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, though in this case sometimes as high as 15%.
From approximately 2000 through 2003, Fiat and CNH Global allegedly violated the books-and-records and internal controls provisions of the FCPA when one of Fiat’s subsidiaries and two of CNH Global’s subsidiaries provided the Iraqi government with approximately $4.3 million in kickback payments, improperly recorded as commissions and service fees. One of Fiat’s subsidiaries, Iveco S.p.A (“Iveco”), allegedly used its Egypt office to enter into four direct contracts with Iraqi Ministries in which $1,803,880 in kickbacks were made on the sale of commercial vehicles and parts. Iveco Egypt increased its agent’s commissions from 5% to between 15 and 20% of the total contract price, which the agent allegedly funneled to the Iraqi government as kickbacks. Iveco and the agent allegedly inflated the U.N. contracts by 10 to 15% to account for these payments. In November 2000, the agent became Iveco’s distributor and, with Iveco’s knowledge, allegedly facilitated $1,364,080 in “after sales service fees” on twelve additional contracts.
One of CNH Global’s subsidiaries, Case France (now known as CNH France S.A.), allegedly engaged in three direct transactions with Iraqi ministries in which $187,720 in kickbacks were made on the sale of construction equipment in the same manner.
Another CNH Global subsidiary, New Holland (now known as CNH Italia S.p.A.), allegedly engaged in two direct transactions with Iraqi ministries in which $447,116 in kickbacks were made on the sale of tractors. The purported “after sales service fees” were recorded as cost of goods sold in New Holland’s books and records. New Holland subsequently made its dealer a distributor, which allowed the dealer to purchase New Holland goods for the dealer’s own account. The dealer then sold New Holland products to the Iraqi government under the dealer’s secretly inflated U.N. contracts. With New Holland’s knowledge, the dealer allegedly facilitated kickback payments totaling $576,861 to Iraq on three U.N. contracts and an additional kickback of $312,198 on a fourth contract was authorized but was never paid.
The government did not allege bribery of any individual foreign governmental officials.
