't see how anybody could make a

7

judgment that it is or is not okay without knowing something

8

about Nigeria, but maybe I'm missing something.

9

MR. DAY:

To -- we agree, Your Honor, that the --

10

whether the act sought to be influenced is discretionary or

11

not under Nigerian law goes directly to the issue of whether

12

the payment is plausibly a facilitating payment or not.

13

very much agree with Your Honor's observation.

14

So I

With respect to corrupt intent, Your Honor,

15

the -- the notion that we're trying to read corrupt intent

16

out of the statute is just not accurate.

17

illustration will -- will drive this point home.

18

I think a simple

If -- if the evidence showed that I paid

19

$10,000 to Your Honor to get a particular decision in this

20

case, there would be no question that that was an improper

21

payment and that it was done with an intent to influence a

22

public official to misuse his or her position.

23

THE COURT:

24

MR. DAY:

25

Right.

There's no additional quantum of proof

that would be required to establish corrupt intent.

The act

163

1

speaks for itself.
That is as simply as I can state the SEC's

2
3

position as a matter of proof.
THE COURT:

4

That's unquestionably true in the United

5

States, but the legislative history of the FCPA does have

6

this carveout for facilitating payments, and -- and that's

7

the complexity, isn't it?
MR. DAY:

8
9

Understood, Your Honor, but it's a narrow

exception to an otherwise broad prohibition.

10

THE COURT:

11

exception in U.S. law; right?

12

MR. DAY:

13

THE COURT:

14

There's no similar -- there's no similar

That's correct, Your Honor.
This is a -- this is a one-off for FCPA

law.

15

MR. DAY:

That's correct, Your Honor.

16

THE COURT:

17

MR. DAY:

Okay.

And, again, the exception is narrow and

18

it's drawn in objective terms as to the nature of the act

19

that's sought to be influenced.

20

the law of the country a discretionary act, you're not within

21

the exception, you're right back into the FCPA's prohibition.

22
23
24
25

THE COURT:

If it's objectively under

Is that helpful?

I think Mr. Hanna's

right, nearly anything involves some discretion, doesn't it?
MR. DAY:

Your Honor, and that's why the FCPA --

which the legislative history is absolutely clear, the 5th

164

1

Circuit was absolutely clear -- sought to prohibit payments

2

to government officials to influence any act except, in a

3

very, very, very, very narrow circumstance.
THE COURT:

4

And what do you think the -- the

5

carveout is?

6

nondiscretionary?

7

"routine" mean automatic?
MR. DAY:

8
9
10

Does it have to be routine and
Does "routine" mean frequent?

Does

What are the variables?

Nondiscretionary, Your Honor, meaning that

it is something to which the applicant, for example, is
entitled as a matter of right in all circumstances.
THE COURT:

11

But assume something is granted

12

automatically as a right, wouldn't there still be discretion

13

as to when you granted it?

14

MR. DAY:

But that goes to the purpose element of

15

the -- the routine government action exception.

16

an objectively nondiscretionary act, then the -- the

17

statute's exception says that if the purpose is to expedite

18

that nondiscretionary act, that exercise of discretion to do

19

it, you know, sooner rather than later, falls outside of the

20

statute.

21

THE COURT:

22

MR. DAY:

23

THE COURT:

24
25

Okay.

If you have

All right.

Very, very narrow exception, Your Honor.
Give me an example of what's -- what's

totally nondiscretionary in -- in a foreign country.
MR. DAY:

I could speculate, Your Honor, but --

165

1

THE COURT:

2

MR. DAY:

Nothing comes to mind?

Actually -- well, no, it's not that

3

nothing comes to mind, I just don't know the laws of Nigeria

4

well enough.

5

THE COURT:

6

MR. DAY:

Okay.

All right.

But I could speculate that obtaining the

7

equivalent of a Social Security card.

8

and you're over a certain age, you get one.

9
10

THE COURT:

MR. DAY:

12

THE COURT:

13

MR. DAY:

Not that I'm aware of, Your Honor.
Okay.

I think I will rest with that observation.

Thank you, Your Honor.

15

THE COURT:

16

Okay.

17

I thought there might have been some

development at this point in the case law, but there's not?

11

14

If you're a citizen

Okay.

All right.

Let's see.

Who's next?

Is it you,

Ms. Randell, or Mr. Khalil or -- you're next?

18

MS. RANDELL:

19

MR. KHALIL:

20

indulge me for a few minutes.

21

THE COURT:

Did you think you were?

22

MR. BRYAN:

I'd be happy to go on, address the

23
24
25

Mr. Khalil, Your Honor.
I am, Your Honor, if the Court will

motion to strike first.
THE COURT:
your first words.

That's fine.

Go ahead.

We'll let Mr. Khalil.

I know

You're going to say, "I will be brief."

166

MR. KHALIL:

1
2

I was going to say, good afternoon.

Very brief.
Your Honor, the government announced for the

3
4

first time this afternoon that they've had recent

5

communications with Jo Onodugo, whom we've talked about a

6

fair amount today.
Now, apparently, according to the SEC, she

7
8

proposes to testify by affidavit in London or maybe Nigeria,

9

and presumably would deny in that affidavit that she gave the

10

advice that's at issue in this case and that we've talked

11

about.
THE COURT:

12

The -- let's postpone for another day

13

the issue of how, if at all, we're going to receive her

14

evidence.

I think that's a very sticky question.
We don't know in what forum she's going to

15
16

appear or what she's going to say; right?
MR. KHALIL:

17
18

Well, what we do know is that she has

not appeared at all up to this point.

19

THE COURT:

20

MR. KHALIL:

I know that.
We're at the summary judgment stage.

21

She has not presented any affidavit up till now.

22

been deposed.

24
25

And what the government --

THE COURT:

23

She has not

Whose fault is that?

Whose fault is

that?
MR. KHALIL:

Well, the government apparently has

167

1

been seeking her testimony and has known about her for

2

several years.
THE COURT:

3
4

Wouldn't you want to seek it, too?

Wouldn't you want her testimony, also?
MR. KHALIL:

5

Your Honor, we have not sought her

6

testimony, and -- and I don't know if we will intend to do

7

that at this point.

