Wednesday, September 30, 2009
The SEC settled another case involving Foreign Corrupt Practices Act books and records and internal controls charges, this time against AGCO Corporation, a manufacturer and supplier of agricultural equipment. The Commission’s complaint alleges that from 2000 through 2003, certain AGCO subsidiaries made approximately $5.9 million in kickback payments in connection with their sales of equipment to Iraq under the United Nations Oil for Food Program (the “Program”). The kickbacks were characterized as “after sales service fees” (“ASSFs”), but no bona fide services were performed. The Program was intended to provide humanitarian relief for the Iraqi population, which faced severe hardship under international trade sanctions. The Program required the Iraqi government to purchase humanitarian goods through a U.N. escrow account; however, AGCO’s subsidiaries’ kickbacks diverted funds out of the escrow account and into Iraqi-controlled accounts at banks in Jordan.
According to the SEC, AGCO failed to maintain an adequate system of internal controls to detect and prevent the payments and AGCO’s accounting for these transactions failed properly to record the nature of the payments. AGCO, without admitting or denying the allegations in the Commission’s complaint, consented to the entry of a final judgment permanently enjoining AGCO from future violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 and ordering AGCO to disgorge $13,907,393 in profits plus $2,000,000 in pre-judgment interest plus a civil penalty of $2,400,000. AGCO will also pay a $1,600,000 penalty pursuant to a deferred prosecution agreement with the U.S. Department of Justice, Fraud Section. AGCO will also enter into a criminal disposition in which the Danish State Prosecutor for Serious Economic Crime will confiscate over $600,000.