Another FCPA Case: Clearly a Growing Trend
Yesterday, the SEC filed another enforcement action based on alleged violations of the Foreign Corrupt Practices Act (“FCPA”). This action was against Ingersoll-Rand Company, Ltd. and related to payments made to Iraq under the U.N. Oil for Food Program. In essence, the complaint alleges that over a three year period, four subsidiaries of the company entered into contracts in which over $950,00 in kickback payments were made. SEC v. Ingersoll-Rand Co., Civil Action No. 107-CV-01955 (D.D.C. Filed October 31, 2007).
The U.N. Oil for Food Program was designed to provide humanitarian relief for the Iraqi people facing severe hardship under international trade sanctions. Under the program, the Iraqi government can purchase humanitarian goods through a U.N. escrow account. According to the SEC’s complaint, the kickback paid by Ingersoll-Rand’s subsidiaries and third parties diverted funds from the account and into an Iraqi slush fund. The U.N., in turn, effectively paid for illicit payments because they were rolled into the price of contracts used in connection with the program, thereby improperly inflating the prices.
Ingersoll-Rand agreed to settle the action, consenting to the entry of a statutory injunction prohibiting future violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act. The company also consented to the entry of an order directing it to pay disgorgement of approximately $1.7 million in profits, over $560,000 in pre-judgment interest and a civil penalty of $1,950,000. The company also agreed to comply with certain undertakings regarding its FCPA compliance program and to pay a $2.5 million fine under a deferred prosecution agreement with the Justice Department.
This case is the latest in a series of FCPA actions the SEC and DOJ has brought this year. Reportedly, there are a number of additional similar actions under investigation. Prosecutions in this area are clearly a growing trend and may be at the highest level in years. In view of this increasing trend, it is clear that issuers should carefully review their compliance programs in this area as well as monitor compliance. This is particularly true since the SEC’s release notes that the settlement here was based in part on the remedial actions of the company and its cooperation.