8

THE COURT:

9

Well, if you're going to rely on it as

heavily as your papers suggest, then I do believe I would

10

allow leave to depose her or whatever, even at this advanced

11

stage.

12

that's -- that's different, but, I mean, thus far what I've

13

seen you're relying on it very heavily and I would like to

14

hear from her.

Now, if you don't want to rely on what she said,

MR. KHALIL:

15

What we're relying on, our

16

recollection, Mr. Ruehlen's recollection of her advice to

17

him --

18

THE COURT:

19

MR. KHALIL:

20

THE COURT:

22

MR. KHALIL:

Right.
-- in this case.

They want to rely on her to promote their

23

25

-- which is corroborated by three other

witnesses --

21

24

I realize that.

theory -THE COURT:

Well, she may, she may come in and say

168

1

exactly what Mr. Ruehlen is saying, "Yes, I told him that, I

2

sure did."
MR. KHALIL:

3

She might, if they can secure her

4

testimony in this courtroom.

5

THE COURT:

Let's not prejudge what she's going to

6

say.

7

that testimony or what form it has to take or -MR. KHALIL:

8
9

We can't decide in advance whether we're going to allow

Well, I agree with you, they haven't

made a firm proposal about what they're going to do, except

10

their fallback is, if they can't secure her testimony here at

11

trial, they have proposed to -- to submit her affidavit -THE COURT:

12

Then we get into a very complicated

13

question of whether it was appropriate for your side to

14

invoke her name and her advice without trying to memorialize

15

it somehow and whether it was appropriate for the government

16

to try to, at this late date, find out something more from

17

her.

18

that.

19
20
21

I just don't know what the state of the record is on

I'm a little bit surprised both sides weren't
trying very hard to find out what she wanted to say.
MR. KHALIL:

Well, Your Honor, and I think it's been

22

made clear today, her advice has been memorialized.

23

been memorialized in the May, 2007, e-mail, from her to the

24

company management on what her advice on this issue was.

25

It's

In addition to that, it was memorialized in

169

1

Mr. O'Rourke's April 20 -- April, 2007, e-mail, referencing

2

it, so the idea that nothing out there corroborates

3

Mr. Ruehlen's testimony is just not --

4

THE COURT:

No, but we --

5

MR. KHALIL:

-- feasible.

6

THE COURT:

7

memorialized is her response to questioning by adverse party.
MR. KHALIL:

8
9

-- what we're lacking, what's not

Right.

And -- and that's due to the

posture of the case and the SEC's -THE COURT:

10

That's what I say.

I don't -- I don't

11

think it's useful for us to imagine -- I think it's

12

considerably un -- I think it's pretty unlikely she will

13

offer any testimony, but I don't know that it makes a lot of

14

sense for us to consider the range of different postures she

15

may adopt and decide which ones would be admissible and which

16

ones would not.
MR. KHALIL:

17

Well, I guess our position is, it's

18

ripe.

The issue is ripe to rule on what they have proposed

19

in their motions, which is to have Ms. Custer, one of their

20

own lawyers, testify as to Ms. Onodugo's conversation --

21

conversation with her, in June of 2013.

22

THE COURT:

23

MR. KHALIL:

Okay.

All right.

And so on.

Those issues are -- are

24

teed up and they are ripe with respect to the hearsay that

25

they propose to admit.

170

THE COURT:

1

This is a new fact to me.

I did not

2

realize that communication had been established on Monday

3

with this woman.

4

on it.

5

MR. KHALIL:

8
9
10
11

Well, it was a new fact for us.

And, you know, I can understand the Court's

6
7

I don't -- I'm not ready to make a ruling

position in wanting to wait and see.
THE COURT:

She may be four square on your side.

I

mean, I wouldn't commit myself too strongly to the notion
that you don't want to hear from her.
MR. KHALIL:

Well, what we would like is if she --

12

she's to be called, is to be called so she can testify under

13

oath at trial and so we can be -- so she can be subjected to

14

cross-examination.

15

THE COURT:

Well, then that leads to question about

16

what jurisdiction I have over a lawyer in Nigeria.

17

it leads to a lot of questions.

18

order her here.

19

impression, I would guess that I cannot.

20
21
22

I really don't.

MR. KHALIL:

I mean,

I don't know that I can
On a -- on a first

Well, and they haven't even proposed

trying to -THE COURT:

But I would think Noble would have the

23

most control over her, because she's a lawyer that apparently

24

the company thought well enough of to, I presume, to pay a

25

retainer or to pay an hourly fee, and I would think she would

171

1

be most responsive to Noble.
MR. KHALIL:

2
3

to testify and -- but her testimony has not been secured.

4

THE COURT:

5

MR. KHALIL:

6

Well, and -- and Noble has allowed her

All right.
So we can punt on these issues, I

suppose.
THE COURT:

7

Yeah, I really would prefer, given the

8

lateness of the hour and the range of different

9

possibilities.
Mr. Hanna.

10

MR. HANNA:

11

I just wanted to clarify.

Mr. Ruehlen fired her.

Noble fired

12

her, Your Honor.

13

to light, Noble instructed that she be terminated, so Noble

14

was not happy.

15

THE COURT:

When was that?

16

MR. HANNA:

In 2007.

17

over her.

18

And --

19
20
21

When all this came

Noble doesn't have any control

Mr. Ruehlen doesn't have any control over her.

THE COURT:

She was fired for what particular

MR. HANNA:

At the -- my understanding, as a result

reason?

22

of the internal investigation, the company decided to get new

23

counsel in Nigeria.

24

THE COURT:

25

Does that -- does that bear on the

question of whether it was appropriate to rely so heavily on

172

1

her opinion previously?
MR. HANNA:

2

I don't think so, because at the time

3

Mr. Ruehlen was relying on her she was considered to be a

4

very valuable asset and -- and respected legal counsel.

5

THE COURT:

Okay.

All right.

6

MR. HANNA:

I think once all this came to light the

7

company decided to go a different direction.

8

the fact.
THE COURT:

9

Okay.

All right.

It was after

Thank you.

10

Thank you very much, Mr. Khalil.

11

Mr. Bryan.

12

MR. BRYAN:

Good evening, Your Honor.

13

THE COURT:

Good evening.

14

MR. BRYAN:

I think your questions to Mr. Khalil

15

frame the issue.

This is just premature.

