The complaint for this class action claims that KBR, Inc. hid that employees or third parties of its UK subsidiary violated bribery and corruption laws. The company had published material that made it seem as if bribery and corruption were forbidden and persons in danger of succumbing to them could be properly vetted and monitored, and the complaint claims this was a violation of the Securities Exchange Act of 1934.
The class for this action is all persons who acquired KBR securities between February 26, 2016 and April 27, 2017.
KBR provides technology and professional services for government services and hydrocarbon industries around the world. It is comprised of three segments: Government Services, Technology & Consulting, and Engineering and Construction.
On February 26, 2016, KBR filed its annual report on Form 10-K for the year ended December 31, 2015. The section on “Compliance” begins, “Conducting our business with ethics and integrity is a key priority for KBR.” It said that the company was subject to bribery and ethics laws and that it had its own Code of Business Conduct as well.
The Code of Business Conduct, found on KBR’s website, has a section on “Bribery and Corruption” that says, “Employees and third parties acting on KBR’s behalf are prohibited from making, offering, authorizing or promising to make any Improper Payments.” The section goes on at length to define improper payments, provide further guidance in questionable situations, and make provisions for proper vetting and control of third parties who might be in a position where bribery or corruption could be a temptation.
The company also filed first-, second-, and third-quarter reports that year, as well as a fourth-quarter and end-of-year Form 10-K and first-quarter report for 2017. All of these filings contained Sarbanes-Oxley Act certifications stating that the financial information in the reports were accurate and that the company had disclosed any material changes to financial reporting.
The Form 10-K 2016 annual report repeated the material in the section on “Compliance” in the 2015 annual report. The Code of Business Conduct contained roughly the same section on “Bribery and Corruption” with prohibitions against it and provisions for vetting and control.
However, the above filings were false or misleading, the complaint claims, because they did not disclose that KBR’s UK subsidiaries had violated bribery and corruption laws.
On April 28, 2017, the United Kingdom’s Serious Fraud Office said it had started an investigation into “the activities of KBR’s UK subsidiaries, their officers, employees and agents for suspected offences of bribery and corruption.” At this news, the company’s stock price fell be 9.24%.
The complaint claims that none of the company’s public filings gave a hint of this behavior and that, on the contrary, they gave the impression that the company was careful not to engage in bribery and corruption and to monitor persons in positions where this might be a temptation.