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SEC v. ABB Ltd.

 
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ABB - ABB Ltd.
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SEC Civil
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September 29, 2010
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SEC v. ABB Ltd.
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SEC v. ABB Ltd., No. 10-cv-01648 (D.D.C. 2010)
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Iraq, Mexico
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1997; 1998; 1999; 2000; 2001; 2002; 2003; 2004
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Officials at a Mexican state-owned utility company (Comisión Federal de Electricidad (“CFE”)); regional companies of the Iraqi Electricity Commission (General Company for Electricity Energy Production; the Baghdad Mayoralty; and State Company Baghdad Electricity Distribution).
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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 from humanitarian goods suppliers.

The kickback payments were masked by inflating the contract price, usually by 10% of the contract value. Six subsidiaries of ABB Ltd. allegedly paid more than $800,000 in kickbacks to the former Iraqi government to obtain 27 contracts for the sale of goods under the U.N. Oil-for-Food Program, and promised to pay additional kickbacks of $239,501 on three other contracts. The total revenues on the contracts were approximately $13,577,727 and profits were $3,801,367. ABB Ltd. – Jordan acted as a conduit for other ABB subsidiaries by making the kickback payments on ABB Ltd. – Jordan contracts, as well as on contracts awarded to other ABB subsidiaries, in the form of bank guarantees and cash payments. ABB Ltd. – Jordan allegedly concealed these kickbacks on its books by mischaracterizing them as legitimate after sales service fees, consultation costs, or commissions.
The government did not allege bribery of any individual foreign governmental officials in connection with the Oil-for-Food Program. However, the SEC did allege that, from 1997 to 2004, ABB Inc. paid bribes that totaled approximately $1.9 million to government officials and others in Mexico to obtain and retain business with two government owned electrical utilities, CFE and Luz y Fuerza del Centro. The bribes were allegedly funneled through phony invoices for local services submitted by several intermediary companies. ABB Ltd. failed to conduct due diligence on the use or payment terms used with these companies, or to conduct any review of the payments. As a result of this alleged scheme, ABB Inc. was awarded contracts that generated over $90 million in revenues and $13 million in profits. The illicit payments were recorded on ABB Ltd.’s books as payments for commissions and services on the government utilities projects.
The complaint also alleges that ABB Ltd. failed to devise and maintain an effective system of internal controls to prevent or detect either of these anti-bribery and books and records violations.
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Anti-bribery (Issuer), Books and records (Issuer), Internal controls (Issuer)
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Civil penalty, Civil Settlement, Disgorgement
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The company was ordered to pay $22,804,262 in disgorgement and prejudgment interest and a $16,510,000 civil penalty.
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39,314,262
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0
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Issuer
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Foreign
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Contract Procurement/Retention
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103,577,727
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Wire/check
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Sales Agent/Consultant, Subsidiary Company
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2,939,501
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Iraq, Mexico
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No