Titan Corp., a San Diego defense contractor, pleaded guilty yesterday to three felony charges related to foreign bribery and agreed to pay $28.5 million to end investigations that spanned the globe and included allegations that the company funneled money to the president of the West African country of Benin.
The penalty is the largest for violations of the Foreign Corrupt Practices Act by a publicly traded company, prosecutors said. Lockheed Inc., now Lockheed Martin Corp., paid $24.8 million in 1995 for conspiring to bribe an Egyptian politician.
"We are relieved that this chapter in the company's history is drawing to a close," David W. Danjczek, Titan's vice president for compliance and ethics, said in a statement. "Titan will not tolerate ethical breaches or violations of the law." Danjczek entered the guilty plea on the company's behalf in federal court in San Diego.
The allegations derailed the company's plans to be acquired by defense giant Lockheed Martin last year.
The penalty includes a $13 million criminal fine for foreign bribery, falsifying books and helping file a false tax return. Titan also settled a case lodged by the Securities and Exchange Commission for $15.5 million. As part of the plea agreement submitted to U.S. District Judge Roger T. Benitez, the company will be on supervised probation for three years and institute a compliance program designed to prevent future violations.
"All United States companies should take note that attempting to bribe foreign officials is criminal conduct and will be appropriately prosecuted," said Carol C. Lam, the U.S. attorney in the Southern District of California. Her office said the investigation is continuing but didn't say whether it was focusing on any current or former Titan officials.
In 2001, according to SEC documents, Titan funneled $2 million toward the reelection campaign of Benin's president to "assist the company in its development of a telecommunication project" there and to get the government's consent to increase the company's management fees on the project. The payments were falsely invoiced as "consulting services," court papers said. Two of the payments -- totaling $1 million -- were wired to the Benin agent's offshore account in Monaco from Titan's headquarters in San Diego, and the rest were made in cash, the documents said.
Knowing that the president's support was critical to the project, Titan gave his wife an $1,850 pair of earrings, the court papers said. The SEC document and federal prosecutors said they were not alleging that Benin's president, whom they didn't name, knew about the bribes. Mathieu Kerekou has been president of Benin since 1996, and he previously led from 1972 to 1991.
The company did not have a Foreign Corrupt Practices Act policy, or meaningful oversight of its agents in foreign countries, the government said. In 2001, Titan's external auditor, Arthur Andersen LLP, said the accounting system in Titan's Africa operations was "not reliable." And in 2001 and 2002, the company received at least two written allegations related to operations in Benin but did not conduct an adequate investigation, according to the court documents.
Titan said the units involved in the guilty plea are in the process of being shut down and that it will file an amended corporate tax return for 2002.
The company said it told its largest customer, the U.S. Navy, about the plea agreement and has been negotiating a separate administrative agreement that will allow it to continue to receive contracts.
Lockheed coveted the information technology company for its contracts with intelligence agencies. Most of Titan's 12,000 employees have security clearances. Providing translators to the Army is one of its largest sources of revenue. Last year, Titan employees were disclosed to be among those under investigation in the abuse of Iraqi prisoners at Abu Ghraib prison west of Baghdad.