Innospec Pleads Guilty to FCPA Charges & Defrauding UN; Admits Violating US Embargo Against Cuba
March 18th, 2010
March 18th, 2010
US Department of Justice
Innospec Inc., a Delaware corporation, pleaded guilty today to defrauding the United Nations (UN), to violating the Foreign Corrupt Practices Act (FCPA) and to violating the U.S. embargo against Cuba, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division; Director Adam Szubin of the Department of the Treasury’s Office of Foreign Assets Control (OFAC); Assistant Director in Charge Shawn Henry of the FBI’s Washington Field Office; and Robert Khuzami, Director of the U.S. Securities and Exchange Commission’s (SEC) Division of Enforcement
Innospec pleaded guilty before U.S. District Judge Ellen Segal Huvelle in the District of Columbia to a 12-count information charging wire fraud in connection with Innospec’s payment of kickbacks to the former Iraqi government under the UN Oil for Food Program (OFFP), as well as FCPA violations in connection with bribe payments it made to officials in the Iraqi Ministry of Oil. Innospec also admitted to selling chemicals to Cuban power plants, in violation of the U.S. embargo against Cuba. According to court documents, Innospec manufactures and sells specialty chemicals and is the world’s only manufacturer of the anti-knock compound tetraethyl lead, used in leaded gasoline.
As part of the plea agreement with the Department of Justice, Innospec agreed to pay a $14.1 million criminal fine and to retain an independent compliance monitor for a minimum of three years to oversee the implementation of a robust anti-corruption and export control compliance program and report periodically to the Department of Justice. Innospec also agreed to fully cooperate with the Department of Justice and other U.S. and foreign authorities in ongoing investigations of corrupt payments by Innospec employees and agents.
“Today’s case is a win for law-abiding companies trying to compete fairly in the marketplace. Fraud and corruption cannot be viewed simply as a cost of doing business,” said Assistant Attorney General Lanny A. Breuer of the Criminal Division. “By continuing to work with our U.S. and foreign law enforcement partners to hold companies accountable for their criminal conduct, we level the playing field for everyone.”
“Today’s settlement agreements are a product of close cooperation both within the U.S. government and with our counterparts in the United Kingdom, and demonstrate the importance of complying with national security and foreign policy sanctions,” said OFAC Director Adam J. Szubin.
“Today’s action makes clear that law enforcement authorities within the United States and across the globe are working together to aggressively monitor violators of anti-corruption laws,” said Robert Khuzami, Director of SEC’s Division of Enforcement.
“I’m proud of the amazing work done by FBI agents and analysts who, together with other agencies, fight this quiet corruption that attacks the underlying basis of the U.S. economy; that is fair business practices,” said Assistant Director in Charge Shawn Henry of the FBI’s Washington Field Office.
According to court documents, from 2000 to 2003, Innospec’s Swiss subsidiary, Alcor, was awarded five contracts valued at more than €40 million to sell tetraethyl lead to refineries run by the Iraqi Ministry of Oil under the OFFP. To obtain these contracts, Innospec admitted that Alcor paid or promised to pay at least $4 million in kickbacks to the former Iraqi government. Court documents detail how Alcor inflated the price of the contracts by approximately 10 percent to cover the cost of the kickbacks before submitting them to the UN for approval, and then falsely characterized the payments on the company’s books and records as “commissions” paid to Ousama Naaman, its agent in Iraq.
According to court documents, Innospec also admitted to paying and promising to pay more than $1.5 million in bribes, in the form of cash and travel, to officials of the Iraqi Ministry of Oil to secure sales of tetraethyl lead in Iraq from 2004 to 2008, as well as to paying $150,000 in 2006 to officials in the Iraqi Ministry of Oil to ensure that a competing product to tetraethyl lead was not approved for use in Iraqi refineries. Innospec admitted that the illicit payments were recorded as “commissions” on the basis of false invoices, which were incorporated into the company’s books and records.
Naaman, Innospec’s agent in Iraq, was indicted in the District of Columbia on Aug. 8, 2008, and later arrested in Frankfurt, Germany, on July 30, 2009, based on a U.S. arrest warrant. The United States is currently seeking Naaman’s extradition from Germany. The charges contained in the indictment are merely accusations and the defendant is presumed innocent until proven guilty beyond a reasonable doubt.
According to the plea agreement, Innospec also admitted that a subsidiary sold nearly $20 million in oil soluble 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. In addition, Innospec acknowledged in court documents that it paid approximately $2.9 million in bribes to officials of the Indonesian government to secure sales.
In a related matter, Innospec today settled a civil complaint filed by the SEC, charging Innospec with violating the FCPA’s anti-bribery, internal controls, and books and records provisions in connection with the misconduct described in court documents. Innospec will disgorge $11.2 million in profits to the SEC. Also today, Innospec agreed to pay $2.2 million to resolve outstanding matters with the OFAC related to the U.S. embargo against Cuba.
In another related matter brought by the United Kingdom’s Serious Fraud Office (SFO), Innospec’s British subsidiary, Innospec Ltd., pleaded guilty today in the Southwark Crown Court in London in connection with the corrupt payments to Indonesian officials. In connection with those charges, Innospec Ltd will pay a criminal penalty of $12.7 million. The judge in this case has reserved his sentencing remarks to a date to be scheduled next week. The SFO’s case was developed as a result of a referral from the Department of Justice in October 2007.
This case is being prosecuted by Trial Attorney Kathleen M Hamann of the Criminal Division’s Fraud Section. The case is being investigated by the FBI Washington Field Office’s dedicated FCPA squad.
The Department of Justice, the SEC, the OFAC and the SFO worked together to reach this $40.2 million global settlement. The department acknowledges and expresses its appreciation for the significant assistance provided by the staff of the SEC’s Division of Enforcement, as well as the Enforcement Division at OFAC and the U.S. Department of Commerce, during the course of this investigation. The Department of Justice also acknowledges the extensive coordination and cooperation with the SFO.