A&O Shearman FCPA Digest | SEC v. Ingersoll Rand Co. Ltd. (D.D.C. 2007)

Source Documents

Nature of Business
Ingersoll-Rand Co. Ltd. (“Ingersoll-Rand”), a Bermuda corporation, engaged in procurement of humanitarian contracts to sell industrial equipment to Iraqi government entities under the United Nations Oil-for-Food Program. Ingersoll-Rand provides industrial equipment and services to transport food and perishables and secure properties, and its common stock is registered with the SEC pursuant to Section 12(b) of the Exchange Act.

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 complaint alleges that, from October 2000 to August 2003, four wholly‑owned subsidiaries of Ingersoll‑Rand (ABG Allgemeine Baumaschinen‑Gesellschaft mbH; Ingersoll‑Rand Italiana, SpA; Thermo King Ireland Limited; and Ingersoll‑Rand Benelux, N.V.) entered into twelve contracts and either made, or agreed to make, “after sales service fees” payments to secure or obtain contracts to sell industrial equipment to the Iraqi government and were improperly recorded in the company’s books and records. The Italian subsidiary, Ingersoll‑Rand Italiana, also allegedly financed leisure travel and entertainment for Iraqi government officials.

Enforcement
Without admitting or denying the allegations in the Commission’s complaint, Ingersoll‑Rand consented to the entry of a final judgment on October 31, 2007. Ingersoll‑Rand agreed to a cease-and-desist order and to pay disgorgement of profits of $1,710,034 plus prejudgment interest of $560,953, and a further civil penalty of $1,950,000, and to retain a compliance monitor. Ingersoll‑Rand also entered into a three‑year deferred prosecution agreement with the DOJ, agreeing to pay a monetary penalty of $2.5 million, accept responsibility for the alleged misconduct, continue to cooperate with the DOJ, adopt an FCPA compliance program as well as a set of internal controls designed to prevent future violations, and retain an independent compliance expert for a period of three years.