They're seeking to

16

make an evidentiary ruling at this stage.

17

what's going to happen with Ms. Onodugo.

18

there's no proffer of what the SEC would do with her

19

out-of-court statement at this stage, so as Your Honor

20

pointed out, it's just too early to --

We don't know
There's no --

THE COURT:

We don't need to debate this.

23

MR. BRYAN:

Thank you, Your Honor.

24

THE COURT:

Okay.

21
22

25

We really

don't.

don't want to go next?

Ms. Randell, you next?

No, you

173

MS. RANDELL:

1

I'd be happy to, Your Honor.

I'll be

2

speaking on our motion to exclude the SEC's expert Jeffrey

3

Harfenist.

You want to do that now?

4

THE COURT:

5

before Ms. Randell?

6

MR. BRYAN:

Anybody think he or she should come

Your Honor, we were going to propose

7

that we address the plaintiff's Daubert motions.

8

to dovetail in many ways off the motion for summary judgement

9

discussions that we had about Thompson & Knight.

10

They seem

It may just

make more sense to start with that.
MS. RANDELL:

11

I think, Your Honor, we'd be fine with

12

that as long as you're talking the motions one by one so that

13

after, we can address each expert.
THE COURT:

14
15

Let's take them one by

one.
You may go ahead, Mr. Bryan.

16
17

That's fine.

MR. BRYAN:

Thank you, Your Honor.

The first

18

motion, the Plaintiff's Motion to Exclude Expert Evidence in

19

this case, I'd like to address is our motion to exclude

20

Mr. Ronald Gilson.
Mr. Ronald Gilson is an expert in corporate

21
22

governance.

And before I talk about his corporate governance

23

opinions, I'd like to skip down, you'll see the third bullet

24

there, Mr. Gilson, as well as several other of the experts

25

that have been proffered by the defense, offer a detailed

174

1

factual narrative of what happened in this case.
And one of the reasons I wanted to start with

2
3

Mr. Gilson with Your Honor is because Mr. Gilson, a -- an

4

expert proffered by Mr. Ruehlen, goes at great lengths in his

5

report to discuss what Thompson & Knight did and what other

6

senior executives within Noble knew, what they did, what PWC

7

did, and what Mr. Ruehlen could reasonably draw from what

8

those parties did.
The problem, however, is Mr. Gilson doesn't

9
10

make any effort to connect any knowledge of what Thompson &

11

Knight did to Mr. Ruehlen.
Mr. Gilson also engages in argument from

12
13

inference.

14

the Court what they viewed as what Thompson & Knight did,

15

that's what Mr. Gilson puts in his report.

16

nothing more than advocacy on disputed issues and inferences.

17

He's doing nothing more than what Mr. Hanna has done in this

18

courtroom today on those same issues and what Mr. Krakoff has

19

done.

20

Much as Mr. Hanna and Mr. Krakoff explained to

He's offering

And that's not the proper role for an expert.
And you'll see this through several of the

21

defendants' experts.

22

fact-finding in their expert reports, and they plan to have

23

these experts testify what the facts are and tell the jury

24

what -- what result they should reach.

25

Five of their six engage in detailed

Again, from Your Honor's prior decisions,

175

1

that's not the proper role for an expert.

2

through, hear the evidence and draw their own conclusions as

3

to state of mind.

4

Mr. Gilson should be excluded from testifying as to his

5

fact-finding.

6

The jury can go

So we believe on that basis alone,

THE COURT:

Okay.

Thank you very much.

Let's take

7

up -- let's go with Mr. Gilson now and -- is that all right?

8

Let's get the response on Gilson.

9
10

MR. BRYAN:

Well, Your Honor, I would like to

address one more point with Mr. Gilson.

11

THE COURT:

Okay.

12

MR. BRYAN:

The corporate governance issue.

There's

13

no issue of corporate governance in this case.

Mr. Gilson is

14

offered simply to say that Noble had good corporate

15

governance and Mr. Ruehlen could reasonably rely on that to

16

tell him if there was anything wrong with these payments.

17

It's not connected to any disputed issue in this case at all.
In fact, Mr. Gilson wants to say that

18
19

Mr. Ruehlen was entitled to rely on it, but, again, there's

20

no connection to what Mr. Ruehlen knew about corporate

21

governance or how it would affect his decision-making at all.

22

THE COURT:

Thank you.

Yes, sir.

23

MR. CHUNG:

Your Honor, I think our responses to the

24

SEC's arguments with respect to Professor Gilson are actually

25

quite simple.

Professor Gilson did not engage in

176

1

fact-finding.

2

do.

3

in his case, principles of corporate governance, how

4

corporations are structured, how -- the roles that various

5

individuals within a corporation have and how those roles

6

interact with each other and how they are supposed to -- and

7

what the outputs of those roles and structures are.

He offers his opinions regarding certain principles and,

Then, Professor Gilson, as any expert is

8
9

supposed to do, apply those principles to the factual record.
THE COURT:

10
11

Is there any law on, from other FCPA

cases, as to the role of an expert on corporate governance?
MR. CHUNG:

12
13

He did exactly what experts are supposed to

We're not aware of any, Your Honor, but

corporate governance is a recognized area.
THE COURT:

14

It's a subject of expertise.

No

15

question about that.

16

the dots here.

17

specific question of what Mr. Ruehlen knew or should have

18

known.

Corporate governance in general, so the very

That seems like an enormous leap to me.
MR. CHUNG:

19

I just -- I'm just trying to connect

Well, I think, Your Honor, that

20

corporate governance is really centrally relevant to this

21

case, this FCPA case, because he was an employee of a company

22

and the company is -- the company made these payments to

23

Nigerian officials for these temporary import authorizations.

24

He did not -- Mr. Ruehlen did not exist in some kind of

25

vacuum.

He didn't exist on an island, and act by himself.

177

1
2
3

THE COURT:

No, but the SEC's not claiming that, is

MR. CHUNG:

I think, effectively -- I mean, I don't

it?

4

want to be flippant about this, but effectively, it is.

5

removing -- by saying that corporate governance has nothing

6

to do -- by removing the fact that Mr. Ruehlen worked and

7

existed in a corporate structure in Noble's corporate

8

structure really takes away crucial context to his actions.

