Texas gas company found that its merger acquisition paid a cartel-connected entity

A Texas-based gas company has disclosed that a Mexican affiliate made payments to local government officials that may have benefited a cartel designated as a terrorist group by the U.S. government. Entanglement with cartels is an increasing risk for companies doing business in Mexico.

Kodiak Gas Services, based in The Woodlands, Texas, disclosed on Nov. 5 that the Mexican affiliate, which came under Kodiak’s control as part of a merger, made “certain payments likely were made to persons associated with an organization designated” as Specially Designated Global Terrorists (SDGTs).

The company said in a Form 10-Q/A that an investigation conducted by outside counsel determined that “the payments appear to have been made in order to protect employees of the Mexican business from threats of harm or harassment, and to ensure access to work sites.” Kodiak’s disclosure was first reported by Global Investigations Review on Nov. 7.