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Thursday, July 24, 2008 1:12:41 PM
A related SEC subpoena was issued on May 9, 2006, and a second related subpoena issued on August 29, 2006. The subpoenas request from ERHC a range of documents including all documents related to correspondence with foreign governmental officials or entities in Sao Tome and Nigeria, personnel records (specifically, those regarding the Company's former Chief Financial Officer, Franklin Ihekwoaba) and other corporate records. The Company has been actively responding to both subpoenas.
On July 5, 2007, U.S. Senate Committee on Homeland Security and Governmental Affairs' Permanent Subcommittee on Investigations served ERHC with a subpoena, in connection with its review of matters relating to the potential abuse of payments made to foreign governments. The subpoena, as amended on July 18, 2007, seeks documents and information regarding ERHC's activities, particularly those related to the acquisition of ERHC's interests in the Gulfof Guinea. ERHC's attorneys, Akin Gump Strauss Hauer & Feld LLP, are assisting ERHC in responding to all subpoenas.
The investigations by the DOJ, SEC and Senate Subcommittee are continuing. The Company anticipates that these investigations will be lengthy and do not expect these investigations to be concluded in the immediate future. If violations are found, the Company may be subject to criminal, civil and/or administrative sanctions, including substantial fines, and the resolution or disposition of these matters could have a material adverse effect on its business, prospects, operations, financial condition and cash flows.
ERHC/Addax Arbitration. Addax, our consortium partner in JDZ Block 4, claims entitlement under our existing agreements to 7.2% out of the recovered 9% interest in Block 4, leaving 1.8% remaining with ERHC. The parties are currently in arbitration to determine whether additional consideration is payable to ERHC under the existing agreements for the 7.2% claimed by Addax. If Addax's claims are successful, ERHC's share of JDZ Block 4 will increase from 17.7% to 19.5% and Addax's share of the JDZ Block 4 will increase from 33.3% to 40.5% for no additional consideration paid to ERHC. The parties are also exploring mediation as a potential alternative to arbitration.
From time to time, ERHC may be subject to routine litigation, claims, or disputes in the ordinary course of business. In the opinion of management, no pending or known threatened claims, actions or proceedings against the Company are expected to have a material adverse effect on ERHC's consolidated financial position, results of operations or cash flows. ERHC intends to defend these matters vigorously; the Company cannot predict with certainty, however, the outcome or effect of any of the litigation or investigatory matters specifically described above or any other pending litigation or claims. There can be no assurance as to the ultimate outcome of these lawsuits and investigations.
http://sec.edgar-online.com/2008/02/11/0001140361-08-003535/Section13.asp
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