Enforcement Action

 

Docket or Case Number:    96-cv-02631

Court:    District of Columbia

Initiation Date:    11/21/1996  Information

Prosecuting Agency:    US Securities and Exchange Commission

Name of Prosecuting Attorneys:   

  • Paul V. Gerlach, SEC Headquarters
  • James A. Kidney, SEC Headquarters
  • Gregory S. Bruch, SEC Headquarters
  • Laura B. Josephs, SEC Headquarters
  • Gregory G. Faragasso , SEC Headquarters

Assisting Agencies:    N/A

Type of Action:    SEC Federal Court Proceeding

Origin of the Proceeding:    N/A

Whistleblower:    Unknown

Case Status:    Resolved


Summary

Montedison S.p.A. ("Montedison") was an Italian conglomerate corporation with headquarters in Milan. The company had interests in the agro-industry, chemical, energy and engineering sectors. Montedison had American Depositary Receipts ("ADRs"), each representing ten shares of the company's common stock, listed on the New York Stock Exchange. Between the filing of the complaint and the filing of final judgment, Montedison was acquired as a wholly-owned subsidiary of Compart, S.p.A., upon acquiring Montedison, by merger, changed its name to Montedison.

From at least December 1988 through May 1993, Montedison materially misstated its financial condition and results of operations in periodic reports filed with the SEC due to the company's extensive and long-term efforts to conceal hundreds of millions of dollars of payments that among other things, were used to bribe politicians in Italy and other persons. Among the bribery schemes were the Exilar loan and the ENIMONT affair. In the first scheme, Montedison "loaned" approximately $272 million to wholly owned subsidiaries as a means of aggragating numerous bribes that had been paid over an extended period of time and disguise them as a single loan. In the second scheme, in an attempt to secure full control over a joint venture Montedison entered with the Italian state energy company, Montedison used an Italian real estate developer as an intermediary to overpay for real estate in Rome. The overpayment was then funneled as bribes to Italian politicians in order to secure an alteration in the terms of the joint venture agreement. In all, the real estate developer paid $106 million to an unnamed third party intermediary with the politicians.

On November 22, 1996, the SEC filed a four count Complaint in the District of Columbia against Montedison alleging (1) violations of Section 10(b) of the Securities Act; (2) violations of Section 13(a) of the Securities Act; and (3-4) violations of the books & records and internal controls provisions of the FCPA. On March 28, 2001, Montedison (then, Compart) entered into a consent agreement with the SEC. Under the terms of the agreement, Montedison consented to entry of judgment without admitting or denying the allegations in the complaint and agreed to pay a civil fine of $300,000.

Country(ies) involved:    Italy

Sanction to Bribe Ratio:    $300,000 / $378,000,000 = 0.08 %

Sanction to Revenue Ratio:    N/A

Sanction to Profit Ratio:    N/A

Number of Related Enforcement Actions (Including This Enforcement Action):    1

Country(ies) involved:    Italy

Total $ Bribery Payments:    $378,000,000

Total $ Revenue Generated from Bribery:    N/A

Total $ Profit Earned or Expenses Avoided from Bribery:    N/A

Total $ Monetary Sanctions:    $300,000

Sanction to Bribe Ratio:    $300,000 / $378,000,000 = (0.08 %)

Sanction to Revenue Ratio:    N/A

Sanction to Profit Ratio:    N/A

Name:    Montedison S.p.A.

Place of Incorporation:    Italy

HQ Country(ies):    Italy

Entity Type:    Public Company

FCPA Claims:    Books & Records, Primary, Issuer (15 U.S.C. § 78m (b)(2)(A)) ; Internal Controls, Primary, Issuer (15 U.S.C. § 78m(b)(2)(B))

Related Claims:    Securities Fraud (15 U.S.C. § 78j) ; Securities Fraud (17 C.F.R. § 240.10b-5) ; Failure to File Accurate Reports (15 U.S.C. § 78m(a)) ; Failure to File Accurate Reports (17 C.F.R. §§ 240.12b-20, 240.13a-1, 240.13a-13)

