U.S. Securities and Exchange Commission
Litigation Release No. 18775 / July 6, 2004
Accounting and Auditing Enforcement
Release No. 2049 / July 6, 2004
SEC SUES ABB LTD IN FOREIGN BRIBERY CASE
ABB SETTLES FEDERAL COURT ACTION
AND AGREES TO DISGORGE $5.9 MILLION IN ILLICIT PROFITS
TWO ABB AFFILIATES ALSO PLEAD GUILTY
AND AGREE TO PAY $10.5 MILLION IN FINES
IN CRIMINAL CASE BROUGHT BY THE DEPARTMENT OF JUSTICE
Securities and Exchange Commission v. ABB Ltd, Case No. 1:04CV1141 [RBW] (U.S.D.C., D.D.C.)
On July 6, 2004, the Securities and Exchange Commission filed a settled enforcement action in the United States District Court for the District of Columbia charging ABB Ltd, a global provider of power and automation technologies headquartered in Zurich, Switzerland, with violating the anti-bribery, books-and-records, and internal-accounting-controls provisions of the Foreign Corrupt Practices Act (FCPA). Simultaneously with the filing of the complaint, and without admitting or denying its allegations, ABB consented to the entry of a final judgment enjoining it from future FCPA violations, and requiring it (i) to pay $5.9 million in disgorgement and prejudgment interest, (ii) to pay a $10.5 million penalty, which would be deemed satisfied by two of its affiliates' payments of criminal fines totaling the same amount in parallel criminal proceedings brought by the Department of Justice; and (iii) to retain an independent consultant to review the company's FCPA compliance policies and procedures.
In its complaint, the Commission charged that, from 1998 through early 2003, ABB's U.S. and foreign-based subsidiaries doing business in Nigeria, Angola and Kazakhstan, offered and made illicit payments totaling over $1.1 million to government officials in these countries. According to the complaint, all of the payments were made to influence acts and decisions by the foreign officials receiving the payments, in order to assist ABB's subsidiaries in obtaining and retaining business. The complaint further alleged that the payments were made with the knowledge and approval of certain management level personnel of the relevant ABB subsidiaries, and that at least $865,726 of the payments were made after ABB became a reporting company in the United States in April 2001. Finally, the complaint charged that ABB improperly recorded these payments in its accounting books and records, and lacked any meaningful internal controls to prevent or detect such illicit payments.
According to the Commission, by making these payments through its subsidiaries, ABB violated the anti-bribery provisions of the FCPA (Section 30A of the Securities Exchange Act of 1934). The Commission further charged that, by improperly recording these payments, ABB violated the books-and-records provisions of the FCPA (Section 13(b)(2)(A) of the Securities Exchange Act of 1934). Finally, the Commission charged that, by failing to devise or maintain an effective system of internal controls to prevent or detect these violations of the FCPA, ABB violated the internal accounting controls provisions of the FCPA (Section 13(b)(2)(B) of the Securities Exchange Act of 1934).
In determining to accept ABB's settlement offer, the Commission considered the full cooperation that ABB provided to the Commission staff during its investigation. The Commission also considered the fact that ABB brought this matter to the attention of the Commission's staff and the U.S. Department of Justice. Based in part upon ABB's cooperation, the Commission determined to allow ABB's $10.5 million civil penalty obligation to be deemed satisfied by two of its affiliates' payments of criminal fines totaling $10.5 million in a parallel criminal proceeding brought by the U.S. Department of Justice.
In that parallel proceeding, also announced today, the U.S. Department of Justice filed criminal FCPA charges against two ABB subsidiaries, who entered guilty pleas before the Honorable Vanessa Gilmore, United States District Judge for the Southern District of Texas: Houston-based ABB Vetco Gray, Inc., and Aberdeen, Scotland-based ABB Vetco Gray UK, Ltd. (United States v. ABB Vetco Gray, Inc. and ABB Vetco Gray UK, Ltd., Case No. 04-CR-279-01 (S.D. Texas)). In particular, ABB Vetco Gray, Inc. and ABB Vetco Gray UK, Ltd. each agreed to plead guilty to two felony counts of violating the anti-bribery provisions of the FCPA and to pay criminal fines that, between them, total $10.5 million.
The Commission acknowledges the assistance of the Department of Justice in its investigation, which is continuing.
SEC Complaint in this matter
http://www.sec.gov/litigation/litreleases/lr18775.htm
