In two similar FCPA enforcement actions, the Department of Justice and SEC have reached plea agreements with two tobacco companies, North Carolina-based Alliance One International Inc. and Virginia-based Universal Corporation, relating to illegal kickback schemes undertaken by their subsidiaries abroad.
On August 10, 2010, Alliance One announced that it had entered settlement agreements with both the SEC and DOJ under which two of its foreign subsidiaries pleaded guilty to violating various provisions of the FCPA. According to the DOJ press release announcing the settlement, each of the Alliance One subsidiaries, based in Switzerland and Kyrgyzstan, pleaded guilty in the U.S. District Court for the Western District of Virginia to separate three-count criminal informations charging the companies with conspiring to violate the FCPA, violations of the anti-bribery provisions of the FCPA and violations of the books and records provisions of the FCPA relating to bribes paid to government officials to secure contracts for the sale of tobacco. Under the plea agreements, the Alliance One subsidiaries agreed a total of $9.45 million in fines. In addition, Alliance One settled charges with the SEC for violating the FCPA’s anti-bribery, internal controls, and books and records provisions, under which the company will disgorge approximately $10 million in profits.
Alliance One was formed in 2005 as the result of a merger of Dimon Incorporated and Standard Commercial Corporation, both wholesale leaf tobacco merchants. Notably, the Alliance One guilty pleas relate to conduct that was committed by employees and agents of foreign subsidiaries of Dimon and Standard prior to the merger. In addition to the fines, Alliance One agreed to enter into a non-prosecution agreement in which it agreed to cooperate with the government’s ongoing investigation and to retain an independent compliance monitor for a minimum of three years to oversee the implementation of an anti-bribery and anti-corruption compliance program.
In the same press release, the DOJ announced that, in a related action, Universal Leaf Tabacos Ltda. (Universal Brazil), a subsidiary of Universal Corporation, pleaded guilty to a two-count criminal information in the Eastern District of Virginia charging the company with conspiring to violate the anti-bribery provisions and books and records provisions of the FCPA, and with violating the FCPA’s anti-bribery provisions. Under the DOJ plea agreement, Universal Brazil agreed to pay $4.4 million in criminal fines. The DOJ also announced that Universal and Universal Brazil both entered into separate, non-prosecution agreements under which they agree to retain an independent compliance monitor for a minimum of three years to oversee the implementation of an anti-bribery and anti-corruption compliance program and to report periodically to the Department.
In addition, Universal settled charges with the SEC for violating the FCPA’s anti-bribery, internal controls, and books and records provisions, under which the company will disgorge $4.58 million in profits.
According to the DOJ press release, from 2000 to 2004, Dimon, Standard and Universal Brazil each retained sales agents in Thailand to provide kickbacks to officials of the Thailand Tobacco Monopoly (a government entity). In order to obtain sales contracts, Dimon and Standard paid bribes totaling $1,238,750 to officials over the course of four years, and Universal Brazil paid approximately $697,000 in kickbacks. The kickback payments were then falsely characterized on each of the companies’ respective books and records as “commissions.” In addition, Alliance One’s Kyrgyzstan subsidiary also admitted that employees of Dimon’s Kyrgyz subsidiary paid a total of approximately $3 million in bribes from 1996 to 2004 to various Kyrgyz government officials who controlled the tobacco industry, as well as bribes to officers of the Kyrgyz Tax Police to avoid penalties and lengthy tax investigations.