Electrical technology giant ABB Ltd of Switzerland reached a settlement Wednesday with the DOJ of criminal FCPA charges and will pay a fine $19 million. And in resolving civil charges with the SEC, the company will disgorge $22.8 million and pay a $16.5 million civil penalty.
ABB Ltd’s U.S. subsidiary, ABB Inc., pleaded guilty to a criminal information charging it with one count of violating the anti-bribery provisions of the FCPA and one count of conspiracy to violate the FCPA. The court imposed a sentence that included a criminal fine of $17.1 million.
ABB Ltd entered into a deferred prosecution agreement and agreed to the filing of a criminal information charging its Jordanian subsidiary, ABB Ltd – Jordan, with one count of conspiracy to commit wire fraud and to violate the books and records provisions of the FCPA, and agreed to pay a criminal penalty of $1.9 million.
Through ABB Network Management (ABB NM), part of ABB’s U.S. subsidiary, it bribed employees at the Mexican state-owned electric utilities, Comisión Federal de Electridad (CFE) and Luz y Fuerza del Centro. It won contracts that generated over $90 million in revenues and $13 million in profits.
Other ABB subsidiaries paid kickbacks to the former regime in Iraq to obtain contracts under the U.N. oil for food program. The bribes generated contracts worth $13.5 million in revenues and $3.8 million in profits.
ABB participated in the oil-for-food program through six subsidiaries: ABB Near East Trading Ltd. of Jordan, ABB Automation, ABB Industrie AC Machines, and ABB Solyvent-Ventec, all from France, ABB AG from Austria, and ABB Elektrik Sanayi AS from Turkey.
The SEC said “ABB’s Jordanian subsidiary acted as a conduit for other ABB subsidiaries by making the kickback payments on their behalf. . . . ABB improperly recorded the kickbacks on its books as legitimate payments for after sales services, consultation costs, and commissions.”
ABB Inc. said the bribes to CFE were paid through various intermediaries, including a Mexican company. Fernando Maya Basurto was a principal of the Mexican company. He pleaded guilty in November 2009 to a one-count criminal information charging him for his role in the conspiracy. Basurto admitted that while he acted as a sales representative for ABB NM, he conspired with others to make corrupt payments to CFE officials, helped launder the bribes, and obstructed the U.S. investigations.
John Joseph O’Shea, a former ABB NM general manager, was charged in November 2009 in an 18-count indictment with conspiracy, FCPA violations, international money laundering and falsification of records related to his alleged role in the bribery scheme. His trial date hasn’t been set.
ABB operates in around 100 countries with 117,000 employees. It had about $31 billion in revenues last year.
ABB Ltd’s common stock trades on the NYSE under the symbol ABB.
View the DOJ’s September 29, 2010 release here.
View SEC Litigation Release No. 21673 and Accounting and Auditing Enforcement Release No. 3191 (both dated September 29, 2010) in U.S. Securities and Exchange Commission v. ABB Ltd, Civil Action No. 1:10-CV-01648 (DDC) (PLF) here.
Download the September 29, 2010 civil complaint in SEC v. ABB Ltd here.
Download the November 16, 2009 criminal indictment in US v. John Joseph O’Shea here.
Download the November 16, 2009 superseding criminal information in US v. Fernando Maya Basurto here.
Download Basurto’s plea agreement with the Justice Department here.
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