9

THE COURT:

Would you -- would you accept the

10

stipulation that -- that Noble had industry standard

11

corporate governance?

12

MR. CHUNG:

By

Your Honor, I don't think that really --

13

I don't think that really gets to the point.

Really the

14

point of Professor -- of this particular testimony and the

15

relevance of corporate governance principles and the

16

structure to this case are Mr. Ruehlen is an employee of a

17

company, he's within this corporate structure, he has

18

reporting lines, he has a certain role within this

19

corporation.

20

THE COURT:

Which part of that is disputed, though?

21

MR. CHUNG:

I think it's -- I think much of it is

22

disputed, Your Honor.

I think that the SEC views Mr. Ruehlen

23

as having responsibilities, knowledge, even expertise in

24

areas relating to the FCPA related to accounting.

25

attributing certain responsibilities, knowledge and

They're

178

1

facilities to him that he just simply -THE COURT:

2

But the SEC's attribution to Mr. Ruehlen

3

could be made in a company that has good corporate governance

4

and in a company that has bad corporate governance, right?

5

They could make that attribution either way.
MR. CHUNG:

6

That's -- they could, Your Honor, but

7

the -- but the purpose of expert testimony here regarding

8

corporate governance is to inform the jury, when you're an

9

employee with a certain role and a certain title and certain

10

responsibilities with a company, you -- if you comply with

11

that role and those responsibilities, and -- and you -- and

12

you report and you report or pass information on to -- or

13

assist others in the company that have other responsibilities

14

and different roles, that you're entitled -- a person in

15

Mr. Ruehlen's position is entitled to rely on those.
THE COURT:

16

I think I understand.

My ruling has

17

nothing to do with Professor Gilson in particular.

I know of

18

him and he's certainly a very distinguished scholar.

19

not that, I just don't know that it advances the ball that

20

much in this case, to hear about corporate governance, but I

21

think I understand both sides' arguments.

Thank you.

It's

Okay.

MR. BRYAN:

Your Honor, I'm happy to move down the

24

THE COURT:

Yes, please.

25

MR. BRYAN:

If I could, with just one more item with

22
23

list.

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1

Mr. Gilson, the Court already touched on this, Mr. Ruehlen is

2

going to testify what his role and responsibilities were.

3

expert would just simply be bolstering.

An

The next -- I'll actually address two motions

4
5

to try and move things along.

Are the plaintiff's motions to

6

exclude professor -- Ambassador Campbell and Aaron Sayne.

7

think the issues overlap significantly.

I

8

And -- could I have indulgence for one moment.

9

Your Honor, Ambassador Campbell has been

10

proffered as an expert to talk about norms of governance in

11

Nigeria.

12

comes up with a series of conclusions, including that the

13

paper process was satisfactory from all perspective -- from

14

the perspective of all parties involved, including the

15

Nigerian government.

And based on what he calls norms of governance, he

He also intends to opine that the payments that

16
17

Noble made were not outside the norms of governance to civil

18

servants in Nigeria.
In other words, Ambassador Campbell is going to

19
20

opine that the false paper process was perfectly okay, it's

21

okay to lie to Nigerian government officials, and it's also

22

okay to make payments to officials to obtain government

23

benefits.

24
25

Now, Ambassador Campbell has disavowed any
knowledge or experience in Nigerian law and, instead, he's

180

1

focused on what he only calls norms of governance.
This testimony is inadmissible for a number of

2
3

reasons.
First --

4

THE COURT:

5

Tell me just a bit about Ambassador

6

Campbell.

Is he -- is he -- was he a foreign service alumnus

7

or was he a political appointment?

8

MR. BRYAN:

I believe he was a career diplomat.

9

THE COURT:

Foreign service?

10

MR. BRYAN:

Yes.

11

THE COURT:

And no legal training; right?

12

MR. BRYAN:

No legal training and certainly no

13

training specifically as to NCS, TIPs, customs laws

14

whatsoever.
And the analogy I think is apt here, Your

15
16

Honor, is Mr. -- Ambassador Campbell is holding himself out

17

as an expert in norms of governance in Nigeria.

18

then opining on what a -- an agency of Nigeria would do if

19

presented with false paperwork, or presented with bribes quid

20

pro quo.

21

If -- and

If I nominated myself as an expert in American

22

norms of governance, I would have no basis to conclude or

23

offer opinions.

24
25

THE COURT:

Okay.

This is like -- this is like in a

case in France, the French ambassador of the United States

181

1

offering testimony.

2

MR. BRYAN:

Is that what you're saying?
Well, he's offering testimony on a

3

specific issue as to a specific agency without any basis of

4

his own experience.

5

THE COURT:

The analog works, doesn't it?

6

MR. BRYAN:

The analog doesn't work for this reason,

7

Your Honor.

If -- if he is an expert in norms of governance,

8

does he have any experience or knowledge of what NCS would do

9

or find acceptable?

10

THE COURT:

That's my point.

I mean, I wouldn't

11

think the French Ambassador to the United States could come

12

in and offer knowledgeable testimony about the import/export

13

bank.

14

MR. BRYAN:

That's right.

15

THE COURT:

That's what you're saying.

16

think I got that.

Absolutely.
Okay.

I

I think I got that.

MR. BRYAN:

17

Your Honor.

Now, another important issue is that

18

testimony is entirely irrelevant.

19

is what Ambassador Campbell intends to opine on, is really a

20

question of what is lawful in Nigeria.
And that's a question for Your Honor to

21
22
23
24
25

What is permissible, which

address.
And it's also -- as we put in our reply papers,
it would do just great damage to the FCPA.
THE COURT:

I got you.

Okay.

182

MR. BRYAN:

1

And just in the interest of time, Your

2

Honor, we discussed in our papers the prejudice that would --

3

that would befall on the Commission in any FCPA enforcement

4

action.

5

corruption or norms of corruption was admissible to show a

6

lack of intent to bribe a foreign official, then wherever

7

rampant corruption is alleged to exist, corrupt intent would

8

be eviscerated.

Can't be understated.

THE COURT:

9

If evidence of rampant

But the law is quite clear that the FCPA

10

did not mean to allow evidence that a given country was

11

lawless; right?

12

MR. BRYAN:

Absolutely, Your Honor.

13

THE COURT:

Okay.

14

MR. BRYAN:

All right.

