A&O Shearman FCPA Digest | SEC v. Armor Holdings, Inc. (2012)

Source Documents

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

Influence to be Obtained
According to the SEC’s complaint, between 2001 and 2006, certain agents of Armor Holdings participated in a bribery scheme in which corrupt payments were authorized to be made to an official at the U.N. for the purpose of obtaining and retaining U.N. contracts for the supply of body armor to be used in U.N. peacekeeping missions. The agents allegedly caused API to enter into a sham consulting agreement with a third‑party intermediary for purportedly legitimate services in connection with the sale of goods to the U.N. The complaint alleges that the intermediary charged illegitimate or inflated commissions for its purported consulting services, and that Armor Holdings agents knew or consciously disregarded that some portion of these commissions would be offered to a U.N. official.

AHP also allegedly employed a separate accounting practice that disguised in the books and records of Armor Holdings 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. GAAP, the subsidiary continued the improper accounting practice. As a result, approximately $4,371,278 in commissions was not properly disclosed in the books and records of the company.

Enforcement
Without admitting or denying any of the SEC’s allegations, 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. Separately, Armor Holdings entered into a non‑prosecution agreement with the DOJ, and agreed to pay a $10.29 million fine.