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SEC v. Titan Corporation

 
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Titan Corporation - Titan Corp.
:
SEC Civil
:
March 1, 2005
:
SEC v. Titan Corporation
:
S.E.C. v. Titan Corporation, No. 05-0411 (D.D.C. 2005)
:
At the time, the $28.5 million in penalties were the largest ever imposed on a company in the history of the FCPA.

In a separate Section 21A report issued by the Securities and Exchange Commission, the Commission warned issuers that failing to update inaccurate FCPA representations and warrantees in a merger agreement attached to a proxy statement filed with the Commission could result in securities fraud violations.
:
Telecommunications-Mobile
:
Benin
:
1999; 2000; 2001
:
An advisor to the President of Benin, the President's election campaign, the President's wife, an official of the World Bank, the Director General of Benin's telecommunications agency, an official of the World Bank, and three Benin consultants.
:
In addition to the anti-bribery allegations made by the DOJ with respect to Benin, the SEC alleged additional false statements, which were books and records violations, in Sri Lanka and Bangledesh.

Titan Corp. ("Titan") violated the FCPA by paying over $3.5 million to its agent in Benin, Africa, to secure contracts for telecommunications services in Benin, improperly recording those payments on its books and records, and failing to devise or maintain an effective FCPA compliance system.

Titan is a Delaware Corporation headquartered in San Diego, CA, that provides military intelligence and communications solutions worldwide. In October 1998, Titan established a joint venture with Afronetwork, a Benin telecommunications company, to build a satellite-based telephone system in Benin. In a November meeting between Titan and Afronetwork, Titan was introduced to a business advisor to the president of Benin.

In July 1999, Afronetwork assigned Titan all its rights to the modernize Benin's telecommunications infrastructure, and Titan hired the Benin president's advisor as its agent to help it fulfill the contract. Titan would pay the agent 5% of all equipment installed in Benin. Before Titan could install any equipment or the agent could perform any services, the agent submitted an invoice for $399,919, which Titan paid via a wire transfer to an account in the name of one of the agent's relatives.

In August 1999, Titan executed a contract that would govern its work in Benin thereafter. In November 1999, Titan assigned its contract rights to a wholly-owned subsidiary. The contract would earn Titan 98.2 million in revenue between 1999-2001.

Titan's contract in Benin also required it to pay part of its profits as subsidies for development of Benin's infrastructure. Benin's Health and Education "sectors" would each receive "social payments" of 2% of the profits from Titan's contracts.

In December 2000, Titan's agent told Titan to accelerate the social payments so that they were paid in full before the Benin 2001 election. Titan made over $2,381,551 in payments by 2001 directly to its agent. Two of these payments were made to the agent's Monaco bank account. The remaining five payments were made in cash in Benin. Internally, Titan recorded the payments as "consulting services" and broke them into smaller increments to make them appear paid out over time. Benin's president used the money to run his relection campaign, including to produce and distribute T-shirts adorned with his name and picture. After Benin's president won re-election, he executed a new contract with Titan that would pay it a 20% management fee for all telecommunications work done in Benin at a value of not less than $9,100,000.

In addition to these payments to the agent, Titan also gave a pair of $1,850 earnings to the President's wife, $14,000 in travel expenses and a $20,000 bonus (which may have been unpaid) for the Director General to attend four Steering Committee Meetings, and $15,000 in cash and $2,000 in travel expenses to a World Bank official.
:
Anti-bribery (Issuer), Books and records (Issuer), Internal controls (Issuer)
:
Civil penalty, Disgorgement
:
The settlement between the SEC and Titan required Titan to disgorge $12,620,000 in profits and $2,859,195 in prejudgment interest. Titan was required to pay a civil penalty of $13,000,000 but this would be deemed satisfied by full payment of criminal fines totalling $13,000,000 in the then-pending criminal case of U.S. v. Titan Corporation.
:
15,479,195
:
0
:
Issuer
:
U.S.
:
Contract Procurement/Retention
:
98,200,000
:
Cash, Political contribution, Wire/check
:
Direct, Sales Agent/Consultant
:
3,500,000
:
Benin
:
United States
:
Yes
:
No