Ingersoll-Rand Pays Fines for UN Oil for Food Program Abuses

The Ingersoll-Rand Company has settled the case against it in connection with fraud in the UN Oil for Food program, agreeing to pay $2.5 million in fines. Ingersoll-Rand takes responsibility for its foreign subsidiaries that offered kickbacks to Iraqi government officials from 2000 to 2003 in return for government contracts at inflated prices.

The US Department of Justice (DOJ) announced the settlement today. The foreign subsidiaries in question are Thermo King Ireland Limited and Ingersoll-Rand Italiana SpA. Both companies were charged with wire fraud, and Italiana SpA was also charged with violating the Foreign Corrupt Practices Act. Both companies were investigated by the US Department of Justice.

Additional charges against Ingersoll-Rand were also settled today with the Securities and Exchange Commission. Ingersoll-Rand will pay civil fines of $1.95 million with an additional penalty of returning the profits made in the illegal contracts that amounts to $2.27 million.

Ingersoll-Rand agreed to the fines as part of a deferred prosecution agreement, which means that the Company will have to show the DOJ that it is making efforts to review and correct compliance policies in its foreign subsidiaries. The deferred prosecution agreement will last for three years, and if at the end of that time, the Company has shown progress, the criminal charges will be dropped against Ingersoll-Rand. Total disclosure of the payments was also part of the deal.

Ingersoll-Rand has accepted and admitted that its employees in the two foreign subsidiaries convinced Iraqi officials to grant them government contracts and add on ten percent of the total cost before submitting the contract to the United Nations, which oversaw the Oil for Food program in the late 1990's and earlier this decade. The Iraqi officials then hid the fact that the final price on the contract contained kickbacks to the Iraqi government. The DOJ estimates that Ingersoll-Rand paid a total of $600,000 in kickbacks, and another quarter of a million was offered.

In 2000, the Iraqi Government started a trend of requiring that all contractors pay kickbacks in this manner. The costs would be inflated ten percent and that extra costs would go into the pockets of government ministers. This was illegal under the UN program.

The Oil for Food program was meant to allow Iraq to sell its oil, despite trade sanctions against the country, in order to use the proceeds to buy humanitarian items such as food or medicine. Iraqi government officials initiated the kickback scheme as a way to bypass sanctions, and companies that agreed to and participated in the scheme are now being charged with fraud.

According to Ingersoll-Rand, which issued a press release regarding the settlement, the individuals involved in the kickbacks scheme have since been terminated. The release adds that Ingersoll-Rand "is committed to conducting business around the globe with the highest ethical standards."

Sources: US Department of Justice, Ingersoll-Rand Company Limited