Allianz SE, the giant German insurer and asset manager, settled FCPA books and records and internal control charges with the SEC. In the Matter of Allianz SE, Adm. Proc. File No. 3-15132 (Dec. 17, 2012). At the time of the underlying events Alianz’s American Depositary Shares and bonds were registered with the Commission under the Exchange Act and listed on the New York Stock Exchange. After the company discovered the conduct involved here, but before the Commission started its investigation, the Allianz voluntarily delisted from all exchanges except those in Germany.
The conduct in the action involved payments by majority owned subsidiary PT Asuransi Allianz Ultama beginning in 2001 and continuing until 2008 to Indonesian officials to obtain and retain insurance business. Initially, the Marketing Manager at Ultama made payments from a special purpose bank account opened years earlier for a legitimate purpose with a local Indonesian broker years. The manager received approval from Ultama management to use the account to make the payments to obtain or retain business.
The improper payments were made by disguising them as part of the policy premium. To implement this system the premium was divided into two segments. One was the actual premium while the other part was for the foreign official. When the entire premium was paid, the Ultama manager had the second portion transferred to the special purpose bank account and paid to the official. Allianz was not aware of these payments because, according to the Order, its internal controls were not effective.
In 2005 Allianz received a complaint through its whistleblower hotline regarding the special purpose account. Internal audit examined the issue, focused largely on whether money had been misappropriated. Eventually the examination was concluded and the account ordered closed without determining the purpose for the payments.
Despite the directive to close the account the Marketing Manager continued to use it from 2005 through 2008 with the agreement of the Ultama’s management. While the Marketing Manager utilized various ways to make the payments none were detected by the parent company, further illustrating its flawed internal controls, according to the Order.
In 2009 there was a second whistleblower complaint at the parent company. Counsel was retained to investigate. The matter was not reported to the SEC. The next year, however, another whistleblower complaint was made. This time it was lodged with the Commission. The staff investigation uncovered 295 government insurance contracts obtained or retained through the payment of about $650,626 to Indonesian government officials from 2001 through 2008.
Over the course of the investigation the cooperation of the company, which changed counsel, improved according to the Order. A footnote indicates that Allianz did report that another German entity in which it had invested was under inquiry for tax issues in Germany. None of the issues involved government projects or payments to foreign officials. The Order alleges violations of Exchange Ac Sections 13(b)(2)(A) and 13(b)(2)B).
The company settled with the Commission, consenting to the entry of a cease and desist order based on the Sections cited in the complaint. It also agreed to pay disgorgement of $5,315,649, prejudgment interest and a civil penalty equal to the amount of the disgorgement.