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U.S. v. Flowserve Pompes SAS

 
:
Flowserve - Flowserve Pompes SAS
:
DOJ Criminal
:
February 21, 2008
:
U.S. v. Flowserve Pompes SAS
:
U.S. v. Flowserve Pompes SAS, No. 08-035 (D.D.C. 2008)
:
Utilities-Other/Multi
:
Iraq
:
2001; 2002; 2003
:
Iraqi government
:
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.

Flowserve Pompes is the wholly-owned French subsidiary of Flowserve Corporation ("Flowserve"), an American corporation. Flowserve was involved in OFF through Flowserve Pompes SAS. Flowserve Pompes entered into 19 contracts in which kickback payments to the Iraqi government were either made or offered to obtain supply contracts worth €7,435,381 (approximately $11,014,000). Flowserve Pompes offered a total of $778,409 in payments, of which approximately $604,651 was in fact paid to the Iraqi government. Flowserve Pompes failed to correctly account for these payments in its books and records.

As seen in other U.N. Oil-for-Food related prosecutions, the DOJ did not charge Flowserve Pompes with a violation of FCPA bribery provisions. Rather, the criminal information against the company only charges conspiracy to commit wire fraud and to violate the FCPA's books and records provisions.
The DOJ entered a deferred-prosecution agreement with Flowserve, which acknowledged responsibility for Flowserve Pompes's actions. Flowserve paid a penalty of $4,000,000 on behalf of itself and Flowserve Pompes, its wholly-owned subsidiary. Flowserve Corporation acknowledged responsibility for the actions of Flowserve Pompes.

Because Flowserve cooperated in the DOJ's investigation and implemented enhanced internal controls, the DOJ agreed to defer prosecution of Flowserve Pompes by three years. In June 2011, the court granted the DOJ's motion to dismiss the criminal information against Flowserve Pompes because Flowserve and Flowserve Pompes had abided by the terms of the deferred-prosecution agreement.

In a related SEC matter, Flowserve consented to an entry of judgment against it. The SEC complaint alleged additional facts, including the involvement of another Flowserve subsidiary, Flowserve B.V., in the OFF kickback scheme.
:
Conspiracy - Books & Records
:
Conspiracy - Wire Fraud
:
Subject to Deferred-prosecution Agreement
:
Not stated.
:
0
:
Other Person
:
Foreign
:
Contract Procurement/Retention
:
11,014,000
:
Cash
:
Sales Agent/Consultant, Subsidiary Company
:
778,409
:
Jordan
:
Jordan
:
No