Aon Pays $16.2 Million In Settlement

Aon Corporation, one of the biggest insurance brokerage firms in the world, agreed today to resolve FCPA charges with the DOJ and SEC.

It will pay a $1.76 million criminal penalty to the DOJ and $14.5 million in disgorgement and prejudgment interest to the SEC.

A U.K. subsidiary of Chicago-based Aon paid a penalty of £5.25 million to the U.K.'s Financial Services Authority in 2009 to resolve overseas bribery allegations. The fine was the largest the FSA had levied for financial crimes.

Citing Aon’s 'extraordinary cooperation,' the DOJ entered into a non-prosecution agreement with the company and its U.K. subsidiary, Aon Limited.

Aon’s subsidiaries, the SEC said, made over $3.6 million in improper payments between 1983 and 2007 to win or retain insurance business in Costa Rica, Egypt, Vietnam, Indonesia, the United Arab Emirates, Myanmar, and Bangladesh. The company made $11.4 million in profits from the bribes.

'[S]ome of the improper payments,' the SEC said, 'were made directly or indirectly to foreign government officials who could award business directly to Aon subsidiaries, who were in position to influence others who could award business to Aon subsidiaries, or who could otherwise provide favorable business treatment for the company’s interests. . . . [T]hese payments were not accurately reflected in Aon’s books and records, and Aon failed to maintain an adequate internal control system reasonably designed to detect and prevent the improper payments.'

The improper payments were for training, travel, and entertainment provided to employees of foreign government-owned clients, and to 'third-party facilitators.'

The DOJ said Aon was given a non-prosecution agreement because of 'its timely and complete disclosure of improper payments in Costa Rica and other countries that it discovered during its thorough investigation of its global operations; its early and extensive remedial efforts; the prior financial penalty of £5.25 million that Aon Limited paid to the United Kingdom’s Financial Services Authority (FSA); and the FSA’s close and continuous supervisory oversight over Aon Limited.'

Aon Corporation trades on the NYSE under the symbol AON.

View the DOJ's December 20, 2011 release here.

View the SEC's Litigation Release No. 22203 and Accounting and Auditing Enforcement Release No. 3348 (both dated December 20, 2011) in Securities and Exchange Commission vs. Aon Corporation, Civil Action No. 1:11-cv-02256 (D.D.C.) (filed Dec. 20, 2011) here.

Bon Anniversaire, Guys

The Wall Street Journal's Corruption Currents just turned one. It celebrated with a post about the top five corruption convictions of the past twelve months.

Two entries have FCPA ties.

Former KBR middleman Jeffrey Tesler's astounding $149 million forfeiture order appears at number three.

And at number two is Costa Rica's former president, Miguel Angel Rodriguez. He was sentenced to five years in prison by a Costa Rican court for taking $800,000 in bribes from French phone giant Alcatel.

Congratulations to Corruption Currents and its generous authors Joe Palazzolo and Sam Rubenfeld, above.

We look forward to many more years of their great coverage.

ICE Loses 'Victim' Claim In Eleventh Circuit

The U.S. Court of Appeals for the Eleventh Circuit today said a lower court didn't make a mistake when it denied victim status to a Costa Rican state-owned utility.

"The district court identified the pervasive, constant, and consistent illegal conduct conducted by the 'principals' (i.e. members of the Board of Directors and management) of ICE . . . .," a two-judge panel wrote for the Atlanta-based Eleventh Circuit.

In a petition for mandamus filed Wednesday, ICE -- the Instituto Costarricense de Electricidad S.A. -- said the federal district court in Miami had been wrong to conclude earlier this month that ICE was a co-conspirator in Alcatel-Lucent's bribery and therefore could not have been a victim for purposes of U.S. federal law.

Following today's ruling, Alcatel-Lucent's $137 million FCPA settlement with the DOJ and SEC will go forward.

Under federal rules, petitions for mandamus -- requests for appellate courts to direct lower courts to take certain action -- have to be decided within 72 hours. ICE's mandamus petition asked the appellate court to stop the Alcatel-Lucent settlement and give victim status to ICE under federal law.

ICE was the first foreign government-linked entity to claim victim's rights in an FCPA enforcement action. If it had succeeded, the Costa Rican utility would have been entitled to restitution.

