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Univ. of Toledo College of Law

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Wednesday, October 31, 2007

Ingersoll-Rand Settles FCPA Charges in Iraq Oil for Food Program

The SEC filed Foreign Corrupt Practices Act books and records and internal controls charges against Ingersoll-Rand Company Ltd., a New Jersey-based industrial equipment company, in the U.S. District Court for the District of Columbia. The Commission's complaint alleges that from 2000 through 2003, four of Ingersoll-Rand's subsidiaries entered into contracts in which $963,148 in kickback payments were made and $544,697 in additional payments were authorized in connection with sales of humanitarian goods to Iraq under the U.N. Oil for Food Program (the "Program"). The kickbacks were characterized as "after-sales service fees" ("ASSFs"), but no bona fide services were performed. The kickbacks paid by Ingersoll-Rand's subsidiaries and third parties diverted funds out of the escrow account and into an Iraqi slush fund. The contracts submitted to the U.N. did not disclose that the illicit payments were included in the inflated contract prices. The complaint also alleges that $8,000 in "pocket money" and travel expenses were paid to Iraqi government officials in connection with a trip to Italy.

Ingersoll-Rand, without admitting or denying the allegations in the Commission's complaint, consented to the entry of a final judgment permanently enjoining it from future violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934, ordering it to disgorge $1,710,034 in profits, plus $560,953 in pre-judgment interest, and to pay a civil penalty of $1,950,000. Ingersoll-Rand is also ordered to comply with certain undertakings regarding its FCPA compliance program. Ingersoll-Rand will also pay a $2,500,000 fine pursuant to a deferred prosecution agreement with the U.S. Department of Justice, Fraud Section.

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