On September 29, 2010, the Department and the SEC announced significant enforcement actions against Swiss-based ABB Ltd and two of its subsidiaries related to improper payments made in Mexico and in Jordan. ABB Ltd, a leading provider of power technologies whose shares are traded on the New York Stock Exchange, agreed to enter into a deferred prosecution agreement as a result of kickback payments made to the Iraqi government in order to obtain inflated contracts under the United Nations Oil for Food program, and separate bribes made to Mexican officials. In addition, the company’s U.S. subsidiary, ABB Inc., pleaded guilty to a criminal information charging it with one count each of violating the anti-bribery provisions of the FCPA and conspiring to do so.
This is not the first time ABB Ltd has faced enforcement actions involving the FCPA. In 2003, ABB Ltd voluntarily disclosed more than $1 million in improper payments by two subsidiaries to oil officials in Nigeria. The disclosures to the Department and the SEC were made in anticipation of the sale of its upstream oil and gas business. On July 6, 2004, a US and a UK subsidiary of ABB each pleaded guilty to a two-count criminal information charging each with violating the anti-bribery provisions of the FCPA and agreed to pay a total of $10.5 million in criminal fines. ABB Ltd also settled with the SEC by agreeing to the entry of an injunction prohibiting future violations of the FCPA and paying $5.9 million in disgorgement and prejudgment interest.
Although the government noted that ABB Ltd should be credited for its “extraordinary cooperation” in the investigation,49 it contended that ABB should be fined $30.4 million as a repeat offender, based on its previous FCPA violations.50 The district court judge declined to find that ABB was a “recidivist company” that had repeatedly violated the FCPA. Instead, the court reduced the fine to $17.1 million, the lowest end of the applicable range.51
Without admitting or denying the charges, ABB Ltd also agreed to the entry of an injunction to settle an SEC complaint charging violations of the FCPA’s anti-bribery, books-and-records and internal controls provisions, and to pay an additional $16.5 million as a civil penalty and $22.8 million in disgorgement and prejudgment interest.
Although the deferred prosecution agreement required ABB Ltd. to adopt an enhanced compliance program, it did not require an external compliance monitor. The Department commended the ABB entities for voluntarily disclosing the relevant misconduct; thoroughly investigating its conduct in Jordan and Mexico, as well as “other misconduct;” cooperating with the Department’s Fraud Section and the SEC; and implementing substantial remedial measures.52 ABB Ltd also assured the government that it would “continue to implement a compliance and ethics program designed to prevent and detect violations of the FCPA and other applicable anti-corruption laws throughout its operations. . . .”53
The Alleged Oil-for-Food Bribery Scheme
The criminal information pertaining to ABB Ltd- Jordan charged the company with one count of conspiracy to commit wire fraud and violate the accounting provision of the FCPA.54 It stated that ABB Ltd-Jordan had paid, or caused to be paid, over $300,000 in kickbacks to the Iraqi government in connection with contracts to sell electrical equipment and services under the United Nations Oil-for-Food Program.55 In return, ABB Ltd-Jordan and its 95%- owned subsidiary, Trading Ltd (“ABB Near East”), received contracts valued at approximately $5.9 million from Iraqi electricity companies.56 The SEC complaint alleged, in addition to the above, that during the four year period that ABB Ltd’s subsidiaries participated in the Oil-for-Food Program, they had paid kickbacks in the form of bank guarantees and cash payments, and had earned as a result $13.5 million in revenues, and $3.8 million in profits.57 According to the SEC complaint, ABB subsidiaries falsely recorded the kickbacks as payments for after-sales services, consultation costs, and commissions. 58
The Mexican Bribery Scheme
The criminal information related to ABB Inc. charged that subsidiary and its ABB Network Management (“ABB-NM”) unit located in Sugarland, Texas, with entering into multiple commission-based representation agreements with Mexican intermediary companies to make illegal payments to Mexican officials of electrical utilities, including paying the officials’ credit card bills and making cash payments to their relatives.59 As a result of the improper payments, ABB-NM secured contracts worth $81 million and made over $13 million in profits.60 ABB Inc. pleaded guilty to one count each of conspiracy to violate the FCPA, and violating the anti-bribery provisions of the Act, and admitted that it had paid approximately $1.9 million in bribes to these officials from 1997 to 2004. The SEC complaint separately alleged that ABB Inc. had “failed to conduct any due diligence on the use [of] or payments” to the relevant agents and failed to maintain accurate books and records.61
In November 2009, John Joseph O’Shea, ABBNM’s former General Manager, was charged with numerous violations of the FCPA, money laundering laws, and falsifying records in connection with the bribery scheme.62 At the same time, Fernando Maya Basurto (“Basurto”), a Mexican citizen and the principal of the Mexican company that served as ABBNM’s sales representative, pleaded guilty and agreed to cooperate with the government.63