By Samuel Rubenfeld, Lynn Cook and Ian Talley
WASHINGTON -- The U.S. Treasury Department on Thursday imposed a
$2 million fine on Exxon Mobil Corp. for what it called a "reckless
disregard" of U.S. sanctions on Russia while Secretary of State Rex
Tillerson was the oil giant's chief executive, a finding the
company immediately said it would challenge.
Exxon, under Mr. Tillerson, in early 2014 deepened the company's
longstanding partnership with the Kremlin despite Washington
levying fresh sanctions against Russia for seizing territory in
eastern Ukraine. In May of that year, the Treasury Department said
the company signed eight documents relating to oil and gas projects
in Russia that were also signed by Igor Sechin, chief executive of
the state oil giant PAO Rosneft. Treasury said Thursday those deals
violated U.S. sanctions against Mr. Sechin, a former Russian
intelligence officer and top ally to President Vladimir Putin.
Mr. Tillerson, who had close business ties to Russia and
received an "Order of Friendship" award from Moscow, left Exxon
last year to become U.S. Secretary of State. The $2 million fine,
Treasury said, was the maximum amount it could levy against the
company.
A spokesman for Exxon called the fine "outrageous" and said it
would fight the Treasury's findings, saying they are a 180-degree
turn from previous guidance handed down by the Obama administration
when the sanctions were enacted. Treasury's sanctions unit started
its probe of the alleged sanctions violation several years ago.
Exxon said it was first notified in 2015 by Treasury's sanctions
unit, the Office of Foreign Assets Control, that it had violated
sanctions regarding its interactions with Mr. Sechin. In a filing
in a Texas court Thursday, the company said it had challenged the
notification about a month later.
Exxon doesn't have any direct deals with Mr. Sechin, but does
have business dealings with Rosneft, where Mr. Sechin signed
company documents in his capacity as CEO, Exxon said. According to
the company, under President Barack Obama, the White House and
Treasury in 2014 said U.S. companies were allowed to participate in
business dealings with Mr. Sechin if they were professional, not
personal.
On Thursday afternoon, the Irving, Texas-based company filed a
complaint in U.S. District Court in the Northern District of Texas,
seeking to toss the fine. In a court filing, Exxon said the
sanctions unit "seeks to retroactively enforce a new interpretation
of an executive order that is inconsistent with the explicit and
unambiguous guidance from the White House and Treasury issued
before the relevant conduct and still publicly available
today."
The Justice Department declined to comment about Exxon's legal
challenge.
The U.S. Treasury said in an enforcement notice against Exxon
that the company showed "reckless disregard for U.S. sanctions
requirements" when failing to consider the warning signs associated
with dealing in the blocked services of someone under U.S.
sanctions. The Treasury unit said one of the "aggravating factors"
it considered was that Exxon is a globally sophisticated company
that routinely deals with sanctions compliance concerns.
The Thursday notice said: "No materials issued by the White
House or the Department of the Treasury asserted an exception or
carve-out for the professional conduct of designated or blocked
persons, nor did any materials suggest that U.S. persons could
continue to conduct or engage in business with such
individuals."
When Mr. Tillerson took his position in President Donald Trump's
cabinet this year, he promised to recuse himself from matters
involving Exxon for one year. He has stood by the current sanctions
regime. In Ukraine earlier this month, Mr. Tillerson said the U.S.
sanctions on Russia -- imposed along with sanctions from the
European Union -- would remain "until Moscow reverses the actions
that triggered these particular sanctions."
Mr. Tillerson, as Mr. Trump's top diplomat, has been leading
administration efforts to improve relations with Russia.
"This is a big black eye for Tillerson," said Anders Åslund, a
senior fellow and Russia expert at the Atlantic Council, a
Washington think tank and Russia critic.
Though the State Department referred most questions about this
specific matter to Exxon, spokeswoman Heather Nauert said Thursday
that Mr. Tillerson is committed to the objectives of the
Ukraine-related sanctions. She said the State Department wasn't
involved with the decision to fine Exxon. She said Mr. Tillerson is
"living up to his ethical commitments," including his recusal from
Exxon-related matters.
Rosneft spokesman Michael Leontiev said signing an agreement
with Mr. Sechin not as an individual, but as a representative of
Rosneft management, can't be the foundation for a sanctions
violation. "I am sure that while Exxon was preparing the decision
about documents signing it consulted with both OFAC and lawyers
specialized on sanctions very carefully," he said.
The penalty comes as committees in the Senate and House of
Representatives, as well as a Justice Department special counsel,
investigate what U.S. intelligence agencies say was a
Kremlin-backed campaign to interfere in the presidential election,
and whether there was any collusion between the Trump campaign and
Russia. Russia has denied meddling and Mr. Trump has denied any
collusion.
"ExxonMobil caused significant harm to the Ukraine-related
sanctions program objectives by engaging the services" of a
sanctioned entity, Treasury said.
Exxon applied to the Treasury Department for a partial waiver
from Russia sanctions in 2015. The application was never acted upon
at that time but was again circulating among government departments
earlier this year. The Trump administration said it wouldn't grant
the waiver in April, two days after the application was reported by
the Journal.
Exxon and other big energy companies also recently joined Mr.
Trump in voicing concerns about congressional efforts to toughen
sanctions on Russia, arguing that it could shut down oil and gas
projects around the world that involve Russian partners. Mr.
Tillerson opposed ramped-up sanctions being considered in Congress,
saying the White House needs flexibility on the matter.
Lobbyists for Exxon told lawmakers in recent weeks that several
provisions in the sanctions legislation under consideration on
Capitol Hill are worrisome, including measures to prohibit
partnerships with Russian individuals.
--Felicia Schwartz contributed to this article.
Write to Samuel Rubenfeld at samuel.rubenfeld@wsj.com, Lynn Cook
at lynn.cook@wsj.com, Ian Talley at ian.talley@wsj.com
(END) Dow Jones Newswires
July 20, 2017 20:33 ET (00:33 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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