SEC v. General Electric Co., Ionics, Inc., and Amersham PLC (D.D.C. 2010)
Case Details
- Case Name
- SEC v. General Electric Co., Ionics, Inc., and Amersham PLC (D.D.C. 2010)
- Foreign Official
- Iraqi Health Ministry and Iraqi Oil Ministry officials.
- Date of Conduct
-
2000 to 2003
- Nature of Business
- General Electric (“GE”) is an international company participating in a wide variety of markets, including the generation, transmission, and distribution of electricity, lighting, industrial automation, medical imaging equipment, motors, railway locomotives, aircraft jet engines, and aviation services. GE is headquartered in Fairfield, Connecticut.
Amersham plc, a company in GE’s Technology Infrastructure segment, is based in the United Kingdom, and its American Depository Receipts are listed on the New York Stock Exchange. Ionics, Inc., a wholly owned subsidiary of GE, is based in Massachusetts and was a publicly-listed company in the United States.
- 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,” (“ASSF”) from humanitarian goods suppliers. The kickback payments were masked by inflating the contract price, usually by 10% of the contract value.
According to the SEC’s complaint, four GE subsidiaries, Marquette, OEC‑Medical, Nycomed, and Ionics Italba, only two of which, Marquette and OEC‑Medical were GE subsidiaries during the relevant period, engaged in Oil‑for‑Food transactions involving ASSF kickbacks. These subsidiaries entered into a total of eighteen contracts in which ASSF kickbacks were either made or authorized. These subsidiaries inaccurately described the in‑kind and cash ASSF payments in their books and records and failed to maintain adequate internal controls to detect or prevent the illicit payments. According to the SEC’s complaint, the kickback scheme occurred from approximately 2000 to 2003.
The government did not allege bribery of any individual foreign governmental officials.
The SEC alleges that Marquette, based in Germany, either paid or agreed to pay illegal kickbacks worth $1.5 million in the form of computer equipment, medical supplies, and services to the Iraqi Ministry of Health. Marquette used an Iraqi third‑party agent to obtain three contracts worth $8.8 million to cover the cost of the illegal kickbacks, Marquette increased the Iraqi agent’s commission by 10%. The agent used this 10% to cover the cost of the equipment and services he kicked back to the Iraqi Ministry of Health. The U.N. contract prices were inflated by a corresponding 10% amount.
OEC‑Medical, based in Switzerland, allegedly paid illegal kickbacks worth $870,000 in the form of computer equipment, medical supplies, and services to the Iraqi Ministry of Health on one contract worth $2.1 million. OEC‑Medical also increased the agent’s commission on the contract by approximately 10% to conceal the kickback, OEC‑Medical and the agent entered into a fictitious “service provider agreement” purportedly identifying services the agent would perform to justify his increased commission.
Nycomed, based in Norway, allegedly paid approximately $750,000 in kickbacks on nine contracts with the Iraqi Ministry of Health worth approximately $5 million in profits. A Nycomed salesperson allegedly explicitly authorized the payments and increased an agent’s commission and the U.N. contract prices by 10% to conceal the kickback. GE acquired Nycomed’s parent company, Amersham plc, based in the United Kingdom, in 2004, after the conduct at issue.
Ionics Italba, based in Italy, allegedly paid $795,000 in kickbacks and earned $2.3 million in profits on five contracts to sell water treatment equipment to the Iraqi Oil Ministry. Four of the five contracts were negotiated with side letters documenting the Ionics Italba’s commitment to make kickback payments. These letters were concealed from U.N. inspectors. Ionics Italba artificially inflated the prices charged to the U.N. by 10% to cover the cost of the kickback payments. GE acquired Ionics Italba’s parent company, Ionics, Inc., based in Massachusetts, in 2005, after the conduct at issue.
- Enforcement
- On July 30, 2010, without admitting or denying the allegations in the SEC’s complaint, GE, Ionics, Inc., and Amersham PLC consented to entry of a final judgment enjoining them from future books and records and internal controls FCPA violations and ordering GE to disgorge $18,397,949 in profits, plus $4,080,665 in prejudgment interest, and pay a civil penalty of $1,000,000. The SEC took GE’s prompt remediation and cooperation into account when determining its penalty.
- Amount of the Value
- $3.6 million
- Amount of Business Related to Payment
- $18.4 million.
- Citizenship of Parent Entity
- United States
- Total Sanction
- $ 23,478,614
- Reporting Requirements
- No
- Total Combined Monetary Sanction
- $ 23,478,614
Defendants
General Electric Co.
- Citation
- SEC v. Gen. Elec. Co. et al., No. 10-cv-01258 (D.D.C. 2010).
- Other Statutory Provision
- None
- Disposition
- Complaint and Consent Order
- Defendant Jurisdictional Basis
- Issuer
- Defendant's Citizenship
- United States
Ionics, Inc.
- Citation
- SEC v. Gen. Elec. Co. et al., No. 10-cv-01258 (D.D.C. 2010).
- Other Statutory Provision
- None
- Disposition
- Complaint and Consent Order
- Defendant Jurisdictional Basis
- Issuer
- Defendant's Citizenship
- United States
Amersham PLC
- Citation
- SEC v. Gen. Elec. Co. et al., No. 10-cv-01258 (D.D.C. 2010).
- Other Statutory Provision
- None
- Disposition
- Complaint and Consent Order
- Defendant Jurisdictional Basis
- Issuer
- Defendant's Citizenship
- United Kingdom
