Exec Claims GE Fired Him For Reporting FCPA Concerns

A former country manager in Iraq for a GE subsidiary claims he was fired for telling supervisors and an ombudsman about potential FCPA problems.

Khaled Asadi, a dual citizen of the United States and Iraq, was based in Amman, Jordan.

He served as country executive in Iraq for G.E. Energy (USA) LLC from 2006 until June 2011. He claims he was fired after raising FCPA compliance concerns when GE was pursuing a seven-year $250 million contract with Iraq's Ministry of Electricity.

G.E. Energy, a Texas company, is a subsidiary of the General Electric Company. The Anti-Whistleblower Retaliation provisions of the Securities Exchange Act protect employees of public companies who were fired or discriminated against for reporting illegal behavior by the company. Asadi brought his suit in federal court in Houston. He's asking for reinstatement, two times his back pay, and litigation costs and attorney fees.

General Electric Company settled an FCPA enforcement action with the SEC in July 2010. It paid $23.4 million in disgorgement, interest, and a civil penalty for violations of the FCPA's books and records and internal controls provisions. From 2000 to 2003, the SEC said, four GE subsidiaries paid $3.6 million in kickbacks to the prior Iraqi regime for medical supply and water purification contracts. The kickbacks violated the United Nation's oil-for-food program and weren't properly accounted for.

The GE subsidiaries named by the SEC were Marquette-Hellige and OEC-Medical Systems (Europa) AG, Ionics Italba S.r.L. (a then-subsidiary of Ionics), and Nycomed Imaging AS (a then-subsidiary of Amersham). Those subsidiaries are now known as GE Healthcare Ltd. and GE Ionics Inc. and aren't mentioned in the new civil suit.

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Asadi's allegations in his complaint are:

In June 2010, he was alerted by a source in the Iraqi government that G.E. had hired a woman closely associated with the Senior Deputy Minister of Electricity (Iraq) to curry favor with the Ministry while in negotiation for a Sole Source Joint Venture Contract with the Ministry of Electricity.

Concerned that the hiring of this ‘female associate’ could be damaging to GE’s reputation and potentially violate the Foreign Corrupt Practice Act, Asadi immediately objected to the hiring and raised this issue with his supervisor.

He, along with a colleague from GE’s oil and gas division, took the concern a step further by raising the issue with the Ombudsperson for G.E.

In direct response to his actions, Asadi’s immediate supervisor began pressuring him to step down from his position with G.E. He was offered several alternatives including the possibility of a new assignment within the region.

Shortly after his discussion with the Ombudsperson, Asadi received an extremely negative and troubling performance review. While no significant employment issues were identified in the review, the company began aggressive negotiations for Asadi's departure.

The negotiations continued until GE abruptly ended discussions and terminated Asadi's employment on June 24, 2011.

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Asadi said the seven-year, $250 million contract between GE and the Ministry of Electricity was signed in Baghdad in December 2010.

Innospec Director Pleads Guilty In U.K.

The Serious Fraud Office said the former sales and marketing director in the U.K. for Innospec pleaded guilty this week to three criminal counts of conspiracy to corrupt.

David Turner, 56, appeared Tuesday at the Southwark Crown Court in London.

According to the SFO, he was charged with two counts of conspiring to bribe public officials in Indonesia and Iraq. The illegal payments were for sales of Innospec's gas additive products, including tetraethyl lead.

Turner also pleaded guilty, the SFO said, to conspiring to bribe Iraqi officials 'to ensure that tests on MMT, a competitor product manufactured by Ethyl Corporation, conducted by or on behalf of the Government of Iraq, concluded with an unfavourable assessment of that product.'

The alleged offenses occurred between 2002 and 2008.

The court didn't set a date for sentencing, the SFO said.

Turner, a U.K. citizen, settled civil charges with the U.S. SEC in 2010. He disgorged $40,000 and wasn't required to pay any further civil penalty.

