A&O Shearman FCPA Digest | SEC v. Textron Inc. (D.D.C. 2007)

Source Documents

Foreign Official
Officials of GASCO, ZADCO, and ADCO (subsidiaries of state owned Abu Dhabi National Oil Company), Pertamina (Indonesian state owned oil company), and unidentified government owned companies in Bangladesh, India, and Egypt.

Nature of Business
Sales of industrial pumps, gears and other equipment to Iraq under the U.N. Oil-for-Food Program by three of Rhode-Island-based Textron, Inc.’s David Brown French subsidiaries. The investigation into the Iraq payments yielded several dozen more corrupt payments in other countries to secure 36 contracts in those places.

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.

Textron’s French subsidiaries allegedly used consultants to make kickback payments to the government of Iraq to secure sales of industrial pumps and gear.

In addition, the Textron subsidiaries paid bribes to officials of state‑owned companies in the UAE, Indonesia, Bangladesh, India, and Egypt to obtain contracts.

Enforcement
The SEC charged Textron with violations of the FCPA’s internal controls and books‑and‑records provisions for failing to implement an adequate set of internal controls to detect and prevent the payments made by its subsidiaries. Without admitting or denying the allegations, Textron consented to the entry of final judgment permanently enjoining it from future violations, ordering it to disgorge $2,284,579 in profits, plus $450,461.68 in prejudgment interest, and to pay a civil penalty of $800,000. Textron is also ordered to take certain steps with respect to its FCPA compliance program.