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SEC v. General Electric Co., Ionics, Inc., and Amersham plc

 
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General Electric Co. - Amersham plc
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SEC Civil
:
July 27, 2010
:
SEC v. General Electric Co., Ionics, Inc., and Amersham plc
:
SEC v. General Electric Co., No. 1:10-cv-01258 (D.D.C. 2010)
:
According to the SEC's complaint, four GE subsidiaries engaged in Oil for Food transactions involving kickbacks: Marquette, OEC-Medical, Nycomed, and Ionic Italba. Of the four subsidiaries only two, Marquette and OEC-Medical were GE subsidiaries during the relevant time period. GE acquired Nycomed’s parent company, Amersham plc, based in the United Kingdom, in 2004, after the conduct at issue. The SEC’s jurisdictional grounds for bringing enforcement against Amersham plc was based on its previous listing of American Depositary Receipts on the New York Stock Exchange.
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Iraq
:
2000; 2001; 2002; 2003
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Iraqi Ministry of Health and Iraqi Ministry of Oil
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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,” (“ASSF”) from humanitarian goods suppliers.  The kickback payments were masked by inflating the contract price, usually by 10% of the contract value.
 
The SEC’s Complaint contained general allegations of kickbacks paid to the Iraqi Ministry of Oil and Ministry of Health, but the SEC did not allege bribery to any individual government officials, nor did it allege a violation of the FCPA’s anti-bribery provisions. Instead, the SEC’s action was based on GE and its affiliates’ acquiescence to a scheme devised by the Iraqi ministries to defraud the UN Oil-For-Food Program by circumventing official procedures and providing false information to UN officials. The alleged conduct by at least two of GE's subsidiaries (including named defendants Amersham and Ionics) took place before they were acquired by GE. The SEC alleged 1) books-and-records violations, because this false information was allegedly documented on the relevant entities’ books and records; and 2) failure to implement a system of internal controls, because the entities allegedly lacked sufficient internal controls to detect the fraudulent actions.
 
According to the SEC's complaint, Nycomed, based in Norway, a subsidiary of Amersham, a U.K. company, allegedly paid approximately $750,000 in kickbacks on nine contracts with the Iraqi Ministry of Health worth approximately $5 million in profits.  A Nycomed salesperson allegedly explicitly authorized the payments and increased an agent’s commission and the U.N. contract prices by 10% to conceal the kickback.  GE acquired Amersham in 2004, after the conduct at issue.  The SEC’s jurisdictional grounds for bringing enforcement against Amersham plc was based on the company listing American Depository Receipts on the New York Stock Exchange. 
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Books and records (Issuer), Internal controls (Issuer)
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Injunction/Cease and desist
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As a result of Amersham's conduct and that of three other company subsidiaries, GE was ordered to disgorge $18,397,949 plus pay pre-judgment interest of $4,080,665 and a civil penalty of $1,000,000, totalling $23,478,614.
:
Not stated.
:
0
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Issuer
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U.S.
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Contract Procurement/Retention, Customs Clearance
:
5,000,000
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Cash
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Sales Agent/Consultant
:
750,000
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Iraq
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Yes