Statutory Basis for FCPA Jurisdiction:    Issuer

Period of Bribery:   1988 - 1993

Total Bribery Payments:    $378,000,000

Total Revenue Generated from Bribery:    N/A

Total Profit Earned or Expenses Avoided from Bribery:    N/A

Country(ies) involved:    Italy

Officials Potentially Influenced (Name; Title; Organization): 

  • Name N/A, Politicians; Italian government

Defendant-Related Entities Involved in the Misconduct:    Unnamed wholly owned subsidiary of Montedison - Subsidiary

Third-Party Intermediary:   

  • Exilar International SA , Shell Company
  • Financing and Investments NV , Shell Company
  • Italian real estate developer , Agent/Consultant/Broker
  • Unnamed third party intermediary , Agent/Consultant/Broker

Type of Bribe:   Money

Cash, Wire or Check:    N/A

Purpose of Bribe:    Influence the adjudication of disputes, lawsuits, or enforcement actions

TRANSACTION OVERVIEW
The Exilar Loan

Period of Bribery:   1988 – 1993

Total Bribery Payments:    $272,000,000

Total Revenue Generated from Bribery:    N/A

Total Profit Earned or Expenses Avoided from Bribery:    N/A

Country(ies) involved:    Italy

Officials Potentially Influenced (Name; Title; Organization):  

  • Name N/A, Politicians; Italian government;

Defendant-Related Entities Involved in the Misconduct:    Unnamed wholly owned subsidiary of Montedison - Subsidiary

Third Party Intermediary:    Exilar International SA - Shell Company
Financing and Investments NV - Shell Company

Type of Bribe:   Money

Cash, Wire or Check:    N/A

Purpose of Bribe:    N/A

TRANSACTION OVERVIEW
The ENIMONT Affair

Period of Bribery:   1988 – 1992

Total Bribery Payments:    $106,000,000

Total Revenue Generated from Bribery:    N/A

Total Profit Earned or Expenses Avoided from Bribery:    N/A

Country(ies) involved:    Italy

Officials Potentially Influenced (Name; Title; Organization):  

  • Name N/A, Politicians; Italian government;

Defendant-Related Entities Involved in the Misconduct:    N/A

Third Party Intermediary:    Italian real estate developer - Agent/Consultant/Broker
Unnamed third party intermediary - Agent/Consultant/Broker

Type of Bribe:   Money

Cash, Wire or Check:    N/A

Purpose of Bribe:    Influence the adjudication of disputes, lawsuits, or enforcement actions

Misconduct by Subsidiary?  No


M&A Negotiated or Completed During Misconduct, Investigation, or Resolution?     Yes

Type of Transaction:    Merger


Successor(s):   Compart, S.p.A.

Predecessor:  Montedison S.p.A.

  • Nature of Misconduct   
    • Misconduct Occurred Solely Pre-acquisition:    Yes
    • Misconduct Occurred Pre- and Post-acquisition, with NO Knowledge and/or Involvement of Successor:    No
    • Misconduct Occurred Pre and Post-acquisition, with Knowledge and/or Involvement of Successor:    No
  • Quality of Due Diligence:    N/A
  • Voluntary Disclosure by Successor in Connection with the Transaction:    No
  • DOJ Opinion Sought in Connection with Transaction:    No
  • Successor Liable for Predecessor Misconduct? :    Yes

  

Re: Montedison S.p.A.

  • 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
Montedison S.p.A.          

Aggravating Factors Referenced by the Government (Company Defendants):

Defendant Insufficient Cooperation Insufficient Remedial Measures
Montedison S.p.A.    

Total Monetary Sanctions for the Action:    $300,000

Case Status:    Resolved


Disposition:    Consent Agreement

Date of Disposition:    03/28/2001

Montedison S.p.A.

—  Total Monetary Sanctions for Defendant:    $300,000

—  Compliance Obligation:    No

—  Reporting Obligation:    No reporting

—  Admission of Guilt/Acceptance of Responsibility:    No

No Document Title Date Category