Enforcement Action

 

Docket or Case Number:    06-cr-398

Court:    D. Oregon

Initiation Date:    10/10/2006  Information

Prosecuting Agency:    US Department of Justice

Name of Prosecuting Attorneys:   

  • Steven A. Tyrrell, Acting Chief, Fraud Section, Criminal Division
  • Mark F. Mendelsohn, Deputy Chief, Fraud Section, Criminal Division
  • Kathleen McGovern, Acting Chief, Fraud Section, Criminal Division
  • Deborah L. Gramiccioni, Trial Attorney, Fraud Section, Criminal Division
  • Amy E. Potter, Assistant United States Attorney

Assisting Agencies:    US Securities and Exchange Commission

Type of Action:    DOJ Criminal Proceeding

Origin of the Proceeding:    Voluntary disclosure

Whistleblower:    Unknown

Case Status:    Resolved


Summary

SSI International Far East, Ltd. ("SSI Korea") was a wholly-owned subsidiary of Schnitzer Steel Industries, Inc. ("Schnitzer Steel"), which was a publicly-traded company organized under the laws of Oregon with offices in Oregon, California and Washington. Schnitzer Steel was engaged in the vertically-integrated businesses of metals recycling, automobile parts, and steel manufacturing. SSI Korea was organized under the laws of the Republic of Korea ("South Korea"). SSI Korea assisted in the sale of scrap metal by Schnitzer to customers in South Korea and in the People's Republic of China and acted as a broker for the sale of scrap metal by Japanese suppliers to steel producers in South Korea. SSI Korea was managed by SSI International, Inc., a wholly-owned subsidiary of Schnitzer Steel in Tacoma, Washington.

From at least as early as 1995 through about August 2004, SSI Korea conspired with Schnitzer Steel to authorize and make payments, principally by means of cash "commissions" and "refunds," to officers and/or employees of government-owned and private steel production companies in China and South Korea to induce those companies to purchase scrap metal from Schnitzer Steel at advantageous prices. The corrupt payments totaled more that $1.8 million.

On October 16, 2006, the DOJ filed a four count Information in the District of Oregon against SSI Korea alleging (1) conspiracy to violate the anti-bribery and books & records provisions of the FCPA and conspiracy to commit wire fraud, (2) violations of the anti-bribery provisions of the FCPA, (3) wire fraud, and (4) aiding and abetting a knowing FCPA books & records violation. On the same date, SSI Korea entered into a plea agreement with the DOJ. Under the terms of the agreement, SSI Korea pleaded guilty to all four counts and agreed to pay a fine of $7.5 million plus a mandatory assessment of $400. Also on the same date, parent company Schnitzer Steel entered into a Deferred Prosecution Agreement with the DOJ. Under the terms of that agreement, Schnitzer Steel admitted and acknowledged its responsibility for the actions of SSI Korea and agreed to continue to implement and enhance its compliance programs and procedures, including the appointment of an independent monitor.

Country(ies) involved:    China, South Korea

Sanction to Bribe Ratio:    $7,500,400 / $208,623 = 3595.19 %

Sanction to Revenue Ratio:    $7,500,400 / $96,396,740 = 7.78 %

Sanction to Profit Ratio:    $7,500,400 / $6,259,104 = 119.83 %

Number of Related Enforcement Actions (Including This Enforcement Action):    5

Country(ies) involved:    China, South Korea

Total $ Bribery Payments:    $1,905,000

Total $ Revenue Generated from Bribery:    $600,000,000

Total $ Profit Earned or Expenses Avoided from Bribery:    $55,000,000

Total $ Monetary Sanctions:    $15,528,133

Sanction to Bribe Ratio:    $15,528,133 / $1,905,000 = (815.12 %)

Sanction to Revenue Ratio:    $15,528,133 / $600,000,000 = (2.59 %)

Sanction to Profit Ratio:    $15,528,133 / $55,000,000 = (28.23 %)

Name:    SSI International Far East, Ltd.

