On September 30, 2009, AGCO Corporation ("AGCO"), a U.S. agricultural equipment-maker based in Duluth, Georgia, agreed to pay approximately $20 million in combined fines and penalties to resolve charges related to kickbacks its European subsidiaries, including AGCO Ltd. in the U.K., paid under the U.N. Oil-for-Food Program.
Pursuant to a three-year Department of Justice ("DOJ") deferred prosecution agreement, and as detailed in a one-count criminal information charging AGCO Ltd. with conspiracy to commit wire fraud and to violate the FCPA's books and records provisions, AGCO acknowledged responsibility for approximately $533,000 in improper kickback payments its subsidiaries made to its Jordanian agent with the understanding that the agent would pass along the payments to the Iraqi Ministry of Agriculture. These payments helped to secure three contracts to sell agricultural equipment and parts to Iraq. The kickback payments were funded by inflating the price of the contracts by 13 to 21 percent before submitting the contracts to the U.N. for approval.
Pursuant to the deferred prosecution agreement, AGCO agreed to pay a $1.6 million criminal fine and, among other things, agreed to cooperate with the DOJ's continuing Oil-for-Food investigations. In agreeing to resolve the matter through a deferred prosecution agreement, the DOJ recognized AGCO's "thorough review of the improper payments and the company's implementation of enhanced compliance policies and procedures."
In a related matter based on the same core conduct described by the DOJ's criminal information, the SEC filed settled books and records and internal controls charges against AGCO. The SEC's complaint contains more detailed allegations than the DOJ information and alleges that the amount of kickback payments totaled approximately $5.9 million made through the Jordanian agent. Payments made to the agent included a flat rate commission, a variable commission, and an "after sales" commission, although no bona fide services were provided in return. The SEC's complaint alleges that kickbacks were made on 16 contracts in this manner.
In order to conceal the conduct, AGCO employees created a fictional account in its books and records denoted as "Ministry Accrual." No one at AGCO questioned why two accounts existed or why the account contained approximately 10 percent of the contract value.
Without admitting or denying the SEC's allegations, AGCO agreed to consent to the entry of a final judgment under which it will pay approximately $18.3 million in combined fees and penalties ($13.9 million in disgorgement of profits, $2 million in pre-judgment interest, and a civil penalty of $2.4 million). AGCO will also enter into a criminal disposition in which the Danish State Prosecutor for Serious Economic Crime will confiscate over $600,000. In resolving the matter, the SEC noted the remedial acts promptly taken by AGCO and the cooperation the company afforded the Commission staff in its investigation.