Two other Innospec executives, Dennis Kerrison and Paul Jennings, have also been charged with criminal offenses in the U.K. Their next court appearance for a plea will be in April.

In 2010, Innospec -- a specialty chemical-maker based in Delaware -- reached a $40 million global settlement of more than a dozen criminal charges in the U.S. and U.K., including FCPA and U.N. oil for food program offenses, and violations of the U.S. trade embargo against Cuba.

Last month, Innospec's agent in Iraq, Ousama Naaman, was sentenced in the U.S. to thirty months in prison. He pleaded guilty to conspiracy and violating the Foreign Corrupt Practices Act.

No Innospec employees have faced criminal charges in the U.S.

Naaman also settled civil charges with the SEC in 2010. He agreed to disgorge $810,076 plus prejudgment interest of $67,030, and pay a civil penalty of $438,038.

The Serious Fraud Office said it had help in Turner's prosecution from the U.S. Department of Justice, the SEC, the City of London Police, and the Cheshire Constabulary.

Thirty Months For Naaman

Innospec's former agent who pleaded guilty last year to bribing Iraqi officials and violating the U.N.'s oil for food program was sentenced today to thirty months in federal prison and fined $250,000.

Naaman, 62, a Canadian citizen, is the only individual prosecuted so far in the United States for Innospec's bribery.

The judge didn't say when he has to surrender and start serviing his prison sentence. He's now free on personal recognizance bond.

Innospec, a Delaware-based specialty-chemical maker, reached a $40 million global settlement last year of more than a dozen criminal charges in the U.S. and U.K.

The DOJ had asked that Naaman be jailed for seven and a half years. Based on his guilty plea, he could have been jailed for more than ten years. His lawyers had argued for time served based on his custody after arrest and later under home detention.

Three former Innospec executives -- Dennis Kerrison, Paul Jennings,  and David Turner -- have been charged by the U.K. Serious Fraud Office with overseas bribery. Their next hearing in London is set for January 6, 2012.

Naaman was arrested in July 2009 in Frankfurt, Germany. The Justice Department extradited him to the United States. In a superseding information, he was charged in Count One under 18 U.S.C. §371 with conspiracy to defraud the U.N. oil-for-food program and to violate both the antibribery and books and records provisions of the FCPA. In Count Two, he was charged under 15 U.S.C. §78dd-l with violating the FCPA and under 18 U.S.C. §2 as an aider and abettor.

In his guilty plea, Naaman admitted paying or promising to pay more than $3 million to officials at Iraq's Ministry of Oil and the Trade Bank of Iraq to win business for Innospec. The company makes and markets the anti-knock compound tetraethyl lead (TEL) used in leaded gasoline. Demand for TEL dropped in most Western countries after enactment of the U.S. Clean Air Act. But Innospec's management encouraged bribery to boost sales in other markets, mainly in developing countries.

In August last year, Naaman and David Turner, one of the London defendants, settled civil FCPA charges with the SEC.

Turner agreed to disgorge $40,000 to the SEC. He wasn't required to pay any civil penalty. The SEC said he provided "extensive and ongoing cooperation in the investigation." Naaman agreed to disgorge $810,076 plus prejudgment interest of $67,030, and pay a civil penalty of $438,038. The civil penalty will be reduced by $250,000 -- the amount of his criminal fine.

What Sentence Is Fair For Naaman?

When Ousama Naaman is sentenced -- now scheduled for December 22 at 10:30 AM before Judge Ellen S. Huvelle in federal court in the District of Columbia -- prosecutors will ask for a seven and half year prison term.

Naaman has said that if his bribery conspiracy was really as bad as the DOJ claimed, why weren't others prosecuted? Why was he the only conspirator to face charges in the United States?

Naaman was Innospec's former agent in Iraq. He pleaded guilty in June last year to one count of conspiracy to violate the Foreign Corrupt Practices Act and commit wire fraud, and one count of violating the FCPA.

