GE to pay $23.4M to settle SEC complaint in foreign-bribes case

By Zachary A. Goldfarb
Washington Post Staff Writer
Tuesday, July 27, 2010; 6:06 PM

General Electric agreed Tuesday to pay $23.4 million to settle a Securities and Exchange Commission complaint that GE bribed Iraqi government officials to win contracts to supply medical and water purification equipment under the U.N. Oil for Food program.

The SEC alleges that two GE subsidiaries and two companies the conglomerate later acquired paid $3.6 million in kickbacks to the Iraqi Health Ministry and Iraqi Oil Ministry for valuable contracts. The bribes, which are illegal under the Foreign Corrupt Practices Act, came in the form of cash, computer equipment, medical supplies and services, the SEC said.

"Bribes and kickbacks are bad business, period," said SEC Enforcement Director Robert Khuzami in a statement. "This case affirms that law enforcement is active across the globe -- offshore does not mean off-limits."

GE, which neither admitted nor denied the allegations, said: "GE is committed to the highest standards of conduct in all transactions in all of the jurisdictions where we do business throughout the world."

The Oil for Food program was designed to allow food, medical aid and other necessary items to enter Iraq despite economic sanctions during the reign of Saddam Hussein.

According to the SEC complaint, the bribes were made from 2002 to 2003. GE subsidiaries Marquette-Hellige and OEC-Medical Systems (Europa) AG paid $2.04 million in kickbacks to the Iraqi government. Ionics Italba and Nycomed Imaging, which were later acquired by GE, paid $1.55 million in kickbacks.

For its bribes, Marquette received $8.8 million in contracts and OEC-Medical secured a $2.1 million contract, according to the SEC. Ionics earned $2.3 million in wrongful profits and Nycomed earned $5 million in wrongful profits on contracts, the SEC said.

The SEC said GE cooperated with its investigation. The Justice Department also often files foreign bribery cases, but GE said none would be forthcoming.

Foreign Corrupt Practices Act violations have been an increasing source of cases for the SEC. One of the five specialized units created as part of an overhaul of the enforcement division focuses on foreign corruption.

Cheryl J. Scarboro, chief of the unit, said Tuesday: "GE failed to maintain adequate internal controls to detect and prevent these illicit payments by its two subsidiaries to win Oil for Food contracts, and it failed to properly record the true nature of the payments in its accounting records."

The GE case is the fourth largest to be brought in the Oil for Food program, after cases filed against German conglomerate Siemens, energy giant Chevron and chemical company Innospec.

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