As part of the Department of Justice's ongoing investigation of the United Nations "Oil for Food" program, the Department of Justice has agreed to defer the prosecution of Ingersoll-Rand Company Limited, to pay a $2.5 million penalty, Assistant Attorney General Alice S. Fisher of the Criminal Division announced today. The agreement calls for Ingersoll-Rand and two of its subsidiaries to pay a $2.5 million penalty.
According to the deferred prosecution agreement and two separate criminal informations filed today in U.S. District Court for the District of Columbia, Ingersoll-Rand acknowledges responsibility for the behavior of two of its subsidiaries, Ingersoll-Rand Italiana SpA and Thermo King European Manufacturing Limited, who engaged in a conspiracy to commit wire fraud. Ingersoll-Rand Italiana is also charged with conspiracy to violate the books and records provisions of the Foreign Corrupt Practices Act.
According to the Deferred Prosecution Agreement, Ingersoll-Rand acknowledges that employees and agents of its subsidiaries paid kickbacks to the Iraqi government in order to obtain contracts with Iraqi ministries to provide road construction equipment, air compressors and parts, and refrigerated trucks. The agreement requires the company to cooperate fully with the Department's ongoing Oil for Food investigations. This agreement is subject to approval by the Court.
In a related matter, Ingersoll-Rand reached a settlement today with the Securities and Exchange Commission on a complaint and agreed to pay $1.95 million in civil penalties and approximately $2.27 million in disgorgement of all profits, including pre-judgment interest, in connection with contracts for which its subsidiaries paid kickbacks to the Iraqi government.
In recognition of Ingersoll-Rand's thorough review of the improper payments and the company's implementation of enhanced compliance policies and procedures, the Department has agreed to defer prosecution of criminal charges against Ingersoll-Rand and its subsidiaries for three years. If Ingersoll-Rand abides by the terms of the Deferred Prosecution Agreement, the Department will dismiss the criminal charges.
According to the court documents filed today, between October 2000 and August 2003, employees of Ingersoll-Rand subsidiaries paid a total of approximately $600,000, and offered to pay an additional $250,000, in kickbacks to the Iraqi government by inflating the price of contracts by approximately 10 percent before submitting them to the United Nations for approval, and concealed from the United Nations the fact that the contract prices contained a kickback to the Iraqi government.
The Oil for Food program was established by the United Nations to enable Iraq to sell its oil for humanitarian purposes, in the context of an extensive international sanctions regime. The program mandated that the proceeds of oil sales be deposited in a U.N. bank account and that those proceeds be used by the Iraqi government only to purchase humanitarian goods and services, such as food and medicine, approved by the United Nations. Beginning in 2000, the Iraqi government began requiring companies wishing to sell humanitarian goods to government ministries to pay a kickback, often mischaracterized as an "after sales services fee," to the government in order to be granted a contract. The amount of that fee was usually 10 percent of the contract price. Such payments were not permitted under the Oil for Food program or other sanctions regimes then in place.
The Department's investigation of Ingersoll-Rand, and of other humanitarian goods suppliers involved with the Oil for Food Program, is being conducted by the Fraud Section of the Criminal Division along with the Federal Bureau of Investigation. This case is being prosecuted by Trial Attorney Kathleen Hamann and Assistant Chief William B. Jacobson of the Fraud Section. The Enforcement Division of the Securities and Exchange Commission has provided significant assistance to the Justice Department's investigation of the Oil for Food program.