After indicting Naaman, the DOJ handed off to the U.K. the prosecution of those who may have helped him bribe Iraqi officials. As of today, the U.K. Serious Fraud Office has charged three individuals in the case.

Naaman argued in a brief last month that the U.K. has a more lenient sentencing regime. Even if individuals charged there are more culpable then he is, Naaman said, they won't face long prison terms.

Naaman told Judge Huvelle:

It is unclear what course the government expects the United Kingdom will take with the other co-conspirators. On the one hand, it says it will "defer prosecution" to a foreign sovereign, but -- on the other hand -- the government argues that there can be "no disparity" when the coconspirator has not been charged or sentenced. Obviously, if the co-conspirators are charged in the United Kingdom under a far more lenient sentencing regime than exists in the United States, this will produce a relevant sentencing disparity.

To support his argument, Naaman tracked sentences imposed on defendants convicted in other SFO prosecutions for oil-for-food bribery prosecutions.

The U.K.'s sentencing record, Naaman said, looks like this:

•  Mark Jessop sentenced to 24-weeks imprisonment for engaging in 54 contracts worth more than $12.3 million with Iraq.

•  Riad El-Taher paid $500,000 in bribes to Iraqi officials and was sentenced to 10-months imprisonment, which was later reduced to 8 months.

•  Aftab Noor Al-Hassan sentenced to a suspended sentence or 16-months imprisonment for paying $1.6 million in bribes to Iraqi officials for oil contracts that profited him $4.4 million.

•  Richard Forsyth sentenced to 21-months imprisonment, David Mabey sentenced to 8-months imprisonment and Richard Gledhill was given a suspended sentence of 8-months imprisonment for making illegal payments to Iraq of more than €420,000.

Last month, a reader talking about the Tesler case reminded us that multi-jurisdictional anti-bribery enforcement is complicated. The Naaman case proves his point. 

Two More Innospec Execs Charged In London

Two former CEOs of Innospec businesses were charged with corruption in the U.K. last week.

The Serious Fraud Office said Dennis Kerrison and Paul Jennings appeared before Westminster Magistrates' Court Thursday on charges 'surrounding alleged corrupt payments to gain public contracts in Indonesia.'

Jennings was also charged for alleged corrupt payments in Iraq. 

The case was sent to the Southwark Crown Court.

Last month, a former Innospec business unit director, Dr David Turner, 56, was charged in London with conspiring to make corrupt payments to public officials in Indonesia and Iraq. His case is also pending in the Southwark Crown Court.

Kerrison, 67, of Chertsey, Surrey, was CEO of Associated Octel Corporation (subsequently renamed Innospec Ltd). He was charged with conspiracy to corrupt by bribing public officials and other agents of the government of Indonesia. The payments were intended to secure sales of Innospec's gasoline additive, tetraethyl lead.

Jennings, 54, of Neston, Cheshire, is also a former CEO of Innospec. The SFO charged him with two allegations of conspiracy to corrupt. He allegedly bribed government officials in both Indonesia and Iraq to sell tetraethyl lead.

Jennings is also accused of conspiracy to defraud Ethyl Corporation by bribing government officials in Iraq 'as inducements to ensure that tests on MMT, a competitor product manufactured by Ethyl Corporation . . . concluded with an unfavourable assessment of that product.'

The alleged offences happened between 2002 and 2008, the SFO said.

The next hearing in the case is set for January 6, 2012.

In March last year, Innospec -- a specialty chemical-maker based in Delaware -- reached a $40 million global settlement of more than a dozen criminal charges in the U.S. and U.K.

Innospec's agent in Iraq, Ousama Naaman, pleaded guilty in June last year in Washington, D.C. to conspiracy and violating the Foreign Corrupt Practices Act. He's waiting to be sentenced.

Kerrison and Jennings were released on conditional bail.

The SFO's Ocober 27 release is here.