In December 2008, Fiat S.p.A. ("Fiat"), an Italian provider of vehicles and agricultural and construction equipment, agreed to pay $17.8 million in combined fines and penalties for illegal kickback payments paid or caused to be paid by three wholly-owned subsidiaries to the former Iraqi government under the United Nations' Oil-for-Food Program.
Up until August 2007, Fiat had American Depositary Receipts ("ADRs") traded on the New York Stock Exchange and it was thus an "issuer" for purposes of the FCPA and subject to the FCPA's books and records and internal control provisions.
In a three-year Department of Justice ("DOJ") deferred prosecution agreement, Fiat admitted and acknowledged its responsibility for the improper conduct of its subsidiaries as charged in three separate criminal informations. Iveco S.p.A. ("Iveco") and CNH Italia S.p.A. ("CNH Italia) were charged with conspiracy to commit wire fraud and conspiracy to violate the FCPA's books and records provisions for participating in a scheme with, respectively, a Lebanese company and Jordanian company (which acted as agents and distributors in connection with sales to the Iraqi government) to defraud the U.N. and to knowingly falsify the books and records of Fiat in that the kickbacks were accomplished through inflated contract prices and concealed as "service and commission payments" or "service fees." The books and records of both Iveco and CNH Italia were incorporated into the books and records of Fiat for purposes of preparing Fiat's year-end financial statements. CNH France S.A. was charged with conspiracy to commit wire fraud for participating in a scheme with a Lebanese company (which acted as an agent and distributor in connection with sales to the Iraqi government) to defraud the U.N. In total, the informations charge that the subsidiaries paid or caused to be paid approximately $4.4 million to the former Iraqi government to secure contracts with various Iraqi ministries.
Pursuant to the deferred prosecution agreement, Fiat agreed to pay a $7 criminal fine and, among other things, agreed to cooperate with the DOJ's continued investigation of the conduct at issue and to continue to implement an effective compliance and ethics program designed to detect and prevent violations of the FCPA and other applicable anti-corruption laws. In agreeing to resolve the matter through a deferred prosecution agreement, the DOJ noted that Fiat conducted a thorough investigation of the conduct at issue, promptly and thoroughly reported its findings to the DOJ, cooperated in the DOJ's investigation, and undertook remedial measures.
In a parallel enforcement action based on the same core conduct described in the DOJ's criminal informations, the SEC filed a settled civil action against Fiat and CNH Global N.V. ("CNH Global") alleging violations of the FCPA's books and records and internal control provisions. In its complaint, the SEC alleges that Fiat and its subsidiary, CNH Global (a company with ADRs also traded on the New York Stock Exchange), violated the FCPA when its subsidiaries, agents and distributors made or caused to be made illegal kickback payments to the former Iraqi government in connection with sales to Iraq under the Oil-for-Food Program. The SEC complaint alleges that: (i) Fiat and CHG Global knew or were reckless in not knowing that such kickback payments were agreed to or being paid; (ii) the kickback payments were improperly recorded as legitimate commissions, cost of goods sold or not recorded at all; and (iii) Fiat and CNH Global failed to devise and maintain a system of internal controls to detect and prevent the improper payments.
Without admitting or denying the SEC's allegations, Fiat and CNH Global agreed to consent to entry of a final judgment under which Fiat will pay $10.8 million in combined fines and penalties ($5.3 million in disgorgement of profits, a $3.6 million civil penalty, and $1.9 million in pre-judgment interest). In resolving the matter, the SEC noted the remedial actions promptly undertaken by Fiat and CNH Global and the cooperation of the companies in the SEC's investigation.