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Griffiths Energy plans IPO, launches probe

Griffiths Energy plans IPO, launches probe


A Canadian energy company with hopes of going public is investigating whether all its consulting agreements complied with corruption laws, as well as probing common share transactions tied to some of its founders.

Griffiths Energy International Inc., formed in 2009, has three oil production deals with Chad, all created this year. The company spent about $8.5-million on consulting agreements, and now about $2-million of those fees are under review by a special committee of the board, according to financial statements contained in a regulatory filing dated Nov. 22.

Canada has been widely criticized for not enforcing anti-bribery laws, but the RCMP recently cracked down on companies suspected of violating the Corruption of Foreign Public Officials Act. Resource companies have come under particular scrutiny given the history of bribery in underdeveloped countries. Canada's Niko Resources Ltd. paid a $9.5-million fine after pleading guilty in June to bribing an energy minister in Bangladesh. It was Canada's first major foreign anti-bribery case.

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Domestic companies can be prosecuted under these corruption laws even if they step over the line outside Canada. If the wrongdoing can be tied back to Canadian companies, they are at risk, said Riyaz Dattu, a partner and head of Osler, Hoskin & Harcourt LLP's international trade and investment law business.

"Canada is now taking this legislation seriously and we're seeing a huge number of investigations," he said. "Canada has stepped up to the plate and is now vigorously enforcing the Corruption of Foreign Public Officials Act." The Mounties have indicated they have about two dozen investigations underway, he noted.

Griffiths' board created a special committee on Oct. 31 to "review consulting agreements and common share transactions by certain founding shareholders," the prospectus said. It did not say which shareholders were under review.

Brad Griffiths, a former Bay Street banker, is called "the [company's]founder" in the prospectus. He drowned in a boating accident north of Toronto in July. The Bradley Griffiths BDG Trust controls 14.4 per cent of the company and is believed to be the only shareholder owning more than 10 per cent, the prospectus said.

The energy company indentified anti-bribery laws as a risk factor for the company in its preliminary prospectus tied to its planned initial public offering. The company said it has contacted the relevant authorities in Canada and the United States. It did not specify which law-enforcement officials are involved.

Griffiths is investigating consulting arrangements between August, 2009 and March, 2011. None of its board members or executives was with the company during this period, it said.

"[The company's]management believes that if any actions are brought against the company, they will not result in a material adverse effect against the company, or the company's ability to continue the aggressive exploration and development plans in Chad," the prospectus said. "However, no assurance can be given that the final outcome of this investigation or any other legal proceedings will not have a material adverse effect on the company."

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