Titan Corp. has pleaded guilty to criminal charges that it bribed foreign officials for business favors and agreed to pay $28.5 million in both criminal and civil fines to the federal government to settle the charges.
The San Diego-based defense and IT contractor pleaded guilty yesterday in the U.S. District Court for the Southern District of California to three felony counts involving its overseas operations, particularly in the West African country of Benin.
The charges include violating the antibribery provisions of the 1977 Foreign Corrupt Practices Act, falsifying company books and records and preparing a false tax return. The act prohibits U.S. companies from bribing foreign government officials to win or keep business.
Titan agreed to pay a criminal fine of $13 million to the Justice Department to settle the charges. Presiding Judge Roger T. Benitez also imposed three years of supervised probation. Titan also agreed to implement a compliance program to detect and deter future violations of the act.
Titan's plea agreement with the Justice Department included an agreement with the IRS to file an amended corporate tax return for 2002 to correct deductions it took related to the bribery charges.
Titan also agreed to pay $15.5 million to settle a lawsuit by the Securities and Exchange Commission. The SEC's complaint against Titan included the following allegations:
- From 1999 to 2001, Titan paid more than $3.5 million to its agent in Benin, who also was the business adviser to the country's president. About $2 million went to buy T-shirts with the president's picture and instructions to vote for him in the upcoming election. Titan made the payments to help its development of a telecom project in Benin and to win the Benin government's consent to increase Titan's management fees for the project. A former senior Titan officer directed that these payments be falsely invoiced as consulting services and spread out over time.
- Titan never had a formal companywide Foreign Corrupt Practices Act policy, despite having more than 120 agents in 60 countries. The company also disregarded or circumvented the limited act policies and procedures, failed to maintain sufficient due diligence files on its foreign agents and failed to have meaningful oversight of them.
- Titan falsified documents that allowed its agents to underreport local commission payments in Nepal, Bangladesh and Sri Lanka.
- Titan also falsified documents presented to the U.S. government by underreporting commission payments on equipment exported to Sri Lanka, France and Japan.
- Titan paid a World Bank Group analyst in cash to assist it with its project in Benin.
- Titan paid a Benin government official about $14,000 in travel expenses from 1999 to 2001.
"Illicit payments to government officials are inconsistent with fair play and vigorous competition and are a violation of U.S. law," Stephen Cutler, director of the SEC's enforcement division, said in a statement. "Capital formation and corporate enterprise thrive when all parties participate on a level playing field."
Titan did not admit or deny the SEC's allegations.
"We are relieved that this chapter in the company's history is drawing to a close," said David Danjczek, Titan's vice president for compliance and ethics, who was hired in September 2004 to oversee its expanded Foreign Corrupt Practices Act and ethics policies. "Titan will not tolerate ethical breaches or violations of the law."
The government began investigating Titan in 2003 during Lockheed Martin Corp.'s attempted purchase of the company. The Bethesda, Md., defense contractor called off the $2.2 billion deal in June 2004 when Titan failed to meet a deadline for settling the allegations. Last year, Titan had set aside the money to cover any fines from the government probes.
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