A&O Shearman FCPA Digest | SEC v. Akzo Nobel N.V. (D.D.C. 2007)

Source Documents

Nature of Business
Akzo Nobel N.V., 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.

The SEC’s complaint alleges that, between 2000 and 2002, two Akzo Nobel subsidiaries authorized and made $279,491 in kickback payments to the Iraqi government in connection with their sales of humanitarian goods to Iraq under the U.N. Oil‑for‑Food Program. The payments were in the form of kickbacks, characterized as “after‑sales services fees,” and were usually 10% of the contract price. The kickback payments were masked by inflating the contract price and the commissions paid to certain agents and were improperly recorded in the company’s books and records as commission payments.

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

Enforcement
Without admitting or denying the allegations in the SEC’s complaint, Akzo Nobel consented to the entry of a final judgment permanently enjoining it from future violations and ordering disgorgement and prejudgment interest of $2,231,513, as well as a civil penalty of $750,000.

The company also 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 or pays less than €381,602, it will pay the difference between the amount paid to the Dutch authorities and $800,000 to the U.S. Treasury.