Enforcement Action

 

Docket or Case Number:    N/A

Court:    N/A

Initiation Date:    07/13/2011  Information

Prosecuting Agency:    US Department of Justice

Name of Prosecuting Attorneys:   

  • Denis J. McInerney, Chief, Fraud Section, Criminal Division
  • Charles E. Duross, Deputy Chief, Fraud Section, Criminal Division
  • Laura N. Perkins, Trial Attorney, Fraud Section, Criminal Division

Assisting Agencies:    N/A

Type of Action:    DOJ Criminal 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 Products International, Ltd. ("API") was a wholly owned subsidiaries of Armor Holdings, Inc.

From around September 2001 through around 2006, API made corrupt payments through its U.N. Agent to a United Nations procurement official to induce that official to provide non-public, inside information to API, and to cause the U.N. to award body armor contracts to API worth approximately $6 million. API paid the U.N. Agent more than $200,000 in commissions for the 2001 and 2003 U.N. contracts obtained by API, knowing that a portion of that money was to be passed on by the U.N. Agent to a U.N. procurement official. The 2001 and 2003 U.N. body armor contracts resulted in a total profit to API of approximately $1 million.

Also, from around 2001 through June 2007, Armor Holding's Products Group also employed a separate accounting practice that disguised in the books and records of Armor Holdings roughly $4.4 million in commissions paid to third-party intermediaries who brokered the sale of goods to foreign governments.

On July 13, 2011, the DOJ entered into a Non-Prosecution Agreement with Armor Holdings. In the Agreement, Armor accepted its responsibility for the violations of the Anti-Bribery, Books & Records, and Internal Controls provisions of the FCPA. Under the agreement, Armor was required 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.

Separately, in a parallel SEC civil case, without admitting or denying the allegations, Armor Holdings consented to entry of a permanent injunction against further violations and agreed to pay $1,552,306 in disgorgement, $458,438 in prejudgment interest, and a civil money penalty of $3,680,000 as well as the compliance program noted above.

Country(ies) involved:    N/A

Sanction to Bribe Ratio:    $10,290,000 / $200,000 = 5145.00 %

Sanction to Revenue Ratio:    $10,290,000 / $6,000,000 = 171.50 %

Sanction to Profit Ratio:    $10,290,000 / $1,000,000 = 1029.00 %

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:    $200,000

Total Revenue Generated from Bribery:    $6,000,000

Total Profit Earned or Expenses Avoided from Bribery:    $1,000,000

Country(ies) involved:    N/A

Officials Potentially Influenced (Name; Title; Organization): 

  • Name N/A, Procurement Official; United Nations

Defendant-Related Entities Involved in the Misconduct:    Armor Products International Ltd. - Subsidiary

Third-Party Intermediary:   

  • U.N. Agent , Agent/Consultant/Broker

Type of Bribe:   Money

Cash, Wire or Check:    Wire Transfer

Purpose of Bribe:    Obtain/retain business

TRANSACTION OVERVIEW
Payments to U.N.

Period of Bribery:   2001 – 2006

Total Bribery Payments:    $200,000

Total Revenue Generated from Bribery:    $6,000,000

Total Profit Earned or Expenses Avoided from Bribery:    $1,000,000

Country(ies) involved:    N/A

Officials Potentially Influenced (Name; Title; Organization):  

  • Name N/A, Procurement Official; United Nations;

Defendant-Related Entities Involved in the Misconduct:    Armor Products International Ltd. - Subsidiary

Third Party Intermediary:    U.N. Agent - 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? :    Yes

  

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:    $10,290,000

Case Status:    Resolved


Disposition:    Non-Prosecution Agreement

Date of Disposition:    07/13/2011

Armor Holdings Inc.

—  Total Monetary Sanctions for Defendant:    $10,290,000

—  Organizational Probation:    None

—  Compliance Obligation:    Yes

—  Reporting Obligation:    Self-reporting

—  Admission of Guilt/Acceptance of Responsibility:    Yes

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