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IRELAND: Irish subsidiary implicated in Saddam fraud

by Arthur BeesleyThe Irish Times
November 1st, 2007

The Irish subsidiary of US industrial group Ingersoll-Rand paid a $53,919 (EUR 37,235) "kickback" to Saddam Hussein's regime in Iraq in an effort to secure a UN contract, US regulators have claimed.

The subsidiary in question - Thermo-King Europe, which makes transport temperature-control equipment - was among four of Ingersoll-Rand's international divisions that paid bribes totalling $963,000 to win business from the Iraqi government during the UN oil-for-food programme between 2000 and 2003.

Ingersoll-Rand has agreed to pay fines of $6.7 million to settle claims on foot of a court action by the US Securities & Exchange Commission (SEC). The group will pay a $2.5 million fine to the US justice department to avoid criminal prosecution and $4.2 million to settle civil claims.

Ingersoll-Rand knew or was reckless in not knowing that illicit payments were either offered or paid, the SEC claimed.

The SEC complaint, filed by the US district court for the District of Columbia, said Thermo-King Europe authorised an "after-sales service fee" payment on an Iraqi contract seven years ago. No bona-fide services were performed in relation to such fees.

"On October 19th, 2000, the regional director for Thermo-King Europe and Thermo-King Europe's Iraq dealer arrived in Baghdad to finalise a contract for the sale of spare parts for refrigerated trucks to the Iraqi government-owned General Automobile & Machinery Trading Company (GAMCO)," the SEC said.

"At that meeting, the regional director signed a side agreement to make an after-sales service fee payment of $53,919. The after-sales service fee payment obligation was not reflected in the contract documents submitted to the UN. The contract, however, failed to receive UN approval for reasons unrelated to the after-sales service fee payment."

In a statement, Ingersoll-Rand said it had consented to the entry of a civil injunction in the SEC action and has entered into a three-year deferred prosecution agreement with the department of justice. "Under both settlements, the company will implement improvements to its compliance programme. The company takes this matter - and all compliance matters - very seriously," it said.

The case relates to a 2005 UN investigation which implicated more than 2,200 companies in illegal payments totalling $1.8 billion during the oil-for-food initiative. "The programme was intended to provide humanitarian relief to the Iraqi population, which faced severe hardship under international trade sanctions," the SEC said. "It allowed the Iraqi government to purchase humanitarian goods through a UN escrow account. The kickbacks paid by Ingersoll-Rand's subsidiaries and third parties diverted funds out of the escrow account and into an Iraqi slush fund. The contracts submitted to the UN did not disclose that the illicit payments were included in the inflated contract prices."

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