SEC v. ABB Ltd (D.D.C. 2010)
Case Details
- Case Name
- SEC v. ABB Ltd (D.D.C. 2010)
- Foreign Official
- Officials at Comisión Federal de Electricidad (“CFE”), a Mexican state-owned utility company; regional companies of the Iraqi Electricity Commission.
- Date of Conduct
-
1999 to 2013
- Nature of Business
- ABB Ltd. is a Swiss public corporation which provides power and automation products and services around the globe. Two of its subsidiaries, ABB Inc., a Delaware corporation based in Sugar Land, TX, and ABB Ltd. – Jordan, provide products and services to electrical utilities, including state-owned utilities.
- 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 from humanitarian goods suppliers. The kickback payments were masked by inflating the contract price, usually by 10% of the contract value. The government did not allege bribery of any individual foreign governmental officials.
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.
Additionally, from 1997 to 2004, ABB Inc. allegedly 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.
- Enforcement
- On September 29, 2010, the SEC filed a settled enforcement action against ABB Ltd., charging it with violations of the anti‑bribery, books and records, and internal control provisions of the FCPA. Without admitting or denying the allegations in the complaint, ABB Ltd. consented to the entry of a final judgment that 1) permanently enjoined the company from similar future violations, 2) ordered the company to pay $22,804,262 in disgorgement and prejudgment interest, 3) ordered the company to pay a $16,510,000 civil penalty, and 4) required the company to comply with certain undertakings regarding its FCPA compliance program. In related criminal proceedings, ABB Ltd. entered a deferred prosecution agreement with the DOJ under which it agreed to pay $30.4 million in criminal penalties. ABB Inc., also settled the charges filed against it by the DOJ by consenting to a judgment entered against it. As part of the order, ABB Inc. agreed to pay a criminal penalty of $17.1 million.
- Amount of the Value
- Approximately $2.7 million.
- Amount of Business Related to Payment
- At least $100 million.
- Intermediary
- Local subsidiaries.
- Citizenship of Parent Entity
- Switzerland
- Total Sanction
- $ 39,314,262
- Reporting Requirements
- No
- Total Combined Monetary Sanction
- $ 86,834,262
Defendants
ABB Ltd
- Citation
- SEC v. ABB Ltd, No. 10-cv-01648 (D.D.C. 2010).
- Other Statutory Provision
- None
- Disposition
- Complaint and Consent Order
- Defendant Jurisdictional Basis
- Issuer
- Defendant's Citizenship
- Switzerland
