A&O Shearman FCPA Digest | In re Akzo Nobel, N.V. (2007)

Source Documents

Nature of Business
Sales of humanitarian goods. Akzo Nobel N.V. (“Akzo Nobel”), a Netherlands-based pharmaceutical company, manufactures human and animal health care products, decorative paints, and other chemicals.

Influence to be Obtained
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.

Between 2000 and 2002, two Akzo Nobel subsidiaries authorized and made approximately $280,000 in kickback payments to the Iraqi government in connection with their sales of humanitarian goods. The kickback payments were improperly recorded in the company’s books and records as commission payments in violation of the books-and-records provisions of the FCPA.

The government did not allege bribery of any individual foreign governmental officials.

Enforcement
On December 20, 2007, Akzo Nobel entered into a non-prosecution agreement with the DOJ, which required the company to reach a resolution with the Dutch Public Prosecutor under which it would pay a criminal fine of no less than €381,602 in the Netherlands. According to the agreement, if Akzo Nobel fails to reach a resolution with the Dutch Public Prosecutor within 180 days, Akzo Nobel will pay $800,000 to the U.S. Treasury. Further, if the criminal fine paid in the Netherlands is less than €381,602, then Akzo Nobel shall pay the U.S. Treasury the difference between the amount of the fine paid and U.S. $800,000. In a related SEC litigation, the company consented to the entry of a final judgment permanently enjoining it from future violations and ordering disgorgement of $1,647,363 in profits, plus $584,150 in prejudgment interest, and a civil penalty of $750,000.