In August 1990, the U.N. adopted Security Council Resolution 661, which prohibited U.N. member-states from transacting business with Iraq, except for the purchase and sale of humanitarian supplies. In April 1995, the U.N. adopted Security Council Resolution 986, a limited exception to Resolution 661 which allowed Iraq to sell its oil so long as the proceeds from oil sales were used by the Iraqi government to purchase humanitarian supplies for the Iraqi people. The U.N. controlled the proceeds from all sales of Iraqi oil and approved payments to suppliers of humanitarian goods. This program became known as the Oil for Food Program. Beginning in approximately August 2000, the Iraqi government demanded that suppliers of humanitarian goods pay a kickback, usually valued at 10% of the contract price, to the Government of the Republic of Iraq in order to be awarded a contract by the government. Suppliers often caused the U.N. to unknowingly fund these improper kickbacks by including the cost of the kickbacks in the contract price.
Innospec Inc., previously known as Octel Corporation, is a Delaware corporation with its principal executive offices in the United States and Ellesmere Port, United Kingdom. Innospec manufactures, distributes and markets fuel and specialty chemicals to oil refineries and other chemical and industrial companies throughout the world. Its operations are divided into three distinct business areas: Fuel Specialties, Active Chemicals and Octane Additives. As part of its Octane Additives business, Innospec manufactures and sells Tetra Ethyl Lead ("TEL"), a product that is used to boost the octane value of leaded gasoline and certain types of jet fuel. Innospec's common stock is registered with the Commission under Section 12(b) of the Exchange Act and since March 21, 2006, it has traded on the NASDAQ under the symbol "IOSP."
David P. Turner held various roles at Innospec, including the Business Director of Innospec's TEL group, from at least 1995 until January 2009 when he was placed on administrative leave by the company.
Ousama M. Naaman was the agent in Iraq for Innospec and Alcor, a wholly-owned subsidiary of Innospec, from at least 1995 until 2008. As Innospec's and Alcor's agent, Naaman negotiated contracts with the Iraqi Ministry of Oil for the sale of TEL to Iraq. Naaman was the principal of two companies, Interact SA.R.L. and Tawam Commercial Est., which he used to facilitate the payment of kickbacks and bribes.
From 2000 to 2008, Innospec routinely paid bribes to government officials in order to sell TEL to government-owned refineries and oil companies in Iraq and Indonesia. Innospec's known bribery activities in Iraq began with its participation in the United Nations Oil for Food Program in 2001 and extended all the way until at least 2008. Turner, the Business Director of Innospec's TEL group, and Naaman, Innospec's agent, both actively participated in the bribery and kickback schemes in Iraq. Innospec also paid bribes to government officials in Indonesia beginning as early as 2000, and continued until 2005, when Indonesia's need for TEL ended. Turner actively participated in the bribery scheme in Indonesia. Innospec's internal controls failed to detect the illicit conduct, which continued for nearly a decade. In all, Innospec made illicit payments of approximately $6,347,588 and promised an additional $2,870,377 in illicit payments to Iraqi ministries and government officials as well as Indonesian government officials in exchange for contracts worth approximately $176,717,341 in revenues and profits of $60,071,613.
On March 17, 2010, the SEC filed a complaint against Innospec in the District of Columbia, alleging violations of the anti-bribery, books and records, and internal controls provisions of the FCPA. Without admitting or denying the Commission’s allegations, Innospec consented to the entry of a court order permanently enjoining it from future violations of Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act; ordering it to pay $60,071,613 in disgorgement, provided that the Commission waive all but $11,200,000 of disgorgement and permitting payment in four installments based upon Innospec’s sworn Statement of Financial Condition; and ordering it to comply with certain undertakings regarding its FCPA compliance program, including retention of an independent monitor for three years.
The consent agreement between Innospec and the SEC was part of a $40.2 million global settlement with the Commission, the Department of Justice, Fraud Section (“DOJ”), the United Kingdom’s Serious Fraud Office (“SFO”), and the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”). As part of the global settlement, Innospec agreed to pay $11,200,000 of disgorgement to the SEC, a reduced criminal fine of $14.1 million to the DOJ and a criminal fine of $12.7 million to the SFO. Innospec also agreed to pay $2.2 million to OFAC for unrelated conduct concerning allegations of violations of the Cuban Assets Control Regulations. This represents the first corruption-related settlement coordinated between the Commission, the DOJ, and the SFO.
Turner and Naaman separately settled claims with the SEC. Naaman also pleaded guilty to one count of conspiracy to commit wire fraud, violate the FCPA, and falsify the books and records of a U.S. issuer, and one count of violating the FCPA, and was sentenced to 30 months in prison and ordered to pay a $250,000 fine.