15

I got that.

I really do.

Thank you, Your Honor.

Aaron Sayne I will address.

16

THE COURT:

Okay.

17

MR. BRYAN:

The same opinions.

18

If we can go to slide 3.

19

Mr. Sayne intends to offer very similar

20

opinions; that ad hoc negotiated settlements involving

21

payments to government officials are not considered as

22

outside --

23

THE COURT:

Remind me of his background.

24

MR. BRYAN:

Mr. Sayne's background is he is a policy

25

wonk.

He is a lawyer practicing in the United States, he

183

1

bounced around from document review jobs before opening his

2

own policy -- macropolicy advisory shop.
THE COURT:

3
4

Does he have a background in United

States government?
MR. BRYAN:

5

No, Your Honor.

His background is, his

6

educational background is one of comparative literature and a

7

JD, I think, issued in 2004.

8

don't have to go through it here, Mr. Sayne -- on top of the

9

issues that we addressed with Mr. Campbell, Mr. Sayne is just

As we put in our papers and I

10

not qualified to testify as an expert, as to the opinions

11

he's offered.
THE COURT:

12
13

Nigeria?

I know I've read this, but just remind me.
MR. BRYAN:

14

What is his particular background in

Mr. Sayne worked for Cadwalader as a

15

staff attorney conducting document reviews, and in the course

16

of his experience during those document reviews, he --

17

THE COURT:

Including this case?

18

MR. BRYAN:

Not including this case.

He had experience with FCPA matters involving

19
20
21
22

Nigeria.
Since then, he has opened, as I said, a -- an
advisory business --

23

THE COURT:

Uh-huh.

24

MR. BRYAN:

-- and he has advised clients, on due

25

diligence, wanting to invest in Nigeria.

184

1

THE COURT:

Okay.

I got you.

2

MR. BRYAN:

So just the -- the last point on

3

Mr. Sayne is the same issue with Mr. Campbell.

4

opine that bribery is permissible.

5

commentary on what is lawful, but the import of his opinion

6

is exactly the same as Mr. Campbell.

7

THE COURT:

Okay.

8

MR. BRYAN:

Thank you.

9

MR. HEWETT:

10

THE COURT:

11

MR. HEWETT:

12

He avoids any -- any

Thank you very much.

Good evening, Your Honor.
Good evening.
I thought I would start just by briefly

summarizing Ambassador Campbell's experience.
He has been a career foreign service officer of

13
14

He intends to

30 years at the state department.

15

THE COURT:

How long was his tenure in Nigeria?

16

MR. HEWETT:

He did two tours in Nigeria, Your

17

Honor.

18

1988 to 1990, and he was the U.S. Ambassador to Nigeria from

19

2004 to 2007, the relevant time period.

20

He was first the political counselor to Nigeria from

But in addition to that experience, he is a

21

scholar of Nigeria.

22

currently is, excuse me, the senior fellow for Africa policy

23

studies at the Council on Foreign Relations.

24
25

THE COURT:

He has a Ph.D. in British history.

He

I'm a member of that, too, just for --

in terms of bias as to what not.

I'm a member of the

185

1

Council.

2

MR. HEWETT:

3

THE VIDEOGRAPHER:

4

MR. HEWETT:

5
6

Okay.
All right.

He's, you know, writes about Nigeria

regularly, has authored a book on Nigeria.
THE COURT:

I don't have any -- I don't have any

7

doubts about his -- his eminence.

I really don't.

And I

8

don't have any doubt about the fact that he probably knows

9

Nigeria better than anybody involved in this case, but -- but

10

how would he know about something this specific, though,

11

about TIPs?

12

knowledge.

13

I mean, that -- that's not ambassadorial-level

MR. HEWETT:

Well, let me start by saying, the

14

Ambassador offers a broad range of opinions, far more than

15

what the SEC just, you know, tried to focus on.

16
17
18

He offers opinions about what it's like for
western businesses to do business in Nigeria, what kind of -THE COURT:

Well, I understand his breadth, too, but

19

is that relevant?

20

confront when they go to Nigeria?

21

Do we need to hear what foreign businesses

MR. HEWETT:

I think we do, Your Honor.

I think,

22

just to be clear, it's our position that it's absolutely

23

critical in this case and that it's critically relevant to

24

Jim Ruehlen's theory of the defense.

25

As an initial matter, as I think our time

186

1

together this afternoon has demonstrated, Nigeria is a

2

country that is outside the average -- the understanding of

3

the average American.
You know, today we've talked about things like

4
5

how do you assess the nature of the payments in this

6

question?
I think we've all agreed at various points that

7
8

you need to know something about Nigeria.

9

how payments work in Nigeria and how law and governance and

10

regulatory systems work in Nigeria.
THE COURT:

11
12

You need to know

Okay.

You make good points, but this

is --

13

MR. HEWETT:

14

THE COURT:

Yes, Your Honor.
All these arguments are in derogation of

15

the arguments that your client is entitled to summary

16

judgment; right?

17
18
19

MR. HEWETT:

No, Your Honor, I think our position is

that the Ambassador's testimony -- well, let me step back.
THE COURT:

I mean, we need to know all this

20

information about Nigeria, we need to hear from the

21

Ambassador.

22

judgment right now, is it?

23

This really isn't appropriate for summary

MR. HEWETT:

Well, I -- I think, I think obviously,

24

the -- we started with an uphill battle on summary judgment

25

for the bribery claims, because obviously those turn on

187

1

corrupt intent, and I think Your Honor is making, you know, a

2

good observation about kind of where we stand this afternoon

3

after speaking with each other for a long time.

4

I think the -- I think that is absolutely not

5

correct with respect to the accounting claims that we've

6

focused on in our summary judgment papers, just to be --

7

THE COURT:

8

MR. HEWETT:

9

Okay.

Fair enough.

Fair enough.

Your Honor, the -- as we've gone

through, the theory of the defense is that Mr. Ruehlen

10

genuinely and reasonably believed that the paper process was

11

a lawful process in Nigeria, that was actually being directed

12

by the Nigerian Customs Service itself and that the payments,

13

far from being intended to induce customs officers to misuse

14

their positions, were merely to expedite things and to, you

15

know, secure TIPs to which Noble was entitled.