Place of Incorporation:    South Korea

HQ Country(ies):    South Korea

Entity Type:    Subsidiary

FCPA Claims:    Anti-Bribery, Conspiracy (18 U.S.C. 371) ; Books & Records, Conspiracy (18 U.S.C. 371) ; Anti-Bribery, Primary, Other (15 U.S.C. § 78dd-3) ; Books & Records , Aiding and Abetting/Causing (18 U.S.C. § 2, 15 U.S.C. § 78m (b)(2)(A), and/or 15 U.S.C. § 78m(b)(5)) ; Books & Records, Primary, Knowing Violation (15 U.S.C. § 78m (b)(5))

Related Claims:    Conspiracy to Commit Wire Fraud (18 U.S.C. § 371; 18 U.S.C. § 1343) ; Wire Fraud (18 U.S.C. § 1343)

Statutory Basis for FCPA Jurisdiction:    Foreign Nationals and Entities ; Conspirator ; Aider & Abettor/Cause/Control Person ; Person (Books & Records, Internal Controls) ; Issuer (Agent)


Name:    Schnitzer Steel Industries

Place of Incorporation:    United States

HQ Country(ies):    United States

Entity Type:    Public Company

FCPA Claims:    N/A

Related Claims:    N/A

Statutory Basis for FCPA Jurisdiction:    Issuer

Period of Bribery:   1995 - 2004

Total Bribery Payments:    $208,623

Total Revenue Generated from Bribery:    $96,396,740

Total Profit Earned or Expenses Avoided from Bribery:    $6,259,104

Country(ies) involved:    China, South Korea

Officials Potentially Influenced (Name; Title; Organization): 

  • Name N/A, Managers; Various customers of SSI
  • Name N/A, Managers; Baosteel

Defendant-Related Entities Involved in the Misconduct:    SSI International Far East, Ltd. - Subsidiary

Third-Party Intermediary:    N/A

Type of Bribe:   Money, Jewelry/Various Luxury Items, Land/Real Estate, Entertainment/Recreation

Cash, Wire or Check:    Wire Transfer, Check/Bank Draft, Cash (bills/coins/etc.)

Purpose of Bribe:    Obtain/retain business

TRANSACTION OVERVIEW
Bribery to Asian steel companies

Period of Bribery:   1995 – 2004

Total Bribery Payments:    $208,623

Total Revenue Generated from Bribery:    $96,396,740

Total Profit Earned or Expenses Avoided from Bribery:    $6,259,104

Country(ies) involved:    China, South Korea

Officials Potentially Influenced (Name; Title; Organization):  

  • Name N/A, Managers; Various customers of SSI;
  • Name N/A, Managers; Baosteel;

Defendant-Related Entities Involved in the Misconduct:    SSI International Far East, Ltd. - Subsidiary

Third Party Intermediary:    N/A

Type of Bribe:   Money, Jewelry/Various Luxury Items, Land/Real Estate, Entertainment/Recreation

Cash, Wire or Check:    Wire Transfer, Check/Bank Draft, Cash (bills/coins/etc.)

Purpose of Bribe:    Obtain/retain business

Misconduct by Subsidiary?  Yes


Parent(s):   Schnitzer Steel Industries

Subsidiary:  SSI International Far East, Ltd.

  • Percentage of Ownership:    100.00 %
  • Direct or Indirect Ownership:    Unknown
  • Parent Had Knowledge of Sub’s Bribery?:    No
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    No

M&A Negotiated or Completed During Misconduct, Investigation, or Resolution?     No

Re: SSI International Far East, Ltd.

  • Inadequate internal controls or auditing

Mitigating Factors Referenced by the Government (Company Defendants):

Defendant Self-Report Cooperation Voluntary Remedial Measures Misconduct Limited to Low Level Individuals Other factors
Schnitzer Steel Industries      
SSI International Far East, Ltd.    

Aggravating Factors Referenced by the Government (Company Defendants):

Defendant Insufficient Cooperation Insufficient Remedial Measures
Schnitzer Steel Industries    
SSI International Far East, Ltd.  

Total Monetary Sanctions for the Action:    $7,500,400

Case Status:    Resolved


Disposition:    Plea Agreement

Date of Disposition:    10/16/2006

SSI International Far East, Ltd.

—  Total Monetary Sanctions for Defendant:    $7,500,400

—  Organizational Probation:    None

—  Compliance Obligation:    No

—  Reporting Obligation:    No reporting

—  Admission of Guilt/Acceptance of Responsibility:    Yes


Disposition:    Deferred Prosecution Agreement

Date of Disposition:    10/16/2006

Schnitzer Steel Industries

—  Total Monetary Sanctions for Defendant:    $0

—  Organizational Probation:    None

—  Compliance Obligation:    Yes

—  Reporting Obligation:    Independent monitor

—  Admission of Guilt/Acceptance of Responsibility:    Yes

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