The Petrofac (LSE:PFC) share price has surged 70% over the past week following an end to a prolonged corruption investigation by the Serious Fraud Office (SFO). Management entered a guilty plea to bring the court case to an end. And it has now received a $104.6m (£77m) fine for bribery charges.
What happened?
The company admitted that senior executives paid £32m as bribes to secure contracts between 2011 and 2017. These bribes were disguised through subcontractors that created fake agreements for fictitious services. The money was linked to over £2.6bn worth of contracts in Iraq, Saudi Arabia and the United Arab Emirates.
Of the £77m, £22.8m is due to be paid on 3 January next year, with the remaining balance due on 14 February. A new CEO and CFO have been brought in. And the former head of sales, David Lufkin, has been issued a suspended jail sentence of two years.
What does this mean for the Petrofac share price?
Initially, Petrofac estimated the fine would likely be around $240m (£176m). However, it seems the efforts of management to reform the business over the last couple of months have been acknowledged by the SFO. As a result, a smaller fine of £77m was issued.
The corruption investigations are still active to ensure no other breaches of compliance occurred during the period. However, the specific case against Petrofac now appears to be over, allowing the business to shift its focus to rebuilding its reputation and delivering energy solutions to the world. And with this matter resolved, investors appear to have regained faith in the new leadership, leading to the rising Petrofac share price.
