The SEC settled another FCPA case arising out of the violations of Innospec, Inc., a manufacturer and distributor of fuel additives and specialty chemicals. Previously the company settled with the SEC and DOJ (here). U.S. v. Innospec, Case No. 1:10-r-00061 (D.D.C. March 17, 2010); SEC v. Innospec, Inc., Civil Action No. 1:10-cv-00448 (D.D.C. Filed Mar. 18, 2010). Actions have also been resolved by two individuals involved, David Turner and Ousama Naaman with the SEC (here) and by Mr. Naaman with DOJ (here).
The latest Innospec settlement is with Paul W. Jennings, the CFO of the company beginning in December 2002 and later CEO in 2005. SEC v. Jennings, Case No. 1:11-cv-00144 (Filed Jan. 24, 2011).
The complaint in large part reiterates the schemes of the company. One involves Iraq and in part the U.N. Oil for Food Program while the other is based on bribes paid in Indonesia. In Iraq the company began paying bribes to sell its fuel additive as early as 2000. In 2001 it began paying bribes in connection with the U.N. program. In one scheme the company agreed to pay a 2% kickback on the sale of its additives. In another an official was bribed to obtain a favorable exchange rate on letters of credit. In a third Innospec bribed officials to ensure the failure of a field test for a competitor. In 2008 bribes were offered to secure a Long Term Purchase Agreement under which about $850,000 would have been shared with Iraqi officials. That agreement was not completed because of the investigation by U.S. regulators into bribery at the company. In Iraq the company paid bribes, according to the court papers, totaling over $1.6 million and promised more than $880,000 in illegal payments. The company also paid for gifts, entertainment and travel.
In Indonesia Innospec is alleged to have paid bribes from about 2000 through 2005 to obtain about $48.5 million in contracts from state owned oil and gas companies. The complaint details two scheme. In one the company paid bribes to the chairman of a state owned oil company called BP Migas. In the other bribes were paid to another company.
Defendant Jennings is not alleged to have been involved with all of the bribery activity at the company. Rather, the complaint alleges that “some . . . [of the bribery] occurred and was approved by Paul W. Jennings beginning in mid to late 2004.” Thus the complaint does not claim that he was involved in the payments involving the U.N. program. It does state however that “Although Jennings was not involved in the payment of kickbacks during the Oil for Food Program, Jennings was aware that ASSF payments [kickbacks] had been made and that the company’s auditors had raised questions about the ASSF payments. After learning that Innospec had paid bribes in connection with the Oil for Food Program, Jennings did not inform the auditors of this information.” The complaint goes on to note that although Mr. Jennings learned that subsequent to the program Iraq officials demanded more bribes which were not paid due to the invasion by the U.S. coalition forces he “did not disclose, that Innospec incorporated the promised kickbacks into its profit.”
To resolve the case Mr. Jennings consented to the entry of a permanent injunction prohibiting future violations of Exchange Act Sections 30A, and 13(b)(5) and from aiding and abetting Innospec’s violations of Exchange Act Sections 30A, 13(b)(2)(A) and 13(b)(2)(B). He also agreed to disgorge $`116,092 along with prejudgment interest and to pay a civil penalty of $100,000. The settlement considers the cooperation of Mr. Jennings.