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SEC v. AGCO Corp.

 
:
AGCO - AGCO Corp.
:
SEC Civil
:
September 30, 2009
:
SEC v. AGCO Corp.
:
SEC v. AGCO Corp., No. 1:09-cv-1865-RMU (D.D.C. 2009)
:
In comparison to other matters, the SEC provided a detailed description of the company's internal control failures, particularly with respect to the lack of oversight by finance personnel of payments to the Jordanian agent and the lack of attention by the company's legal department to due diligence and contractual irregularities.
:
Agricultural/Construction Equipment
:
Iraq
:
2000; 2001; 2002; 2003
:
Unspecified Iraqi ministries
:
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.
AGCO settled this action with the SEC without admitting or denying the following facts alleged in the SEC's complaint. According to the SEC, from 2000 through 2003 AGCO's subsidiaries made approximately $5.9 million in kickback payments in connection with their sales under the U.N. Oil-for-Food Program. AGCO Ltd., AGCO's U.K. subsidiary, marketed and negotiated sales through the U.N. Program via two other European subsidiaries, AGCO S.A., located in France, and AGCO Danmark A/S, located in Denmark. In connection with winning 16 sales contracts with the Iraqi Ministry of Agriculture for the sale of farm machinery and spare parts, an AGCO Ltd. business manager and his supervisor allegedly acquiesced to demands from Iraqi ministries for kickback payments. These payments of approximately 10% of the contracts' values were made through a third-party agent based in Jordan. According to the SEC's complaint, AGCO Ltd.'s marketing staff created a fictional account in its books from which AGCO made these payments with virtually no review or verification from AGCO Ltd.'s finance department; AGCO's legal department failed to perform due diligence on or training of AGCO's Jordanian agent.

In a complaint filed on September 30, 2009, the SEC charged AGCO with violating the books and records and internal controls provisions of the FCPA. As seen in other U.N. Oil-for-Food related prosecutions, the SEC did not allege violation of FCPA bribery provisions.

On July 31, 2009 AGCO consented to the entry of a final judgment enjoining it from future similar violations and mandating that it disgorge $13,907,393 plus $2 million in pre-judgment interest, and pay a civil penalty of $2.4 million.

AGCO has also entered a deferred-prosecution agreement with the DOJ to resolve related criminal charges and settled other Oil-for-Food related charges brought by the Danish State Prosecutor for Serious Economic Crimes related to contracts executed by AGCO's Danish subsidiary.
:
Books and records (Issuer), Internal controls (Issuer)
:
Civil penalty, Civil Settlement, Disgorgement, Injunction/Cease and desist, Prejudgment Interest
:
$13,907,393 in disgorgement, $2 million in prejudgment interest, and $2.4 million in civil penalty.
:
18,307,393
:
0
:
Issuer
:
U.S.
:
Contract Procurement/Retention
:
Not stated.
:
Wire/check
:
Sales Agent/Consultant, Subsidiary Company
:
5,900,000
:
Iraq
:
Jordan
:
No
:
Brazil, Denmark, France, United Kingdom