Enforcement Action

 

Docket or Case Number:    11-cv-01271

Court:    District of Columbia

Initiation Date:    07/13/2011  Information

Prosecuting Agency:    US Securities and Exchange Commission

Name of Prosecuting Attorneys:   

  • Gerald W. Hodgkins, SEC Headquarters
  • Gregory G. Faragasso , SEC Headquarters
  • Richard J. Kutchey, SEC Headquarters
  • Sarah L. Levine, SEC Headquarters

Assisting Agencies:    U.S. Department of Justice , Federal Bureau of Investigation

Type of Action:    SEC Federal Court Proceeding

Origin of the Proceeding:    Voluntary disclosure

Whistleblower:    Unknown

Case Status:    Resolved


Summary

Armor Holdings, Inc., during the relevant period, was a Delaware corporation, headquartered in Jacksonville, Florida, whose operating subsidiaries specialized in the manufacture and sale of military, law enforcement, and personnel safety equipment. During the relevant period, the company's common stock was registered with the Commission pursuant to Section 12(b) of the Exchange Act, and listed on the New York Stock Exchange and, thus, was an "issuer" pursuant to the FCPA. On July 31,2007, after the conduct described in this Complaint had already occurred, Armor Holdings was acquired by BAE Systems, Inc., an indirect wholly-owned U.S. subsidiary of Britain's BAE Systems PLC. Accordingly, Armor Holdings is no longer registered as an issuer of securities.

Armor Holdings Products, LLC ("AHP") and Armor Products International, Ltd. ("API") were wholly owned subsidiaries of Armor Holdings, Inc.

Between 2001 and 2006, AHP and API made at least ninety-two payments to a third party intermediary, totaling approximately $222,750. Agents of Armor Holdings caused API to wire payments to the intermediary with the understanding that part of these payments would be offered to a U.N. official who could help steer business to API. In that time, Armor Holdings derived gross revenues of approximately $7,121,237 and net profits of approximately $1,552,306.

Also, from around 2001 through June 2007, AHP also employed a separate accounting practice that disguised in the books and records of Armor Holdings roughly $4,371,278 in commissions paid to third-party intermediaries who brokered the sale of goods to foreign governments.

On July 13, 2011, the SEC filed a three count complaint against Armor Holdings alleging violations of the Anti-Bribery, Books & Records, and Internal Controls provisions of the FCPA. On the same day, without admitting or denying the allegations in the complaint, Armor Holdings entered into a Consent Agreement with the SEC . The Agreement permanently enjoined Armor Holdings from violating Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, ordered the company to pay disgorgement of $1,552,306, plus prejudgment interest of $458,438 and a civil penalty of $3,680,000, and further ordered the company to comply with certain undertakings regarding its FCPA compliance program. The Agreement was approved by the court on July 23, 2012.

Separately, Armor Holdings entered into a Non-Prosecution Agreement with the DOJ. In that agreement, Armor agreed to pay a penalty of $10,290,000 and agreed to implement enhanced compliance programs including an internal monitor to report on compliance to the board of directors and the DOJ for a period of two years.

Country(ies) involved:    N/A

Sanction to Bribe Ratio:    $5,690,744 / $222,750 = 2554.77 %

Sanction to Revenue Ratio:    $5,690,744 / $7,121,237 = 79.91 %

Sanction to Profit Ratio:    $5,690,744 / $1,552,306 = 366.60 %

Number of Related Enforcement Actions (Including This Enforcement Action):    2

Country(ies) involved:    N/A

Total $ Bribery Payments:    $222,750

Total $ Revenue Generated from Bribery:    $7,121,237

Total $ Profit Earned or Expenses Avoided from Bribery:    $1,552,306

Total $ Monetary Sanctions:    $15,980,744

Sanction to Bribe Ratio:    $15,980,744 / $222,750 = (7174.30 %)

Sanction to Revenue Ratio:    $15,980,744 / $7,121,237 = (224.41 %)

Sanction to Profit Ratio:    $15,980,744 / $1,552,306 = (1029.48 %)

Name:    Armor Holdings Inc.

Place of Incorporation:    United States

HQ Country(ies):    United States

Entity Type:    Public Company

FCPA Claims:    Anti-Bribery, Primary, Issuer (15 U.S.C. § 78dd-1) ; 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:    N/A

Statutory Basis for FCPA Jurisdiction:    Issuer

Period of Bribery:   2001 - 2006

Total Bribery Payments:    $222,750

Total Revenue Generated from Bribery:    $7,121,237

Total Profit Earned or Expenses Avoided from Bribery:    $1,552,306

Country(ies) involved:    N/A

Officials Potentially Influenced (Name; Title; Organization): 

  • Name N/A, Official; United Nations

Defendant-Related Entities Involved in the Misconduct:    Armor Holdings Products, LLC - Subsidiary ; Armor Products International Ltd. - Subsidiary

Third-Party Intermediary:   

  • Third party intermediary , Agent/Consultant/Broker

Type of Bribe:   Money

Cash, Wire or Check:    Wire Transfer

Purpose of Bribe:    Obtain/retain business

TRANSACTION OVERVIEW
Bribes to the U.N.

Period of Bribery:   2001 – 2006

Total Bribery Payments:    $222,750

Total Revenue Generated from Bribery:    $7,121,237

Total Profit Earned or Expenses Avoided from Bribery:    $1,552,306

Country(ies) involved:    N/A

Officials Potentially Influenced (Name; Title; Organization):  

  • Name N/A, Official; United Nations;

Defendant-Related Entities Involved in the Misconduct:    Armor Holdings Products, LLC - Subsidiary ; Armor Products International Ltd. - Subsidiary

Third Party Intermediary:    Third party intermediary - Agent/Consultant/Broker

Type of Bribe:   Money

Cash, Wire or Check:    Wire Transfer

Purpose of Bribe:    Obtain/retain business

Misconduct by Subsidiary?  Yes


Parent(s):   Armor Holdings Inc.; Armor Holdings Products, LLC

Subsidiary:  Armor Holdings Products, LLC

  • 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?:    Yes

Subsidiary:  Armor Products International, 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?:    Yes

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

Type of Transaction:    Acquisition


Successor(s):   BAE Systems PLC

Predecessor:  Armor Holdings Inc.

  • 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? :    No

  

Re: Armor Holdings Inc.

  • 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
Armor Holdings Inc.        

Aggravating Factors Referenced by the Government (Company Defendants):

Defendant Insufficient Cooperation Insufficient Remedial Measures
Armor Holdings Inc.    

Total Monetary Sanctions for the Action:    $5,690,744

Case Status:    Resolved


Disposition:    Consent Agreement

Date of Disposition:    07/23/2012

Armor Holdings Inc.

—  Total Monetary Sanctions for Defendant:    $5,690,744

—  Compliance Obligation:    Yes

—  Reporting Obligation:    Self-reporting

—  Admission of Guilt/Acceptance of Responsibility:    No

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