A lawsuit against the Houston energy company Cobalt International Energy has posed a question which is not often considered under the Foreign Corrupt Practices Act—what does contradictory due diligence mean? There are also ancillary questions of what must a company disclose about possible issues of corruption and when must it do so? These questions arose in the continuing saga of Cobalt and drilling rights it secured in Angola in 2010. Cobalt had engaged a local third-party partner, who turned out to have been owned by Angolan government officials. The company later severed its relationship with the local third party.
The Houston lawsuit has revealed that two top international investigation firms that reviewed the ownership of the local third-party partner concluded it was owned by Angolan government officials. Two law firms hired by the company’s board of directors, however, contradicted these findings, and the contract with the local third party was concluded with drilling rights then awarded to Cobalt. As noted, the company ended its ties with the local third party. U.S. government regulators reviewed the matter and declined to bring any action under the FCPA.
