WASHINGTON – The Dutch company Akzo Nobel N.V., has entered into an agreement with the Department of Justice, acknowledging that its subsidiaries made improper payments to the Iraqi government in connection with contracts acquired by the subsidiaries pursuant to the U.N. “Oil for Food” Program, Assistant Attorney General Alice S. Fisher of the Criminal Division announced today.
Akzo Nobel, a Dutch company with its headquarters in Arnhem, Netherlands, has acknowledged responsibility for the actions of two of its subsidiaries whose employees and agents made improper payments to the Iraqi government in order to obtain contracts with Iraqi ministries. According to the agreement, between 2000 and 2002, the two subsidiaries, N.V. Organon and Intervet International B.V., sold by Akzo Nobel earlier this year, paid a total of approximately $280,000 to the Iraqi government by inflating the price of contracts, usually by adding 10% before submitting the contracts to the United Nations for approval, and concealing from the United Nations the fact that the prices contained a kickback to the Iraqi government.
According to the agreement, within 180 days, N.V. Organon is expected to reach a resolution with the Dutch National Public Prosecutor’s Office for Financial, Economic and Environmental Offences regarding its conduct under the Oil for Food Program, wherein it will pay a criminal fine of approximately €381,000 in the Netherlands. If N.V. Organon fails to reach a timely resolution with the Dutch Public Prosecutor, Akzo Nobel will pay $800,000 to the United States Treasury.
The non-prosecution agreement between Akzo Nobel and the Department of Justice requires the company to cooperate fully with the Department’s ongoing investigations related to the Oil for Food Program. In recognition of N.V. Organon’s anticipated resolution with the Dutch Public Prosecutor, Akzo Nobel’s disclosure of the improper payments to the Department following the publication of the final report of the Independent Inquiry Committee into the United Nations Oil-for-Food Program, and its thorough review of those payments, the Department has agreed not to file criminal charges against the company or its subsidiaries.
In a related matter, Akzo Nobel reached a settlement today with the Securities and Exchange Commission on a complaint and agreed to pay $750,000 in civil penalties and approximately $2.2 million in disgorgement of all profits, including pre-judgment interest, in connection with contracts for which its subsidiaries paid kickbacks to the Iraqi government.
The Oil for Food Program was established by the United Nations to enable Iraq to sell its oil for humanitarian purposes, in the context of an extensive international sanctions regime. The Program mandated that the proceeds of oil sales be deposited in a United Nations bank account and that those proceeds be used by the Iraqi government only to purchase humanitarian goods and services, such a food and medicine, approved by the United Nations. Beginning in 2000, the Iraqi government began requiring companies wishing to sell humanitarian goods to government ministries to pay a kickback, often mischaracterized as an “after sales services fee,” to the government in order to be granted a contract. The amount of that fee was usually 10% of the contract price. Such payments were not permitted under the Oil for Food Program or other sanction regimes then in place.
The investigation of Akzo Nobel is being conducted by the Fraud Section of the Criminal Division and the Federal Bureau of Investigation. This matter is being handled by Trial Attorney Lori A. Leonovicz and Assistant Chief William B. Jacobson. The Enforcement Division of the Securities and Exchange Commission has provided significant assistance to the Justice Department’s investigation of the Oil for Food Program.