With potentially millions at stake, ICE's U.S. lawyers were aggressive in attacking the way the DOJ and SEC handled the case.

ICE accused them of ignoring federal victim-rights laws and holding an “imperialist” view of Latin America.

The DOJ said it always treated ICE and the Costa Rican government with courtesy and good faith, and that the mutual cooperation even resulted in Costa Rica receiving $10 million in restitution last year from Alcatel-Lucent France, S.A. for “moral damages” to the country's citizens.

"This marked the first time in Costa Rica’s history that a foreign corporation paid the Costa Rican government damages for corruption," the DOJ said.

Despite that record, the DOJ said, the case was marked by ICE's "vitriolic allegations and false accusations questioning the motives, competence, and conduct" of the DOJ and SEC.

ICE's failure to gain victim status will probably deter other foreign governments and state-owned enterprises from rushing to intervene in FCPA enforcement actions. 

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Download a copy of the Eleventh Circuit's June 17, 2011 order denying mandamus to ICE here.

Download a copy of ICE's June 15, 2011 petition for a writ of mandamus under the victim's rights act here.

Download a copy of ICE's May 2, 2011 petition for relief pursuant to 18 U.S.C. §3771(d)(3) and objection to plea agreements and deferred prosecution agreement in U.S. v. Alcatel-Lucent S.A. here.

Download a copy of the DOJ's reply brief here, and Alcatel-Lucent's reply brief here.

ICE Appeals 'Victim' Ruling

The Costa Rican state-owned utility that lost a bid earlier this month to become the first 'victim' compensated under federal law in an FCPA case has appealed the lower court's decision.

Instituto Costarricense de Electricidad S.A. (ICE) asked the United States Court of Appeals for the Eleventh Circuit to overturn District Court Judge Marcia G. Cooke's ruling that ICE wasn't a victim of Alcatel-Lucent's bribery and not entitled to restitution.

In the appeal filed Wednesday, ICE said the district court was wrong to conclude it was a co-conspirator and therefore could not have been a victim for purposes of U.S. federal law. That conclusion, ICE said in its brief, "is not supported by record evidence or the law."

When she made her ruling at the June 1 hearing in Miami, Judge Cooke said the issues were too intertwined as to whether ICE was a victim or an offender, and that corruption was rampant at ICE.

Her decision cleared the way for Alcatel-Lucent's $137 million settlement with the DOJ and SEC.

ICE had argued that just three of its directors and three employees out of 16,000 personnel benefited from Alcatel-Lucent's bribery.

Alcatel-Lucent's former top executive in Costa Rica, Edgar Valverde Acosta, said in a sworn statement filed in U.S. federal court last month that no one at ICE knew about Alcatel's bribery except those directly involved. Acosta, 63, is serving a year in prison in Costa Rica for corruption.

ICE was the first party to ask a U.S. court to grant it victim's status in an FCPA enforcement action.

The DOJ has opposed ICE's petition. "The evidence gathered during the investigation," the DOJ said in an earlier filing, "suggests that corruption at ICE was pervasive in the tender process and occurred at the highest reaches of ICE."

Even if ICE is a victim, the DOJ said, restitution is limited to the victim’s "provable actual loss." And that loss can't be established for ICE within any reasonable time, if at all. So blocking resolution of the Alcatel-Lucent enforcement action wouldn't serve justice, according to the DOJ.

Download a copy of ICE's June 15, 2011 petition for a writ of mandamus under the victim's rights act here.

Breaking News: ICE Loses 'Victim' Bid

At a hearing in federal court in Miami yesterday, Judge Marcia G. Cooke made a finding that Costa Rica's Instituto Costarricense de Electricidad S.A. (ICE) was not a victim of Alcatel-Lucent's bribery, and not entitled to restitution. 

At the hearing, Judge Cooke said the issues were too intertwined as to whether ICE was a victim or an offender, and that corruption was rampant at ICE.

The ruling vindicates the DOJ. Its practices had come under fire in ICE's court filings.

Unless ICE appeals, the ruling will end the first petition by an alleged victim in an FCPA enforcement action seeking to intervene and claim restitution under U.S. law.

The judge's action cleared the way for final court approval of Alcatel-Lucent's $137 million settlement with the DOJ and SEC.