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.
Ingersoll-Rand Company Limited ("Ingersoll-Rand") is a Bermuda company with its executive offices in Montvale, New Jersey, and Davidson, North Carolina. Ingersoll-Rand is a global diversified industrial firm that provides industrial equipment and products and services to transport food and perishables, and secure homes and commercial properties. ABG Allgemeine Baumaschinen-Gesellschaft mbH ("ABG") was a wholly-owned German subsidiary of Ingersoll-Rand. During the relevant time, ABG manufactured and sold road construction equipment, including pavers and compactors. Ingersoll-Rand Italiana, SpA. ("I-R Italiana") is a wholly-owned Italian subsidiary of Ingersoll-Rand. I-R Italiana manufactures and sells large air compressors under the brand name Centac for use in oil refineries. Thermo King Ireland Limited ("Thermo-King Europe") is a wholly-owned Irish subsidiary of Ingersoll-Rand. Thermo-King Europe manufactures and sells refrigeration equipment for trucks, buses, and rail cars. Ingersoll-Rand Benelux, N.V. ("I-R Benelux") is a wholly-owned Belgian subsidiary of Ingersoll-Rand. I-R Benelux manufactures and sells skid steer loaders and other compact construction vehicles.
From approximately 2000 through 2003, Ingersoll-Rand's subsidiaries entered into contracts involving approximately $1,507,845 in kickback payments in connection with sales of industrial equipment to Iraqi government entities under the United Nations Oil for Food Program. In total, Ingersoll-Rand subsidiaries, their distributors, and one contract partner made payments of approximately $963,148 and authorized additional payments of $544,697. The kickbacks paid in connection with Ingersoll-Rand's Oil for Food contracts had the effect of diverting funds out of the escrow account and into an Iraqi slush fund. In accounting for certain of its Oil for Food Program transactions, Ingersoll-Rand failed to accurately record the nature of the payments as kickbacks to the Iraqi regime. Ingersoll-Rand also failed to devise and maintain a system of internal accounting controls sufficient to detect and prevent the illicit payments.
The SEC filed a two count complaint against Ingersoll-Rand on October 31, 2007. That same day, Ingersoll-Rand entered into a consent agreement with the SEC which enjoined the company from future violations of the books & records and internal controls provisions of the FCPA. The agreement required Ingersoll-Rand to disgorge $1,710,034 in improper profits, along with pre judgment interest of $560,953, and to pay a civil penalty of $1,950,000. The agreement further required the company to retain an outside expert to review the company's compliance programs.
In a related action, Ingersoll-Rand entered into a Deferred Prosecution Agreement with the DOJ. The agreement covered the informations filed against Thermo King Ireland Limited and Ingersoll-Rand Italiana S.p.A., another Ingersoll subsidiary. The agreement requires Ingersoll to pay a criminal fine of $2,500,000 and to enhance its compliance programs.
