On December 1, 2011, about 1005 central standard time, a Bell 407 helicopter, N435PH, was successfully autorotated to the water following a loss of engine power while maneuvering near a platform in the Gulf of Mexico. The helicopter was not damaged during the on water landing. The commercial pilot, and sole passenger, were not injured. The helicopter was registered to and operated by PHI, Inc., under the provisions of 14 Code of Federal Regulations Part 135 as a non-scheduled air-taxi flight. Visual meteorological conditions prevailed and a company flight plan had been filed. The flight originated from platform EC278-C, and was en route to platform EC261, both in the Gulf Of Mexico. According to the pilot, while en route to EC261 the engine chip light illuminated. The flight was abeam platform EC278-B at the time, and the pilot elected to divert for a precautionary landing. While on the base leg to EC278-B, the pilot heard a loud whining noise, followed by a loud popping noise, and the helicopter began to yaw. The pilot entered an autorotation, called mayday, inflated the floats, and performed a successful water landing. The pilot and passenger were able to exit the helicopter unassisted into a life raft and were picked up within 10 minutes. The helicopter remained upright for approximately 20 minutes before overturning. The engine was removed from the helicopter and examined at the PHI facility in Lafayette, Louisiana, under the supervision of a Federal Aviation Administration inspector. Examination and disassembly of the engine revealed the No. 2 bearing was fractured. The bearing components were located throughout the engine and retained for metallurgical examination. According to the operator's maintenance records, the Rolls-Royce Model 250-C74B gas turbine engine, serial number CAE 847428, underwent a 150/300 hour inspection, and an overhaul to the compressor section, at a total time of 7,475.6 hours. The engine was installed on the helicopter 2.7 hours prior to the accident. Metallurgical examination of the bearing and other components was completed by Rolls-Royce Corporation, Indianapolis, Indiana. According to Rolls-Royce, the No. 2 bearing outer ring cracked in fatigue, initiating from a spalled area on the raceway surface. The microstructure, hardness, and chemistry of the outer ring conformed to the engineering drawing requirements. The damage associated with the other compressor and turbine components examined was consistent with damage that would occur after the No. 2 bearing failure. The failed bearing was then sent to FAG Aerospace, Inc, Stratford, Ontario, Canada, for evaluation. Results of the evaluation showed the failure occurred due to false brinnelling, where the bearing is stationary, but subjected to ambient vibration or shock during transport. The bearing balls were free to vibrate within the bearing. During the vibration period, the bearing experienced relative microscopic motion. The spacing between each set of brinnelling marks was equal to the ball spacing within the bearing. False brinnelling increased sufficient load during bearing operation which caused premature spalling. One spalling area was severe enough to propagate mechanical stress in the outer ring causing the ring to fracture.