Halliburton to plead guilty to destroying evidence in Gulf spill case

Oil field services firm Halliburton will plead guilty to a misdemeanor charge of destroying evidence related to the 2010 Gulf of Mexico oil spill in exchange for a fine and probation, the Justice Department said Thursday.

Halliburton has agreed, subject to the court’s approval, to pay $200,000, the maximum-available statutory fine, and to be subject to three years of probation, the Justice Department said. The stunning development follows testimony at a civil trial earlier this year at which a former company lab manager admitted that he was asked to throw away his notes on some cement testing the company did after the spill.

It comes as a federal judge in New Orleans is weighing whether Halliburton, Transocean and BP were grossly negligent in connection with the worst offshore oil spill in U.S. history.

A gross negligence finding would open the companies to potentially billions of dollars in punitive damages. Attorneys for victims suing the companies have suggested in court that Halliburton’s conduct after the incident should be factored into the gross negligence finding.

Because the questions the former company official was asked at the civil trial involved cement samples and the charge announced Thursday involves centralizer modeling related to the cement, it was not immediately clear whether that testimony forms the basis, at least in part, of the charge to which Halliburton is pleading guilty to. The Justice Department declined to comment on the issue.

Halliburton said in a statement that the Justice Department has agreed that it will not pursue further criminal prosecution of the company or its subsidiaries for any conduct relating to or arising out of the well incident.

“The Department of Justice acknowledged the company’s significant and valuable cooperation during the course of its investigation, and the company has agreed to continue to cooperate with the Department of Justice in any ongoing investigation related to or arising from the incident,” the company, which is based in Houston and Dubai, said.

Authorities did not immediately say whether individuals also could face criminal charges for destroying evidence. Further court documents are expected to be filed as early as Friday. It wasn’t immediately clear when Halliburton would enter its plea.

Separately, Halliburton made a voluntary contribution of $55 million to the National Fish and Wildlife Foundation that was not conditioned on the court’s acceptance of its plea agreement, the Justice Department said.

Halliburton has signed a cooperation and guilty plea agreement with the government.

BP owned the undersea well that blew out off Louisiana, triggering an explosion on the Transocean-owned Deepwater Horizon rig that killed 11 workers. Millions of gallons of oil spilled into the sea for nearly three months before the well was capped. Halliburton supplied the cement that failed to prevent oil and gas from seeping out.

Federal prosecutors say that after the well blowout, Halliburton established an internal working group to examine the Macondo well disaster,  including whether the number of centralizers used on the final production casing could have contributed to the blowout.

Use of centralizers can help keep the casing centered in the wellbore away from the surrounding walls as it is lowered and placed in the well.  Centralization can be significant to the quality of subsequent cementing around the bottom of the casing.

Halliburton had recommended to BP the use of 21 centralizers in the Macondo well.  BP chose six centralizers instead.

Prosecutors say that the month after the blowout, a Halliburton official directed a senior program manager to run two computer simulations of the Macondo well final cementing job. The simulations indicated that there was little difference between using six and 21 centralizers.  The program manager was directed to, and did, destroy the results, the Justice Department said.

The allegation is noteworthy because Halliburton has long publicly argued the opposite, that since BP didn’t follow its advice on the number of centralizers the cement didn’t hold and that BP should be liable for the disaster.

In June 2010, similar evidence also was destroyed when Halliburton’s cementing technology director asked another, more experienced, employee to run simulations again comparing six versus 21 centralizers.  The employee  reached the same conclusion and, like the program manager before him, was then directed to “get rid of” the simulations, federal prosecutors say.

Efforts to forensically recover the original destroyed computer simulations during ensuing civil litigation and federal criminal investigation were unsuccessful, prosecutors say.

In March of this year, during the civil trial former Halliburton lab manager  Timothy Quirk testified that a company official asked him not to record results of a cement stability test related to the blown-out well.

Quirk said that while the request was “a little unusual,” he complied.

The test was conducted shortly after the spill, using ingredients similar to those used to seal the undersea well that blew out. Quirk said he told the results to the company official that asked for the test, then he threw away his notes.

“He did not want them reported,” Quirk testified, referring to his former colleague. Quirk left Halliburton and was working for Chevron at the time of his testimony.

The testimony came a week after a Halliburton lawyer, Don Godwin, acknowledged that officials had recently discovered cement samples possibly tied to the ill-fated drilling project that weren’t turned over to the Justice Department after the oil spill.

Plaintiffs attorneys have been seeking to show there was a cover-up over the cement samples in an effort to deflect attention away from Halliburton.