The SEC, the Department of Justice Fraud Section and the United Nations Independent Inquiry Committee continue to investigate matters arising in connection with the U.N. Oil For Food Program. To date, the SEC has brought fifteen enforcement actions in connection with that program.

The SEC’s latest FCPA case based on the Oil For Food Program was brought against General Electric Company and two of its subsidiaries. The case focuses on bribes paid by two wholly owned GE subsidiaries and two entities acquired by the company after the wrongful conduct occurred and charges violations of the books and records and internal control provisions. SEC v. General Electric Company, Case No. 1:10-CV-01258 (D.D.C. Filed July 27, 2010). Last year, GE, a company known for its management and systems, settled a financial fraud case with the Commission. Its latest case emphasizes the need for FCPA controls at the subsidiary level and the need for pre-acquisition due diligence.

The case names as defendants GE, Amersham plc (currently GE Healthcare) and Ionics, Inc (currently GE Ionics). Two wholly owned GE subsidiaries are involved in the transactions in this case. One is third tier subsidiary Marquette-Hellige, based in Germany. This company manufactures and sells medical equipment. Here, it sold fetal monitors, disposable electrodes, and transducers to the Iraqi government. A second is second tier subsidiary OEC-Medical Systems, based in Switzerland. The company manufactures and sells medical equipment.

Two other companies were involved in FCPA violations prior to their acquisition by GE. Defendant Ionics, Inc. is the parent of Ionics Italba S.r.I., an Italian based manufacturer of water purification equipment. It was acquired by GE in February 2005. Defendant Amersham plc, acquired by GE on April 1, 2004, is the parent of Nycomed Imaging A.S. that company manufactures and sells X-Ray and MRI contrast agents.

According to the complaint, from 2000 to 2003 GE subsidiaries Marquette and OEC made about $2.04 million in kickback payments in the form of computer equipment, medical supplies and services to the Iraqi Health Ministry as part of the U.N. program. The kickbacks were made through agents in the form of after sales service fees on the sales of products to Iraq.

Prior to the time GE acquired their parent companies, Ionics Italba and Nycomed Imaging paid about $1.55 million in cash kickback payments to Iraqi as part of the U.N. program. Nycomed authorized and paid the kickbacks through agents in the form of after sales service fees.

The two count complaint alleges violates by each of the three defendants of Exchange Act Sections 13(b)(2)(A) and 13(b)(2)(B). To settle the action, each of the three defendants consented to the entry of a permanent injunction prohibiting future violations of the Exchange Act Sections cited in the complaint. GE also agreed to disgorge $18,397,949 in wrongful profits, pay prejudgment interest and a civil penalty of $1 million. The settlement reflects the cooperation of the defendants. See also Litig. Rel. 21602 (July 27, 2010).

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