Wednesday, July 13, 2011
The SEC settled charges that Armor Holdings, Inc. violated the Foreign Corrupt Practices Act by participating in a bribery scheme from 2001 through 2006 to obtain contracts to supply body armor for use in United Nations (U.N.) peacekeeping missions. The SEC also charged Armor Holdings, a Florida-based manufacturer of military and law enforcement safety equipment, with failing to properly account for more than $4 million in commissions from 2001 through 2007 in violation of the books and records and internal controls provisions of the federal securities laws. Armor Holdings agreed to settle the SEC’s charges by paying nearly $5.7 million in disgorgement, prejudgment interest, and penalties. Armor Holdings also agreed to pay a $10.29 million fine to settle a parallel criminal investigation announced by the U.S. Department of Justice today.
The SEC’s complaint alleges that certain agents of Armor Holdings caused its U.K. subsidiary to wire at least 92 payments, totaling approximately $222,750 to a third-party intermediary, with the understanding that part of these payments would be offered to a U.N. official who could help steer business to Armor Holdings’ U.K. subsidiary. The complaint alleges that agents of Armor Holdings caused its U.K. subsidiary to enter into a sham consulting agreement with the intermediary for purportedly providing legitimate services in connection with the sale of goods to the U.N. The complaint alleges that, through this bribery scheme, Armor Holdings derived gross revenues of $7,121,237, and net profits of $1,552,306.
The SEC alleges that another Armor Holdings subsidiary disguised in its books and records commissions paid to intermediaries who brokered the sale of goods to foreign governments. Even after being warned by internal and external accountants that this practice violated U.S. Generally Accepted Accounting Principles, Armor Holdings’ subsidiary continued the improper accounting practice. As a result, approximately $4 million in commissions was not properly disclosed in the books and records of the company.