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United States v. AB Volvo

 
:
AB Volvo - AB Volvo
:
DOJ Criminal
:
March 18, 2008
:
United States v. AB Volvo
:
Matter resolved through deferred-prosecution agreement (March 2008).
:
Although AB Volvo had delisted from American exchanges by the time of this action, it had been an "issuer" at the time of the payments to the Iraqi government. Thus, the DOJ's Statement of Facts recites violations of the FCPA's books and records provisions applicable to issuers.

In addition, although the government brought criminal charges only against AB Volvo's subsidiaries and did not allege any direct involvement or knowledge by the parent corporation, AB Volvo entered into a DPA and accepted responsibility for its subsidiaries' actions.
:
Automotive
:
Iraq
:
2000; 2001; 2002; 2003
:
Iraqi government, including Iraqi Ministry of Housing & Construction; Iraqi Ministry of Transport & Communication General Establishment of Civil Aviation; Iraqi Ministry of Irrigation; Ministry of Higher Education and Scientific Research; and Economics and Finance Department of the Ministry of Oil.

Iraqi state-owned companies: General Automobile and Machinery Company (Iraqi Ministry of Trade); State Company of Baghdad Electricity Distribution (Commission of Electricity); and State Company of Iraqi Airways (Ministry of Transport and Communication).
:
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.
From 2000 to 2003, two wholly-owned subsidiaries of AB Volvo, Volvo Construction Equipment (formerly Volvo Construction Equipment International, AB or "VCEI") and Renault Trucks SAS, paid millions of dollars in kickbacks to the Iraqi government. These payments were mischaracterized in the subsidiaries' books and records, which were incorporated into AB Volvo's books and records.

VCEI was an international seller of heavy commercial construction equipment. Between December 2000 and January 2003, VCEI paid approximately $1.3 million in kickbacks to the Iraqi government. To do so, VCEI hired two companies, Company X and Company Y, to act as distributors and funnel kickbacks to the Iraqi government. VCEI, Company X, and Company Y included the cost of these kickbacks in various contract prices submitted to the U.N. for approval. As a result, the Iraqi government awarded VCEI and its distributors contracts worth approximately $13.8 million to supply construction vehicles to the Iraqi government. To conceal these kickbacks, VCEI labeled them as "commission" payments in its books and records. VCEI's books and records were incorporated into AB Volvo's books and records.

Renault Trucks SAS was an international manufacturer of trucks. From November 2000 through April 2003, Renault Trucks SAS entered into at least 17 contracts with various Iraqi ministries. The price of each contract was inflated by 10% before it was sent to the U.N. for review; the U.N. approved the contracts and Renault Trucks SAS was issued letters of credit for the contract value which included the 10% kickback. In performing the contracts, Renault Trucks SAS used a Swiss bodybuilder company to tailor the requested vehicles to the Iraqi ministry's specifications. Renault provided extra payments to the bodybuilder company, which it passed onto the Iraqi government to ensure that Renault Trucks SAS would be awarded additional contracts. Overall, the Iraqi government received $4.8 million in kickbacks from Renault Trucks SAS. In return for these kickbacks, Renault Trucks SAS obtained contracts to supply vehicles and other equipment approximately worth €61 million (approximately $95,641,900).
As in the majority of Oil for Food cases, the government did not allege any improper payments to any individual foreign officials.

In March 2008, AB Volvo and the DOJ agreed to a deferred prosecution agreement. Pursuant to the agreement, AB Volvo agreed to pay a fine totaling $7 million for FCPA violations committed by VCEI and Renault Trucks SAS.

In March 2009, three unnamed executives at Volvo Construction Equipment were criminally charged by Swedish prosecutors for their involvment in the bribery scandal. They could face jail sentences if convicted.

In June 2011, the court granted the DOJ's motion to dismiss the information against AB Volvo because it had complied with the terms of the DPA relating to its subsidiaries' actions.
:
Deferred-prosecution Agreement
:
Monetary penalty of $7,000,000 to be paid by AB Volvo on behalf of itself and its subsidiaries, Volvo Construction Equipment AB and Renault Trucks SAS.
:
7,000,000
:
0
:
Issuer
:
U.S.
:
Contract Procurement/Retention
:
109,441,900
:
Wire/check
:
Sales Agent/Consultant, Subsidiary Company
:
6,100,000
:
Iraq
:
Iraq
:
No
:
Sweden