16
17
18

THE COURT:

As a foreign service officer, what was

Ambassador Campbell's experience with the granting of TIPs?
MR. HEWETT:

He -- the Ambassador had no particular

19

experience with the temporary import regime.

20

that's surprising.

I don't think

21

THE COURT:

No, no, I don't either.

22

MR. HEWETT:

23

THE COURT:

He was wasting his time if he was

24

worried about that.

He needs to be worried about more

25

important things.

I also think the --

188

MR. HEWETT:

1

Fair enough, Your Honor.

I also think

2

the law is clear that experts can be qualified to testify

3

about topics within their level of expertise, even if they

4

don't have that granule level.

5

assure the Court.
THE COURT:

6
7
8
9

And just to -- I just want to

I take your point.

That's fair.

That's

fair.
MR. HEWETT:

I want to assure the Court, the

Ambassador is not doing the things the SEC repeatedly, over

10

and over, says he is doing.

11

testify that bribes are -- payments to government officials

12

in all instances are lawful under the written law of Nigeria.

13

He's not going to testify that under Nigerian written law it

14

is okay to submit false documents to --

15
16
17

THE COURT:

He is not going to come in and

Tell me the three most salient points he

will make about this case.
MR. HEWETT:

I think the three most salient points

18

are, number one, the way that governance works in Nigeria.

19

Nigeria is, unlike the United States, I can't go -- people

20

can't go to the Internet, for example, or go down to the

21

local library and figure out what the rules are.

22

a distinct disadvantage and it's not just the Ambassador.

23

THE COURT:

24

MR. HEWETT:

25

They're at

I'd call that a lack of transparency.
Absolutely.

that -- those difficulties.

Lack of predictability and

189

1

THE COURT:

2

MR. HEWETT:

Okay.
Second and critically, the -- the

3

nature of the types of payments that have to be made, have to

4

be made to government officials in Nigeria.

5

THE COURT:

And what's his experience with that?

6

What does he know about that?

7

MR. HEWETT:

Extensive.

You know, in addition to

8

just, you know, speaking with Nigerians from all walks of

9

life during his tours there, he -- he has studied and written

10
11

about Nigeria for -- for many, many years now.
THE COURT:

And has he -- has he tried to draw the

12

distinction that all of us are trying to draw between a

13

facilitating payment --

14

MR. HEWETT:

15

THE COURT:

16

MR. HEWETT:

No.
-- and a corrupt payment?
No, Your Honor.

And Mr. Day earlier,

17

when he was speaking said something to the effect of the

18

Ambassador, when he testified at deposition, expressed his

19

view that TIPs are not routine government actions with

20

respect to the facilitating payment.

21

I'm sorry.

That's a -- that's a pretty gross

22

mischaracterization of his testimony.

The Ambassador is not

23

testifying as to whether the payments qualify as facilitating

24

payments under United States law.

25

doing anything like that.

Your Honor, he's just not

His -- his opinions go primarily

190

1

to the context in which these events happened.

2

THE COURT:

3

MR. HEWETT:

4

Let me fill it out.

5

THE COURT:

6

MR. HEWETT:

7

THE COURT:

8

Okay.
So you asked me for a list, Your Honor.

On that, on the second point.
Yes.
Is there any disagreement that sometimes

payments need to be made in Nigeria -MR. HEWETT:

9

THE COURT:

10

No.
-- or things are different than they are

11

in the United States.

12

there?

13

MR. HEWETT:

There's no disagreement about that, is

Well, I don't know.

Well, first of

14

all, I don't -- regardless of whether there's a disagreement,

15

I don't think this is something an average juror is going to

16

be aware of.
What the SEC is proposing --

17
18
19
20

THE COURT:

No, but I can do it with a stipulation,

couldn't I?
MR. HEWETT:

Well, I'm not sure -- I'm not sure how

21

that stipulation would be crafted.

22

a stipulation along the lines, capture --

23

THE COURT:

I can't imagine, frankly,

The stipulation would read exactly like

24

his direct testimony is going to read.

This is -- this is

25

not the United States, things are done very differently,

191

1

money changes hands all the time.

2

don't think there's any disagreement about that.
MR. HEWETT:

3
4

SEC.

5

is inadmissible --

I mean, I don't -- I just

Well, I don't want to speak for the

I think their position would be even that stipulation

6

THE COURT:

7

MR. HEWETT:

Okay.
-- because what the -- what the SEC

8

proposes to do, Your Honor, is to have Your Honor instruct

9

the jury on Nigerian law, including things like law based on

10

a document that not even the SEC knew about until last year.

11

And, in addition, the SEC proposes, actually

12

proposes, although it doesn't mention it in its papers, to

13

have one of its experts testify to the jury about corruption

14

in Nigeria.
Mr. Harfenist, the FCPA compliance expert, on

15
16

pages 12 and 13, I believe, of his report, intends to,

17

drawing on -- on other studies, testify that Nigeria is one

18

of the most corrupt countries in the world.
Now, the SEC, I -- I know thinks that will be

19
20

helpful to their case.

21

on -- to educate the jury as to the real version of Nigeria,

22

and the way Nigeria really works and the environment that he

23

lived in.

24
25

Mr. Ruehlen has to be allowed to put

This case is all about Nigeria.

Your Honor,

we're not proposing anything close to some sort of, you know,

192

1

multi-day exposition about the history of Nigeria.

2

propose to do this in an efficient way.

3

once again, and the -- there are some key cases in our brief

4

that I won't go through, but courts have recognized that

5

where a case comes down to a fundamental issue as -- which

6

is:

7

belief reasonable.

10
11

But just to be clear

The defendant has testified as to a belief and is that
That's the key issue in the case.

That is the key issue in this case.

8
9

We

THE COURT:

Yeah, and I'm still -- I'm still trying

to understand how Ambassador Campbell helps us on that.
MR. HEWETT:

Well, the Ambassador, in addition to

12

his kind of foundational opinions, has assessed the facts in

13

this case, as experts do.

14

reached certain narrow opinions.

He has analyzed them.

And he has

One of them is the paper process is -- I mean,

15
16

the paper process, I think we can all agree, the first time

17

we hear about it, from our American perspective, it sounds

18

very unusual.

