A&O Shearman FCPA Digest | In re Armor Holdings Inc. (2011)

Source Documents

Nature of Business
Manufacture and sales of military, law enforcement, and personal safety equipment by Armor Holdings Inc. (“Armor Holdings”), a Delaware corporation. On July 31, 2007, after the conduct described in the complaint occurred, Armor Holdings was acquired by BAE Systems Inc., an indirect wholly-owned U.S. subsidiary of Britain’s BAE Systems PLC.

Influence to be Obtained
From September 2001 through 2006, certain agents of Armor Holdings made corrupt payments to an U.N. procurement official to induce that official to provide non-public, inside information to an Armor Holdings subsidiary and to cause the U.N. to award body armor contracts to that subsidiary. Armor Holdings made more than $200,000 in commissions payments to an independent sales agent, a portion of which was forwarded to the U.N. procurement official. Armor Holdings employees falsely recorded the nature and purpose of these improper payments in Armor Holdings’ books and records.

An Armor Holdings subsidiary also allegedly employed a separate accounting practice that disguised additional commissions paid to third-party intermediaries who brokered the sale of goods to foreign governments. Even after being warned by internal and external accountants that this practice violated U.S. Generally Accepted Accounting Principles, Armor Holdings’ subsidiary continued the improper accounting practice. As a result, approximately $4.4 million in commissions was not properly disclosed in the books and records of the company.

Enforcement
On July 13, 2011, Armor Holdings entered into a non-prosecution agreement with the DOJ, under which it agreed to pay a monetary penalty of $10,290,000.

Separately, in an agreement with the SEC, Armor Holdings consented to entry of a permanent injunction against further violations and agreed to pay $1,552,306 in disgorgement, $458,438 in prejudgment interest, and a civil money penalty of $3,680,000.