SEC Asks U.S. Oil Companies on Business in Terror States

Benoit Faucon, The Associated Press:

The Securities and Exchange Commission has sent letters to U.S. companies requesting they disclose any business dealings with terror-supporting states, a lawyer specializing in sanctions told Dow Jones Newswires. READ MORE

The U.S. financial watchdog's inquiries to European companies, such as ENI SpA of Italy, Total SA of France and Norsk Hydro ASA of Norway, about possible commissions paid in Iran are already known. But Michael Burton, a Washington-based lawyer with Miller and Chevalier, said the letters - of which he has seen several - had also been sent to U.S. companies, a move underscoring the shift in the SEC's role following September 11.

Burton said letters were sent up until June, and were addressed to oil exploration and production, and services companies based in the United States, as well as to companies in other sectors such as chemicals.

However the lawyer declined to identify any of the corporate recipients of the letters, for confidentiality reasons.

Burton said the SEC had requested information from these companies on their business in Iran, Sudan and Syria - which are all subject to U.S. sanctions - or Libya - where the U.S. embargo was almost completely lifted in September 2004.

Burton said the letters sought information on transactions made by the companies within those countries, as part of the U.S.'s application of anti-corruption laws and sanctions. But he said the letters also strongly suggested that companies disclose in filings any dealings in countries designated as terror-supporting states.

The SEC declined to comment.

Burton, who is based in Washington, said the letters have been sent by the SEC's Office of Global Security Risk, a special division that monitors companies with operations in Iran and other countries under U.S. sanctions, which were created by the U.S. Congress in 2004.

But, he added, the regulator was also addressing investors' demands, by being "concerned that shareholders have access to that information following September 11."

"Certain institutional investors, for instance, have expressed interest in whether companies they invest in conduct business in those countries," Burton said.

Burton said the SEC agreed to expand its role by looking at the business of companies working in terror-supporting states, as it felt it respected "the interest of U.S. capital markets."

The regulator is "quite persistent," Burton added, in some cases sending multiple separate letters to get the companies to disclose their activities in terror-supporting states.

So far, none of the main oil companies, such as Devon Energy Corp., ConocoPhillips, Marathon Oil Corp. or Occidental Petroleum Corp., involved in countries on the list of state sponsors of terrorism have changed their disclosure policy in recent quarterly reports. ConocoPhillips and Marathon are based in Houston.

But some small players have mentioned their operations within embargoed countries for the first time.

For instance, Houston-based seismic-data acquisition specialist Veritas DGC Inc. detailed in its 2004 annual report the receipt of $1.5 million in revenue from Libyan customers, $428,000 from Iranian customers and $9,000 from a Syrian customer.

Veritas DGC emphasized that "the governments of Libya, Iran and Syria have been identified by the U.S. government as state sponsors of terrorism and are subject to sanctions." In its report for 2002 - the last one available on the SEC's Web site - no presence in these countries was mentioned, but the contracts disclosed may have started in 2004. Veritas DGC didn't return calls.

Devon Energy, which had activities in Syria until it recently sold its stake in a field, and Marathon, which has a stake in a license in Sudan, said they weren't aware of receiving a letter from the SEC.

Marathon said the renewal in December of its right to participate in the exploration of Block B, of which French oil major Total is the designated operator, had been approved by the U.S. Treasury's Office of Foreign Assets Control.

ConocoPhillips, which has a service contract with the Syrian Petroleum Co. that expires on Dec. 31, didn't return calls.