19

certainly sound unusual -- sounded unusual to Mr. Ruehlen the

20

first time he learned of it, and that's why he took

21

appropriate action and told his superiors, "Hey, someone

22

needs to look at this."

It's going to sound unusual to the jury.

23

THE COURT:

24

MR. HEWETT:

25

than the SEC.

It

Okay.
The Ambassador has a different view

The SEC is going to argue the to the jury,

193

1

"Ladies and gentlemen, it is absurd that Jim Ruehlen could

2

have had this belief.

3

belief."

No reasonable person could have this

4

And without context of understanding how you go

5

about figuring out what the rules are in Nigeria, whether you

6

can have any assurances in their predictability or stability,

7

the inability to even interact directly with government

8

agencies, which -- which, you know, no one was able to do

9

with customs.

10

You had to go through an agent.

This was

something customs essentially required.
These are all going to be concepts that are

11
12

just foreign to us because we live in the United States and

13

not Nigeria.

14
15
16

THE COURT:

Okay.

Was there a third salient point

you wanted to mention?
MR. HEWETT:

The third point, Your Honor, was the --

17

just the importance of the oil industry in Nigeria, which is

18

just a critical backdrop, again, to not only the events in

19

the case, but the reasonableness of Mr. Ruehlen's

20

understanding that, in fact, this could be an arrangement

21

being directed by the government because above all, in

22

Nigeria, he understood and, you know, the Ambassador explains

23

in detail, the continuity of oil drilling and oil production

24

was paramount.

25

THE COURT:

Okay.

Well, you did extremely well.

194

1

You've helped me, you really have.

2

thing with respect to Ambassador Campbell.

3

MR. HEWETT:

4

THE COURT:

Let me make sure of one

Yes, sir.
I don't think I know him, but I've known

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a lot of foreign service officers and I have the utmost

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respect for the foreign service.

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MR. HEWETT:

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THE COURT:

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10

Yes.
I wish -- to me, it's the closest --

it's the closest counterpart to the British civil service,
which is entirely merit based, it is not political --

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MR. HEWETT:

Yes.

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THE COURT:

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administration changes, so --

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MR. HEWETT:

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THE COURT:

-- it does not undergo change when the

Exactly, and my --- I'm sure Ambassador Campbell is a

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sterling representative of what is a really impressive

17

pedigree, so it's not that I have any reservations about him.
I just -- I just am trying to understand at

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19

what level of granularity we're going to proceed in this

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trial.

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22

That's my only reservation.
MR. HEWETT:

I think -- level of granularity.

I -- again, I don't think it would be in our

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interest and I don't think it would be efficient to have the

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Ambassador or Aaron Sayne, our other proposed expert, who is

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quite qualified, testify for days and days about how Nigeria

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works.

That is -- I just want to assure the Court, that's

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not what we are proposing.

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THE COURT:

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MR. HEWETT:

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THE COURT:

No, I understand your direct testimony

would be to the point and nonredundant and -- and brief.
I don't know that'd be true of

8
9

We're not proposing to extend this

trial in any -- in any significant sense.

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7

Okay.

cross-examination, though.
MR. HEWETT:

10

Well, I think -- I mean, I think the --

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I can't speak for the SEC, but I think their basic

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cross-examination of the Ambassador and Mr. Sayne is pretty

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clear.

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bribery.

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They dismiss them.

They think he is rationalizing

They think he -THE COURT:

I know, but that takes a long time to go

into on cross.
MR. HEWETT:

Well, I understand the Court's, you

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know, concerns about -- we will -- we will have time to -- I

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know we'll have time to, you know, manage these issues, but I

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just want to stress again, I mean, from our perspective, the

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fundamental issue, the most important issue is the

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reasonableness of my client's belief.

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context about Nigeria, the average juror is going to be just

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hamstrung to even begin to assess it.

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THE COURT:

And without some

You make an excellent point, but some of

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the defendants' arguments are at cross purposes.

I mean, if

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we need that on-the-ground understanding of what was going on

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in Nigeria, then it seems to me Thompson & Knight, whatever

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they said, is of no help, because they didn't have that.
So, I mean, I think -- I think there is some --

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6

there is some circularity to some of these arguments.

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mean, either we need to know Nigeria, in which case we get

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deep into the cells and membranes of Nigeria, or there's FCPA

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law that's applicable across the globe and people sitting in

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Dallas, Texas, like Thompson & Knight can give knowledgeable

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advice about it.
MR. HEWETT:

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Yeah.

I

I mean, Your Honor, I guess what

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I would say is I just -- I view them as separate issues.

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know, the Thompson & Knight issue, you know, I think is -- is

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important, less of a -- less of an issue for Mr. Ruehlen.

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You know, at the time he was, you know, he was not working at

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corporate headquarters.

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decisions about what to -- what to investigate and what steps

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to take.

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You

He was not directly involved in the

You know, that -- that's an evidentiary issue
about what happened in this case.
What this really comes down to, Your Honor, is

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I think the case law is quite clear, and particularly in

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circumstances like this, that, you know, it's not as though

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the only thing that could be relevant to someone's state of

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mind is -- is just what that person knew at the time.

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Because there are issues, there become credibility issues.
The SEC is going to ask the jury to draw

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4

inferences, for example, against my client with respect to

5

his corrupt intent based on the size of the payments.
Well, I mean, if we're -- we're not going to

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have any context for these events, well, sure, I mean, ten,

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$20,000 sounds, you know, large to an American audience.

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Ambassador puts those payments in context.

10

this system has understood norms.

The

He explains that

It has understood rules.

Does that mean that it is -- it is enshrined in

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12

written law?

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mean, it's just -- the Ambassador's opinions are not just his

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own, frankly.

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how it's impossible to figure out what the rules are, how

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it's -- you're forced to basically pay for any type of

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government service you can think of, are -- are widely

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recognized.

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No, it doesn't.

But that's not surprising.

I

These observations about how regulation works,

I mean, you know, the U.S. Trade

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Representative, the U.S. State Department, Human Rights

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Watch, consortiums of accounting firms that have done studies

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for the Nigerian government, all of which are cited in the

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Ambassador's report.

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This is not controversial stuff.
the SEC doesn't dispute it.

It's -- and

They just don't want the jury to

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know about it.
Because it will be very simple if they just

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3

have Your Honor instruct the jury:

Under Nigerian law, you

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can only get one TIP and one extension, full stop.

