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SEC v. Fiat S.p.A. and CNH Global N.V.

 
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Fiat - CNH Global N.V.
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SEC Civil
:
December 22, 2008
:
SEC v. Fiat S.p.A. and CNH Global N.V.
:
SEC v. Fiat S.p.A. and CNH Global N.V., No. 1:08-cv-02211 (D.D.C. 2008)
:
In this Oil-for-Food case, the SEC charged Fiat, which had delisted from the NYSE after the events at issue, with, among other things, violations of the FCPA's books and records provision based on Fiat's former status as an issuer. This case also provided the SEC with a rare opportunity to charge a majority-owned subsidiary of Fiat, CNH Global, which itself was an issuer during the relevant period and continued to be listed at the time of the proceedings.
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Agricultural/Construction Equipment
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Iraq
:
2000; 2001; 2002; 2003
:
Iraqi government, including Ministry of Agriculture and Ministry of Oil
:
In April 1995, the U.N. adopted Security Council Resolution 986, which permitted the government of Iraq to sell 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"). 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, though in this case sometimes as high as 15%.

Fiat S.p.A. (“Fiat†�) and CNH Global N.V. (“CNH Global†�) settled this action with the SEC without admitting or denying the following facts alleged in the SEC's complaint. From approximately 2000 through 2003, Fiat and CNH Global, which is 90% owned by Fiat, allegedly violated the books and records and internal controls provisions of the FCPA when one of Fiat’s subsidiaries and two of CNH Global’s subsidiaries allegedly provided the Iraqi government with approximately $4,300,000 in kickback payments.

One of Fiat’s subsidiaries, Iveco S.p.A. (“Iveco†�), allegedly used its Egypt office to enter into four direct contracts with Iraqi ministries in which $1,803,880 in kickbacks were made on the sale of commercial vehicles and parts. Iveco Egypt allegedly increased its agent’s commissions from five percent to between fifteen and twenty percent of the total U.N. contract price, which the agent funneled to Iraq as kickbacks. Iveco and the agent allegedly secretly inflated the U.N. contracts by ten to fifteen percent. In November 2000, the agent allegedly became Iveco’s distributor and, with Iveco’s knowledge, facilitated $1,364,080 in “after sales service fees†� on twelve additional contracts.

One of CNH Global’s subsidiaries, Case France (now known as CNH France S.A.), allegedly engaged in three direct transactions with Iraqi ministries in which $187,720 in kickbacks were made on the sale of construction equipment. Case France and its agent allegedly secretly inflated U.N. contracts by approximately ten percent and then inflated its commission payments to the distributor, who in turn forwarded the excess funds to Iraq as kickbacks. Case France allegedly did not record these kickbacks on its books and records.

Another CNH Global subsidiary, New Holland (now known as CNH Italia S.p.A.), allegedly engaged in two direct transactions with Iraqi ministries in which $447,116 in kickbacks were made on the sale of tractors. New Holland allegedly secretly inflated U.N. contracts by approximately ten percent and recorded the “after sales service fees†� as cost of good sold in its books and records. New Holland allegedly subsequently made its dealer a distributor, which allowed the dealer to purchase New Holland goods for the dealer’s own account. The dealer then allegedly sold New Holland products to Iraq under the dealer’s secretly inflated U.N. contracts. With New Holland’s knowledge, the dealer allegedly facilitated “after sales service fees†� payments totaling $576,861 to Iraq on three U.N. contracts. An additional “after sales service fee†� of $312,198 on a fourth contract was allegedly authorized, but never received by Iraq.

As in the majority of Oil for Food cases, the government did not allege any improper payments to any individual foreign officials.

Fiat and CNH Global consented to the entry of a final judgment enjoining them from future violations of the books and records and internal controls provisions of the FCPA and ordering the payment of $10,809,142 in civil penalties, disgorgement, and pre-judgment interest.
:
Books and records (Issuer), Internal controls (Issuer)
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Civil penalty, Disgorgement, Injunction/Cease and desist, Prejudgment Interest
:
Disgorgement of $5,309,632 in profits, pre-judgment interest of $1,899,510, and a civil penalty of $3,600,000.
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10,809,142
:
0
:
Issuer
:
Foreign
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Contract Procurement/Retention
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59,000,000
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Wire/check
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Sales Agent/Consultant
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4,300,000
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No