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U.S. v. Innospec, Inc.

 
:
Innospec, Inc.
:
DOJ Criminal
:
March 18, 2010
:
U.S. v. Innospec, Inc.
:
U.S. v. Innospec, Inc., 10-cr-00061 (D.D.C. 2010)
:
This case is the first corruption-related settlement coordinated between the SEC, DOJ, and the United Kingdom's Serious Fraud Office ("SFO"). The DOJ, SEC, and the SFO have agreed to the appointment of a joint monitor.
:
Chemicals
:
Indonesia, Iraq
:
2000; 2001; 2002; 2003; 2004; 2005; 2006; 2007; 2008
:
Iraqi government officials (Ministry of Oil)
:
On March 18, 2010, the DOJ announced that Innospec, Inc., pleaded guilty to a 12-count information charging FCPA violations, wire fraud, and conspiracy. Innospec is a specialty chemical company incorporated in Delaware with principal offices in the United States and the United Kingdom. From 2000 to 2008 Innospec paid, or promised to pay, more than $5,800,00 in kickbacks to the Iraqi government and bribes to Iraqi officials to secure contracts to sell tetraethyl lead (TEL) to the Iraqi Ministry of Oil. Innospec's Swiss subsidiary, Alcor, obtained contracts in the United Nations Oil for Food Program by paying kickbacks to Iraq and Iraqi government officials through an Iraqi agent, Ousama Naaman. Naaman was charged with FCPA violations, wire fraud, and conspiracy in connection with payments on behalf of Innospec and its subsidiaries in 2008. The DOJ is seeking Naaman's extradition from Germany. Innospec admits that its former CEO and a number of senior executives were aware of and approved the kickback payments.

After the termination of the Oil for Food Program, Innospec continued to use Naaman to pay bribes to Iraqi officials, including officials at the Iraqi Ministry of Oil, to secure TEL business from Iraq. Naaman paid a bribe to officials at the Iraqi Ministry of Oil to ensure the failure of a field test of a competitor's product. Innospec also paid for lavish trips for Iraqi officials, including a honeymoon in Thailand for one and "pocket money" for others during the trips.

Innospec concealed improper payments as "remuneration for after sales services," "commissions," and "sales promotion expenses."

The DOJ's sentencing memorandum notes that Innospec initially denied culpability but has been cooperating with the DOJ since early 2008, including conducting an extensive internal investigation that resulted in the identification of additional improper payments to officials in Indonesia.
Innospec admitted that a subsidiary sold $20 million in fuel additives from 2001 to 2004 to state-owned Cuban power plants without a license from OFAC, in violation of the Trading With the Enemy Act.

Innospec's British subsidiary pleaded guilty in a matter brought by the SFO in connection with corrupt payments to Indonesian officials.

Innospec will pay $40.2 million as part of a global settlement with the DOJ, the SEC, the SFO, and OFAC. Innospec agreed to pay a criminal fine of $14.1 million to the DOJ, disgorgement of $11.2 million to the SEC, a criminal fine of $12.7 million to the SFO and $2.2 million to OFAC. Innospec also agreed to injunctive relief and certain undertakings regarding its FCPA compliance program, including an independent monitor for three years.
:
Anti-bribery (Issuer), Conspiracy - Anti-Bribery, Conspiracy - Books & Records, Internal controls (Issuer)
:
Conspiracy - Wire Fraud, Wire Fraud
:
Compliance Monitor, Fine, Injunction/Cease and desist, Plea, Probation
:
A criminal fine of $14,100,000 to the DOJ and a special assessment of $4,800 to the DOJ, disgorgement of $11,200,000 to the SEC, a criminal fine of $12,700,000 to the SFO, and $2,200,000 to the Office of Foreign Asset Control. Innospec also agreed to injunctive relief and certain undertakings regarding its FCPA compliance program, including retaining an independent monitor for three years.
:
40,200,000
:
0
:
FCPA (Antibribery Provisions) Total Offense Level: 38 (Base Offense of 12 plus More than One Bribe of 2 plus High Level Official of 4 plus Total Value/Profit between $7-20 million of 20)

FCPA (Books and Records Provisions) Total Offense Level: 33 (Base Offense of 7 plus Total Value/Profit Between $20-50 million of 24 plus Significant Conduct Outside the United States/Sophisticated Means of 2)

Wire Fraud Total Offense Level: 30 (Base Offense of 6 plus Total Value/Profit Between $20-50 million of 22 plus Significant Conduct Outside the United States/Sophisticated Means of 2)

Combined Offense Level: 40

Total Culpability Score: 7 (Base Score of 5 plus Involvement of High-Level Personnel of 3 minus Acceptance of Responsibility of 1)
:
Issuer
:
U.S.
:
Contract Procurement/Retention
:
50,000,000
:
Cash, Entertainment, Gifts, Meals, Travel, Wire/check
:
Sales Agent/Consultant
:
5,800,000
:
Switzerland
:
No
:
United Kingdom