Calgary-based Niko Resources Ltd. is facing a bumpy ride in markets after revealing it had agreed to plead guilty to bribing a Bangladesh minister after explosions from one of the company's natural gas fields in the south Asian country.
Niko was due in court Friday morning and faces a multimillion-dollar fine, the first major charges under the RCMP's initiative to combat foreign bribery.
The company has production and exploration activities in seven countries, most prominently in India and Indonesia, and expects to triple its natural gas production this year, compared to 2009 levels.
Its profit in 2010 was $119-million (U.S.) - a sharp improvement after it posted a loss in 2009.
But Niko's share price has been under pressure for the past year, and its legal troubles will only add to that. The shares fell 65 cents or 1 per cent in early trading Friday, as investors waited to assess the penalty that Niko will be forced to pay.
"Difficult headlines, like this, will lead to companies suffering some pain in the currently weak equity markets," said Nathan Piper analyst with RBC Dominion Securities.
"Relative to Niko's operations now, Bangladesh is not significant but clearly it's not the kind of headline you want associated with yourself," he said. "Reputationally, it's not very good but within our valuation, Bangladesh is less than 5 per cent."
Niko grew from a $50-million junior gas company when it debuted on the Alberta Stock Exchange in 1987 to one with a current market value of more than $3.2-billion on the Toronto Stock Exchange.
Its chief executive officer, Ed Sampson, was the highest paid CEO last year, at $16-million including stock options. No individual from the company have been charged. The company said in a statement Thursday night that its board's audit committee voted to enter the guilty plea.
The RCMP began investigating after a 2005 explosion from one of the company's gas fields sparked complaints from villagers. Bangladesh junior energy minister A.K.M. Mosharraf Hossain was responsible for assessing what compensation Niko should provide to villagers. The charges relate to a Toyota land cruiser that was purchased by Niko and later delivered to Mr. Hossain's home, as well as to a trip made by Mr. Hossain and his family to New York.
Niko provided $525,000 (U.S.) to villagers who complained of contaminated drinking water and devastated agriculture after the explosion.
International resource companies have come under increasing pressure in recent years to publish what they pay to local governments, and from anti-bribery initiatives aimed at reducing widespread corruption in poor countries where they operate.
Canada has often been viewed as a laggard in that effort.
But the Niko case suggested the RCMP is stepping up its enforcement effort, said Dan Grager, an analyst at Calgary-based Peters & Co.
"They are definitely showing their willingness to crack down," Mr. Grager said. "And it's definitely needed."