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.
Textron is a Delaware corporation with its headquarters in Providence, Rhode Island. Textron is a global, multi-industry company that operates in four business segments. Its Industrial Segment is comprised of numerous subsidiaries, including several under the name "David Brown." Textron's common stock is registered with the Commission pursuant to Section 12(b) [15 U.S.C. § 781(b)] of the Exchange Act and is traded on the New York Stock Exchange under the symbol "TXT."
Union Pump S.A.S., formerly known as David Brown Guinard Pumps S.A.S. ("DB Guinard Pumps"), acquired by Textron in December 1999, is a wholly-owned fifth-tier French subsidiary of Textron that is part of the company's Industrial Segment. DB Guinard Pumps manufactures industrial pumps for the oil, gas and petrochemical industries. DB Guinard Pumps is located in Annecy, France.
David Brown Transmissions France S.A. ("DB Transmissions France"), acquired by Textron in November 1998, is a wholly-owned fifth-tier French subsidiary of Textron that is part of the company's Industrial Segment. DB Transmissions France designed and manufactured industrial gears, transmissions and other items. DB Transmissions France was located in Chassieu, France.
From 2001 to 2005, DB Guinard Pumps and DB Transmissions France made a series of illicit payments both in Iraq, as part of the U.N. Oil for Food Program, and in several other countries, all in order to secure contracts to sell a variety of its products. In Iraq, Textron's subsidiaries made a total of $650,539 in illicit payments to Iraqi government ministries and secured total profits of $1,936,926 on those contracts. In the United Arab Emirates, Bangladesh, Indonesia, Egypt, and India, Textron's subsidiaries made a total of $114,995 in illicit payments and secured total profits of $328,939 on those contracts.
Despite the illegality of these payments, the DOJ agreed not to file criminal charges against the company or its subsidiaries in recognition of Textron’s early discovery and reporting of the improper payments; Textron’s’ thorough review of those payments as well as its discovery and review of improper payments made in other countries; and the company’s implementation of enhanced compliance policies and procedures. On August 21, 2007, Textron entered into a non-prosecution agreement with the DOJ under which it agreed to pay a fine of $1.15 million and to strengthen its compliance, bookkeeping and intemal controls standards and procedures.
In a related SEC civil injunctive action, Textron agreed to pay approximately $3.5 million in disgorgement and civil penalties.
