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.
ABB Ltd. was a Swiss corporation headquartered in Zurich, Switzerland. ABB was a global provider of power and automation products and services that operated through hundreds of subsidiaries worldwide. ABB's American Depositary Shares were registered with the SEC since April 4, 2001, and traded on the New York Stock Exchange.
ABB Ltd - Jordan was a wholly owned subsidiary of ABB Ltd. ABB Near East Trading Ltd ("ABB Near East") was a 95% owned subsidiary of ABB Ltd - Jordan. ABB Ltd - Jordan, through ABB Near East, provided equipment and services to electrical utilities, including control measurement and protection systems, transducers, and metering equipment.
From about April 2000 through about April 2004, ABB Near East received eleven purchase orders for electrical equipment and services worth over $5.9 million with the General Company for Electricity Energy Production ("GEEP"), the Baghdad Mayoralty, and State Company Baghdad Electricity Distribution, all of which were regional companies of the Iraqi Electricity Commission, an Iraqi government agency, pursuant to the Oil For Food Program. To obtain these purchase orders, ABB Near East caused over $300,000 in kickbacks to be paid to the government of Iraq.
On September 29, 2010, the DOJ filed a single count Information in the Southern District of Texas against ABB Ltd - Jordan alleging conspiracy to violate the books & records provisions of the FCPA and conspiracy to commit wire fraud.
Although not criminally charged, ABB Ltd. entered into a three-year Deferred Prosecution Agreement with the DOJ on the same day. Under the terms of the DPA, ABB Ltd. agreed to pay a total monetary penalty in the amount of $30,420,000, or the bottom of the applicable combined Sentencing Guidelines fine range for ABB Inc. and ABB Ltd - Jordan. ABB Ltd would pay $28,500,000 on behalf of ABB Inc. in connection with ABB Inc.'s guilty plea and $1,920,000 on behalf of ABB Ltd - Jordan in connection with the Deferred Prosecution Agreement. This fine represented an upward adjustment in the applicable culpability score based on ABB Ltd.’s alleged status as a repeat offender.
At sentencing, however, Judge Lynn Hughes refused to rubber stamp the parties' settlement. Judge Hughes declared that ABB Ltd. was not a recidivist because the entire corporation could not be held responsible for the rogue actions of a few individuals. Judge Hughes then discounted the proposed increased culpability score for repeat offenses and reduced the size of the fine by roughly $13,000,000 to $17,100,000 – a fine at the lowest end of the applicable range for non-recidivists. Accordingly, ABB Ltd. was sanctioned a total of approximately $19 million - $17.1 million for ABB Inc. and $1.92 million for ABB Ltd - Jordan. ABB Inc. was ordered to pay a fine of $17.1 million, which was deducted from the penalty imposed on ABB Ltd.
