SEC Files Settled Books and Records and Internal Controls Charges Against Fiat S.p.A. and CNH Global N.V. For Improper Payments to Iraq Under the U.N. Oil for Food Program — Fiat Agrees to Pay Over $10 Million in Disgorgement, Interest, and Penalties

The Securities and Exchange Commission filed Foreign Corrupt Practices Act books and records and internal controls charges against Fiat S.p.A. and CNH Global N.V. in the U.S. District Court for the District of Columbia. Fiat S.p.A., an Italian company, provides automobiles, trucks and commercial vehicles. CNH Global N.V., a majority-owned subsidiary of Fiat, provides agricultural and construction equipment. The Commission’s complaint alleges that from 2000 through 2003, certain Fiat and CNH Global subsidiaries made approximately $4.3 million in kickback payments in connection with their sales of humanitarian goods to Iraq under the United Nations Oil for Food Program (the “Program”). The kickbacks were characterized as “after sales service fees” (“ASSFs”), but no bona fide services were performed. The Program was intended to provide humanitarian relief for the Iraqi population, which faced severe hardship under international trade sanctions. The Program required the Iraqi government to purchase humanitarian goods through a U.N. escrow account. The kickbacks paid by Fiat’s and CNH Global’s subsidiaries diverted funds out of the escrow account and into Iraqi-controlled accounts at banks in countries such as Jordan.

According to the Commission’s Complaint:

During the Oil for Food Program, Fiat’s subsidiary, IVECO S.p.A., used its IVECO Egypt office to enter into four direct contracts with Iraqi ministries in which $1,803,880 in kickbacks were made on the sales of commercial vehicles and parts. After agreeing to pay the ASSFs, IVECO Egypt increased its agent’s commissions from five percent to between fifteen and twenty percent of the total U.N. contract price, which the agent funneled to Iraq as kickbacks. The agent submitted invoices for the inflated commissions, and IVECO financial documents show line items for “contract pay-back” due to the agent. IVECO and the agent secretly inflated the U.N. contracts by ten to fifteen percent. Despite the agent’s invoices being held for one year and the unusually large commissions, IVECO paid the invoices. In one instance, IVECO set up a bank guarantee in the amount of the ASSF in favor of a Dubai-based firm that operated as a front company for Iraq. IVECO’s bank guarantee was canceled and, instead, the agent established an identical bank guarantee to conceal IVECO’s role. A line item identified as “pay-back” on IVECO documents corresponded to the amount of the agent’s bank guarantee. The ASSFs were incorrectly recorded as legitimate commissions on the company’s books and records.

For more see SEC.gov.