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Foreign Corrupt Practices Act & Anti-Corruption

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  • Four Sentenced in United Kingdom for Role in Innospec Matter

    On August 4, 2014, the United Kingdom’s Serious Fraud Office announced that four former executives of Innospec Inc. (formerly known as Associated Octel Corp.) were sentenced following a long-running investigation related to conduct in in Indonesia and Iraq.  Three of the four were sentenced to prison terms, with a former chief executive receiving four years in prison after being convicted at a jury trial earlier this year.  A former regional sales director received an 18 month sentence following a conviction at trial, and another former CEO was sentenced to two years following a guilty plea.  The fourth individual, a former business unit director, received a suspended 16-month sentence following a guilty plea. The sentencing of these former executives comes after Innospec pled guilty in 2010 to FCPA and anti-bribery criminal charges brought by DOJ and the UK’s Serious Fraud Office, and after Innospec settled civil charges brought by the SEC.  The charges alleged that Innospec, a global specialty chemicals company, had bribed Indonesian and Iraqi government officials to win sales of a gasoline additive after environmental legislation in the US and abroad led to a decline in sales of that additive.  As part of the settlement, Innospec paid U.S. authorities $27.5 million, and paid UK authorities $12.7 million.  Two of the four individuals sentenced in the UK had also previously settled with the SEC over civil FCPA charges.

    Indonesia UK SFO Innospec Iraq

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  • SEC Announces $2 Million FCPA Settlement with Smith & Wesson

    On July 28, the SEC announced that Smith & Wesson Holding Corporation agreed to pay $2 million to settle charges that the United States-based firearms manufacturer had violated the FCPA by making or authorizing improper payments to foreign officials in Pakistan and other countries in an effort to win contracts to sell weapons to overseas military and police forces.  The settlement comes just weeks after Smith & Wesson announced in a June 19 securities filing with the SEC that the DOJ had abandoned its own related investigation without pursuing FCPA criminal charges. The claims against Smith & Wesson were filed in the SEC's administrative court.  In the order instituting the settled administrative proceeding, the SEC alleged that Smith & Wesson from 2007 to 2010 engaged in a "pervasive effort" of making the improper payments in order to generate new overseas business.  According to the SEC the only contract that was successfully consummated under the scheme arose after Smith & Wesson officials in 2008 authorized a third party agent to make cash payments and provide firearms to Pakistani police officials as gifts.  The resulting agreement to sell more than 500 pistols yielded a profit to Smith & Wesson of more than $100,000, the SEC found.  Similar improper payments and gifts that did not ultimately result in contracts for Smith & Wesson were allegedly made to foreign officials in Indonesia, Turkey, Nepal, and Bangladesh.  As described in the SEC's order, Smith & Wesson failed to account for the improper payments and instead characterized them as legitimate commissions and business expenses.  The order also found the illegal conduct was allowed to continue undetected for years because Smith & Wesson failed to establish an appropriate compliance program or adequate internal accounting controls in connection with its expanding business in "new and high risk" overseas markets. In addition to the $2 million settlement, which consists of disgorgement, prejudgment interest, and a civil penalty of more than $1.9 million, Smith & Wesson also agreed for the next two years to report to the SEC on its FCPA compliance efforts.  In its press release, the SEC praised Smith & Wesson's cooperation with the investigation and its other remedial efforts following discovery of the bribery scheme, including the termination of the company's entire international sales staff and the implementation of "a series of significant measures to improve its internal controls and compliance process."  Smith & Wesson consented to the settlement without admitting or denying the SEC's findings.

    Indonesia Smith & Wesson Pakistan Turkey Nepal Bangladesh

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  • DOJ, SEC Announce FCPA Actions Against U.S. ATM Maker

    On October 22, the DOJ and the SEC announced parallel actions against a U.S. company that makes ATMs and bank security systems for allegedly violating the FCPA. The federal authorities allege that from 2005 to 2010 the company provided a total of approximately $1.8 million in payments, gifts, and non-business travel to employees of state-owned banks in China and Indonesia, and attempted to disguise the benefits, including by making payments through third parties designated by the banks and by inaccurately recording leisure trips for bank employees as "training." The government also alleges that from 2005 to 2009, the company entered into false contracts with a distributor in Russia for services that the distributor was not performing in order to facilitate approximately $1.2 million in bribes to employees of privately-owned banks in Russia in order to obtain and retain ATM-related contracts with those customers. The company entered into a deferred prosecution agreement with the DOJ and consented to a final judgment in the SEC matter. Pursuant to those agreements, the company must pay a $25.2 million penalty and disgorge approximately $22.97 million, inclusive of prejudgment interest. The company also must implement numerous specific changes to its internal controls and compliance systems, and retain a compliance monitor for at least 18 months. The government acknowledged the company's voluntary disclosure and extensive internal investigation and cooperation.

    China Russia Indonesia Diebold

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  • Allianz Settles SEC Administrative Proceeding for $12.3 Million

    On December 17, 2012, German insurance and asset management company Allianz SE settled an administrative proceeding brought by the SEC for more than $12.3 million.  The SEC alleged that Allianz violated the internal controls and books and records provisions of the FCPA in connection with improper payments to government officials by its Indonesian subsidiary over a seven-year period.

    Indonesia Allianz

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