Wednesday, October 3, 2007

York Settles FCPA Investigation

York International Corp., now a subsidiary of Johnson Controls, settled an investigation of overseas bribes by agreeing to a deferred prosecution agreement (available below) with the Department of Justice and a civil settlement with the SEC.  The case involves a wide range of payments in violation of the Foreign Corrupt Practices Act, as described in the SEC's Litigation Release (here):

The Commission's complaint alleges that York International's Delaware subsidiary paid approximately $522,500 to an intermediary while knowing that most of the money was intended to bribe United Arab Emirate officials; York International's Dubai subsidiary authorized and made approximately $647,110 in kickback payments under the U.N. Oil for Food Program; and that York International's subsidiaries devised elaborate schemes to conceal kickback payments of over $7.5 million made to secure orders on certain commercial and government projects in the Middle East, India, China, Nigeria and Europe.

The company agreed to pay a $10 million criminal fine, a $2 million civil penalty, and disgorge profits and pre-judgment interest of over $10 million, for a total cost of $22 million. 

An interesting part of the deferred prosecution agreement concerns waiving the attorney-client privilege and work product protection, an issue that has become quite contentious.  The agreement provides that the Department of Justice can request documents and information from the company, including those covered by the privilege, and that York can assert the privilege and protection in response and refuse to provide the requested materials on that basis.  However, the agreement goes on to state that "[i]n the event that York withholds access to the information, documents, records, facilities and/or employees of York, the Department may consider this fact in determining whether York has fully cooperated with the Department."  While the company has not agreed to waive the privilege, assertion of it could come at the cost of determining whether (and to what extent) it has been cooperative. (ph)

Download us_v_york_international_deferred_prosecution_agreement_oct_2007.pdf

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