Armor Holdings to Pay SEC and DOJ $16 million

13 July 2011 Publication

On July 13, 2011, Armor Holdings, Inc. ("Armor Holdings") reached a $16 million global settlement with the Securities and Exchange Commission ("SEC") and the U.S. Department of Justice ("DOJ"). Armor Holdings agreed to pay a $10.3 million criminal penalty as part of a non-prosecution agreement with the DOJ and more than $5.7 million in disgorgement, prejudgment interest, and civil penalties to resolve the SEC’s charges. Armor Holdings had been charged criminally and civilly for violating the anti-bribery, books and records, and internal controls provisions of the Foreign Corrupt Practices Act ("FCPA"). Armor Holdings, a military and law enforcement equipment company formerly headquartered in Jacksonville, FL, was previously listed on the New York Stock Exchange (NYSE). On July 31, 2007, Armor Holdings was acquired by BAE Systems, a British defense contractor, and is currently a BAE subsidiary.

According to court documents, agents of Armor Holdings participated in a bribery scheme in which corrupt payments were authorized to be made to an official of the United Nations (U.N.) for the purpose of obtaining and retaining U.N. contracts for body armor. Additionally, an Armor Holdings subsidiary, Armor Products International Ltd., employed an accounting practice known as a "distributor net," which disguised in the books and records of Armor Holdings roughly $4.4 million in commissions paid to third-party intermediaries who brokered the sale of goods to foreign governments. The violations occurred between 2001–2006, and the U.N. contracts received by Armor have been valued at $6 million.

The DOJ specifically acknowledged Armor Holding’s: voluntary disclosure; cooperation with both the DOJ and SEC; the fact that the conduct took place prior to the acquisition of Armor Holding by BAE; and Armor’s extensive remedial efforts undertaken before and after its acquisition by BAE. Due to the remedial steps taken, including the implementation of BAE’s due diligence protocols and review processes, its application of BAE’s compliance policies and internal controls to all Armor Holdings businesses, its extensive remediation and improvement of its compliance systems and internal controls, as well as the enhanced compliance undertakings included in the agreement, Armor Holdings was not required to retain a corporate monitor.