A&O Shearman FCPA Digest | SEC v. Paul W. Jennings (D.D.C. 2011)

Source Documents

Foreign Official
Iraqi government officials (Ministry of Oil) and Indonesian government officials and officials of state-owned oil and gas companies in Indonesia (BP Migas and Pertamina).

Nature of Business
Paul W. Jennings, a dual citizen of the U.K. and the U.S. and former CFO and CEO of Innospec, Inc., which manufactures and sells fuel additives and other specialty chemicals. Innospec is incorporated in Delaware, and its common stock traded on the New York Stock Exchange pursuant to Section 12(b) of the Exchange Act.

Influence to be Obtained
From 2000 to 2007 Innospec paid more than $6.3 million in bribes and promised another $2.8 million in illicit payments to Iraqi and Indonesian government officials to obtain contracts for sales of tetraethyl lead (TEL). The SEC alleges that Jennings approved of these bribes beginning in mid‑ to late‑2004 during his tenure as Chief Financial Officer, and continuing after he became Chief Executive Officer in 2005.

In Iraq, Jennings allegedly approved of bribery payments to Iraqi Ministry of Oil officials, through Innospec’s agent, Ousama M. Naaman. Through these payments, Innospec allegedly obtained additional TEL orders and favorable exchange rates, and facilitated TEL shipments. The SEC also alleges that Jennings was aware that payments were made to fund lavish trips for Iraqi government officials, and that various bribe payments were improperly booked as legitimate commission payments on Innospec’s books and records. In Indonesia, Jennings allegedly approved of bribes that were paid under various euphemisms, such as “the Indonesian Way,” “the Lead Defense Fund,” and “TEL Optimization.” Bribes were allegedly paid to Indonesian officials through Innospec’s Indonesian agent, to generate more TEL sales. The SEC alleges that Jennings was involved in discussions regarding the bribery scheme and approved of, or was aware of, the payments to Indonesian government officials.

Enforcement
Without admitting or denying any of the SEC’s allegations, Jennings was ordered to disgorge $116,092, representing profits gained as a result of the alleged conduct, together with prejudgment interest thereon of $12,945, and a civil penalty of $100,000. Innospec has agreed to pay $40.2 million as part of a global settlement with the SEC, the DOJ, the United Kingdom’s Serious Fraud Office (“SFO”), and the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”). Innospec agreed to pay disgorgement of $11.2 million to the SEC, a criminal fine of $14.1 million to the DOJ, a criminal fine of $12.7 million to the SFO and $2.2 million to OFAC. Innospec also agreed to injunctive relief and certain undertakings regarding its FCPA compliance program, including an independent monitor for three years. Ousama Naaman, the agent in Iraq, and David Turner, a former Innospec employee, also settled with the SEC on related allegations.