Settlement

General Electric settles Iraq bribery case with SEC

The Securities and Exchange Commission on Tuesday reached a $23.4 million settlement with General Electric Co. over charges that the company violated the Foreign Corrupt Practices Act.

GE, along with two subsidiaries and two other companies that have since been acquired by GE, allegedly made illegal kickback payments totaling $3.6 million in the form of cash, computer equipment, medical supplies and services to the Iraqi Health Ministry or the Iraqi Oil Ministry in order to obtain contracts under the U.N. Oil for Food Program.

It's the fifteenth FCPA case brought by the SEC against companies involved in Oil for Food-related kickback schemes in Iraq, according to the SEC, resulting in the recovery more than $204 million.

In a complaint filed in the U.S. District Court for the District of Columbia, the SEC charged GE and its subsidiaries with violating the books and records and internal controls provisions of the FCPA.

GE subsidiaries Marquette-Hellige and OEC-Medical Systems (Europa) AG allegedly made approximately $2 million in kickback payments. Italba S.r.L. (a then-subsidiary of Ionics) and Nycomed Imaging AS (a then-subsidiary of Amersham) made approximately $1.55 million in cash kickback payments. Since their acquisitions by GE, Amersham and Ionics are now known as GE Healthcare Ltd. and GE Ionics, Inc., respectively.

Without admitting or denying the allegations, GE agreed to pay $18,397,949 in disgorgement of profits, $4,080,665 in prejudgment interest, and a penalty of $1 million. GE, which was represented by F. Joseph Warin and John Chesley of Gibson Dunn & Crutcher, cooperated with the investigation.

The settlement concludes the SEC's investigation and related U.S. Justice Department review of GE regarding the Oil for Food Program.

In a statement, GE said, "The SEC has identified 18 contracts under the Oil-for-Food Program that it alleges were not accounted for or controlled properly. Fourteen of these transactions involve businesses that were not owned by GE at the time of the transactions. The SEC alleges that, in acquiring these companies, GE acquired their liabilities as well as their assets. The other four transactions relate to GE Healthcare units in Europe. These units declined to make cash payments to the Iraqi Ministry of Health, but they acquiesced when their agent offered instead to make in-kind payments of computer equipment, medical supplies, and services to the Iraqi Health Ministry, and then failed to reflect the transactions accurately in their books and records."

SEC lawyers working on the case included Cheryl Scarboro, Tracy Price and Robert Dodge.

(Published by The Law.com – July 28, 2010)