Agricultural equipment-maker AGCO Corporation will pay nearly $20 million in criminal and civil penalties to resolve charges related to kickbacks it paid under the U.N. oil for food program. Under its plea deal with the Justice Department, the Duluth, Ga.-based firm will pay a criminal penalty of $1.6 million and enter into a three-year deferred prosecution agreement. The DOJ charged its U.K. subsidiary, AGCO Limited, in a one- count criminal information with conspiracy (18 U.S.C. § 371) to commit wire fraud (18 U.S.C. § 1343) and to violate the books and records provisions of the Foreign Corrupt Practices Act by falsifying accounts of parent AGCO Corporation, an issuer ( 15 U.S.C. §§ 78m(b)(2)(A), 78m(b)(5), and 78ff(a)).
In settling civil charges brought by the Securities and Exchange Commission, AGCO Corporation will disgorge $13,907,393 in profits and $2 million in pre-judgment interest. It will also pay a civil penalty of $2.4 million. The SEC charged the company with failing to maintain an adequate system of internal controls to detect and prevent the corrupt payments and failing to properly record the payments (Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934).
AGCO is also paying a fine of $630,000 to the Danish State Prosecutor for Serious Economic Crimes to resolve criminal charges against its Danish subsidiary.
From 2000 through 2003, wholly-owned subsidiaries in Denmark, the U.K. and France paid about $5.9 million in kickbacks to the Iraqi regime and officials there in connection with sales of equipment under the oil for food program. The illegal payments were made through an agent and falsely recorded as “after sales service fees.” The U.K. subsidiary maintained and used a second set of accounts to track the payments. The SEC said,
The [second] accrual account was created by AGCO Ltd.’s marketing staff with virtually no oversight from AGCO Ltd.’s finance department. No one questioned the existence of the dual accounts. No one questioned why the Ministry Accrual account contained approximately ten percent of the contract value despite the fact that there was no contract in place requiring that such ten percent be paid to the ministry or anyone else. Unlike other payments to the agent, the Ministry Accrual payments were made by bank guarantee and in French francs or Euros instead of U.S. dollars. Marketing and finance employees in the U.K., Denmark, and France were all instrumental in the scheme. . . .AGCO's cooperation with U.S. authorities was evident. Among other things, in its deferred prosecution agreement it undertook to give the DOJ and other agencies all information it has about the illegal conduct and individuals involved, including the material from its internal investigations. The company didn't reserve the right to assert any claims of attorney-client or work-product privilege. In return, the DOJ didn't charge the U.S. parent company but only its U.K. subsidiary, and didn't bring substantive criminal FCPA or wire fraud charges, but instead used only the federal conspiracy statute. That should preserve AGCO Corporation's eligibility to do business with the U.S. government and bid for World Bank and IMF-funded projects.
AGCO operates worldwide and has annual revenues of about $8 billion. It manufacturers and sells tractors, combines, hay tools, sprayers, and forage and tillage equipment through its Challenger, Fendt, Massey Ferguson and Valtra brands.
AGCO Corporation trades on the New York Stock Exchange under the symbol AGCO.
Download the DOJ's September 30, 2009 release here.
Download the criminal information in U.S. v. AGCO Limited here.
Download AGCO Corporation's September 29, 2009 plea agreement with the Justice Department here.
View the SEC's Litigation Release No. 21229 dated September 30, 2009 in Securities & Exchange Commission v. AGCO Corporation, Civil Action No. 1:09-CV-01865 (D.D.C.)(RMU) here.
Download the SEC's civil complaint against AGCO Corporation here.