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Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

Bill Steinman
Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Shruti J. Shah
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
Contributing Editor

Eric Carlson
Contributing Editor

Executive Action At Innospec

Photo by MJCdetroitWhat stands out about Innospec’s FCPA guilty plea yesterday is the hands-on role former top managers had in the criminal activity. For nearly a decade they used bribery as just another sales tool, a manipulative and cynical revenue spinner, and did what they could to cover it up.

By 2000, the company’s flagship product, TEL, an additive used only in leaded gasoline, was in trouble. The market was drying up after the U.S. and other countries ordered the switch to cleaner, healthier unleaded fuels. But under their go-team bosses, Innospec’s salesmen and agents began paying bribes to move TEL into mainly third-world markets.

The SEC’s complaint said “Innospec’s former management did nothing to stop the bribery, and in fact authorized and encouraged it.”

An email from a former agent in October 2005 to Innospec’s then business director and another executive said Iraqi officials were demanding a 2% kickback on sales. The e-mail said: “We are sharing most of our profits with Iraqi officials. Otherwise, our business will stop and we will lose the market. We have to change our strategy and do more compensation to get the rewards.” 

The Business Director authorized over $195,000 in bribes, and in an e-mail discussing the wording of the invoice, said: “The fewer words the better!”

Innospec acted like a classic corrupter. According to the SEC complaint, it paid lavish travel and entertainment expenses for Iraqi officials, including a seven day honeymoon. It handed out mobile phone cards and cameras and paid thousands in cash for “pocket money.”  It even paid bribes to ensure the failure of a 2006 field test of MMT, a fuel product manufactured by a competitor.

In Indonesia, the bribes to push TEL sales came when the country was planning to go unleaded. At government-linked BP Migas, Innospec paid “special commissions” to a Swiss account and a “one off payment” of $300,000. The greed was mutual. The SEC said one Indonesian official indicated he would assist Innospec in landing TEL sales but he wanted more than just “cents” in return.

The case is far from over. The DOJ said as part of its guilty plea, the company “agreed to fully cooperate with the Department of Justice and other U.S. and foreign authorities in ongoing investigations of corrupt payments by Innospec employees and agents.”

Download a copy of the SEC’s civil complaint here.

View the DOJ’s March 18, 2010 release here.

Copies of the criminal information, sentencing memorandum, and plea agreement can be download from our post here.

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