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U.S. v. Akzo Nobel, N.V.

 
:
Akzo Nobel, N.V.
:
DOJ Criminal
:
December 20, 2007
:
U.S. v. Akzo Nobel, N.V.
:
No citation
:
In an example of international cooperation, the U.S. criminal penalty in this case was to be remitted if the company reached a resolution with the Dutch public prosecutor's office within 180 days to pay a criminal fine of not less then 381,602 Euros in the Netherlands.
:
Manufacturing-Other/Multi
:
Iraq
:
2000; 2001; 2002
:
Iraqi Ministry of Agriculture and Ministry of Health
:
In April 1995, the U.N. adopted Security Council Resolution 986 which permitted Iraq to sell its oil and to use proceeds from those sales to purchase humanitarian supplies such as food for the Iraqi people ("U.N. Oil-for-Food Program" or "OFF"). In an extensive scheme, the Iraqi government received illicit payments in the form of surcharges from oil purchasers and kickbacks, often termed "after sales service fees," from humanitarian goods suppliers. The kickback payments were masked by inflating the contract price, usually by 10% of the contract value.

Akzo Nobel, N.V. ("Akzo") signed a non-prosecution agreement after its subsidiaries made payments prohibited by the U.N. Oil-for-Food program to Iraqi government agencies in exchange for contracts.

Akzo produces and sells coatings, chemicals, and human and animal healthcare products. Two of its wholly-owned subsidiaries participated in the United Nations Oil-for-Food Program: Organon, which manufactured and sold prescription pharmaceuticals, and Intervet, which manufactured and sold veterinary vaccines and animal pharmaceuticals. Both subsidiaries employed Jordan-based agents to obtain Oil-for-Food contracts with the Iraqi government. Akzo paid the agents jointly regardless of which obtained a contract. Before August 2000, the agents each received a 5% fee for every contract; after August 2000, the agents received a 2.5% fee.

Beginning in 2000, the Iraqi government began requiring companies wishing to sell humanitarian goods to government ministries to pay a kickback in order to be granted a contract, usually 10% of the contract price. In September 2000, one of Akzo's agents told Intervet's Middle East Regional Sales Manager that the Iraqi Agricultural Ministry required a kickback of 5% before it would sign a contract. The Regional Sales Manager refused, then learned that the agent had already agreed to pay the kickback. After the Iraqi government signed the contract, the agent asked the Regional Sales Manager and Intervet's General Manager to reimburse him for the 5% ($38,741) kickback he paid to the agricultural ministry. The managers decided to reimburse the agent by reverting to the agent's old 5% sales commission. The reversion allowed Akzo to pay the agents their standard 2.5% commission and reimburse the 5% kickback. Intervet invoiced the U.N. for the price of the contract and the kickback. The U.N. repaid Intervet in full in November 2001. Intervet recorded the payment as a legitimate agent commission payment, and made $200,741 from the contract.

Organon paid $240,750 in kickbacks to the Iraqi Ministry of Health in exchange for three contracts, increasing the agents' commission to 15% to cover a 10% kickback to the Iraqi government. Organon agreed to the first kickback in June 2001, inflating its contract price by 10% and making a payment to "Sabbagh Drugstore," an entity affiliated with one of the Akzo agents. Organon inflated two subsequent contracts by 10%, depositing the funds directly into the agent's Jordan bank account in November 2002. Organon made $1,446,627 on the contracts, and improperly recorded the kickbacks as legitimate agent commissions.
:
Anti-bribery (Issuer), Books and records (Issuer)
:
Non-prosecution Agreement
:
The non-prosecution agreement indicates that Akzo Nobel expects to admit liability to the Dutch National Public Prosecutor's office and pay a fine of no less than 381,602 Euro. If Akzo Nobel has not been assessed such a fine within 180 days of the non-prosecution agreement, then it shall pay the U.S. $800,000. If the Dutch prosecutor assesses a fine of less than the 381,602 Euro, then Akzo Nobel will pay the U.S. the equivalent of the difference between the Dutch fine and $800,000.
:
800,000
:
0
:
Issuer
:
Foreign
:
Contract Procurement/Retention
:
1,647,368
:
Wire/check
:
Sales Agent/Consultant
:
279,491
:
Iraq
:
Jordan, Lebanon
:
No
:
No
:
Netherlands