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context.

No

And then, second, their expert, Mr. Harfenist

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will get up and testify:

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known that Nigeria is one of the most corrupt countries in

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the world.

Nigeria, we have to be able to present that.

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THE COURT:

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MR. HEWETT:

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THE COURT:

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Okay.

I take your point.

Thank you.

Thank you, Your Honor.
Do you want to speak to the other

witness?
MR. HEWETT:

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No context.

If we're going to present two versions of

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11

Full stop.

Ladies and gentlemen, it's widely

Yes.

Sorry, if you'll bear with me one

moment.
Mr. Sayne's opinions are relevant, I think, for
largely the same reasons.
Just for background, his opinions go more

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directly to the nature of the oil industry at this time.

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were the bureaucratic players?

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oversee drilling operations?

Who

To what extent did they

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This is all extremely relevant, because, you

25

know, a related theory of the defense is that from Noble's

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perspective and Mr. Ruehlen's perspective, the Nigerian

2

government knew exactly where these rigs were at all times

3

and they didn't feel like they were lying to anyone, which is

4

the new -- the new term the SEC has started using in its

5

papers, "advice to lie."
Among other things, Your Honor, Noble submitted

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7

weekly reports to the Department of Petroleum Resources.

The

8

main regulator of this -- the sector, the oil sector, giving

9

essentially the latitude and longitude of the rigs, the past

10

week, any days that it moved, any expected movements the week

11

before.

12

I mean, it makes no sense to, frankly, think

13

you're lying to kind of a less powerful agency of government,

14

but -- but create this, you know, perfect paper trail.

15

THE COURT:

16

MR. HEWETT:

I understand.

I understand.

So Aaron Sayne gives context to that

17

and he -- he reaches a number of opinions about probabilities

18

of what would have happened had -- excuse me.

19

He assesses the likelihood that during the

20

relevant period NCS, the Nigerian Customs Service, actually

21

would have ordered one of these rigs out of --

22

THE COURT:

23

MR. HEWETT:

Yes.
-- out of the country.

The SEC's whole

24

theory here is that but for -- but for the payments, these

25

rigs would be forced to leave and come back at great cost to

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Noble and that was Mr. Ruehlen's motivation.

2

avoid -THE COURT:

3
4

No, I understand that.

He wanted to

That does seem

like a very time-consuming and needless exercise.
MR. HEWETT:

5

Yes.

So, again, you know, explaining

6

that context, explaining that based on, you know, numerous

7

factors that he lays out in detail in his report and that I

8

won't bore you with, because I know the hour is late, but

9

which the SEC essentially just dismisses, he -- he -- his --

10

his -- his conclusions as to that likelihood is that it is

11

extremely unlikely, given the nature of the government actors

12

who ran the country at that time, including the president,

13

President Obasanjo -- whose first name I will not try to

14

pronounce because I will embarrass myself --

15

THE COURT:

16

MR. HEWETT:

17

THE COURT:

19

MR. HEWETT:

THE COURT:

That's relevant.

That challenges the

I think, it's just two different views

of what belongs in the record and I --

23

MR. HEWETT:

24

THE COURT:

25

Yeah.

reasonableness of the -- one of the SEC's --

21
22

-- but in light of that political

economy, it's unlikely this would have even happened.

18

20

Yeah.

that.

Yes, sir, Your Honor.
Reasonable people can disagree about

I understand that.

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1

MR. HEWETT:

2

THE COURT:

3

MR. HEWETT:

4

THE COURT:

Unless there are any other questions.
No, you did well.

You did well.

Thank you, Your Honor.
Briefly, I'm just arbitrarily going to

5

knock it off.

6

home, but we have -- one member of my staff has a brand-new

7

baby, and others have other claims on their time.

8

to just call it quits after we hear from you.

9

tomorrow at 9:00 a.m.

10

My wife is out of town, I don't need to be

MR. BRYAN:

Thank you, Your Honor.

I'm going

We'll resume

I think what we

11

heard from counsel is they do want to put Nigeria in this

12

trial and on trial.

13

Nigeria, and they want the former Ambassador to tell the jury

14

what's okay to do in Nigeria, what is lawful.

15

definitely not within the purview of an expert.

16

Honor's job.

17

Nigeria is only for the Court to decide.

What is acceptable and permissible in

And that is
That's Your

What is the law -- what is permissible in

18

THE COURT:

I understand that.

19

MR. BRYAN:

The second issue is, as counsel

20

explained it, Ms. -- the Ambassador Campbell is going to tell

21

the jury that Nigeria lacks transparency, government agencies

22

are difficult to deal with.

23

what Mr. Ruehlen will say, so we can see how this is going to

24

present itself at trial.

25

difficult place to do business.

He is going to testify exactly

Mr. Ruehlen will say, "Nigeria is a
You have to rely on experts.

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1

It's difficult to deal with the government.

2

what the rules are.

I didn't know

They're opaque."

And then the Ambassador, former Ambassador to

3
4

Nigeria is going to get on the stand and say, "Ladies and

5

gentlemen of the jury, he's right."

6

impermissible bolstering.

And that is

And that --

7

If we could go back to slide 29.

8

That is exactly what he intends to do.

9

Ambassador Campbell intends to say, "Someone in Mr. Ruehlen's

10

position, in Nigeria, could reasonably conclude that the

11

paper process was legitimate" --

12

THE COURT:

Yeah, yeah, I understand.

13

MR. BRYAN:

-- "and that bribery, he could have

14

thought that was legitimate."
And that is telling the jury what result to

15
16
17
18

reach.
And that is not context, Your Honor.

That is

impermissible testimony.

19

THE COURT:

Okay.

20

MR. BRYAN:

And with that, Your Honor, I will rest

21

with the late hour.

22

THE COURT:

23
24
25

Okay.

Thank y'all very much.

tomorrow at 9:00.
(Proceedings were adjourned at 6:34 p.m.)

See you

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C E R T I F I C A T E.
I, Peggy Ann Antone, certify that the foregoing is a

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complete, true, and accurate transcript from the record of

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proceedings in the above-entitled matter.

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/s/ Peggy Ann Antone, RMR, CRR

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Contract Court Reporter

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29th day of May, 2014
Date