Armor Holdings to Pay $10.29M to Resolve FCPA Violations
On July 13, 2011, the Justice Department announced that it had entered into a non-prosecution agreement with Armor Holdings Inc., which will pay a $10.29 million penalty to resolve violations of the Foreign Corrupt Practices Act involving an Armor subsidiary's commissions to a third-party sales agent which were knowingly passed on to a United Nations procurement official.
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(At the time of the conduct at issue, Armor manufactured security products, vehicle armor systems, protective equipment and other products primarily for use by military, law enforcement, security, and corrections personnel. In July 2007, Armor was acquired by BAE Systems Inc. and is currently a subsidiary of BAE. See ITT's Online Archives or 02/16/10 news, 10021620, for BP summary of BAE agreeing to pay $400 million for making false statements about its FCPA compliance program, etc.)
Subsidiary Paid Commissions to 3rd Party Sales Agent to Pass on to UN Official
According to the agreement, Armor accepts responsibility for its subsidiary’s payment of more than $200,000 in commissions to a third-party sales agent, a portion of which it knew was to be passed on to a UN procurement official to induce the official to award two separate UN contracts to Armor’s subsidiary. The contracts were for the sale of approximately $6 million of body armor.
Falsely Recorded Commission Payments, Kept $4.4M Off Its Books and Records
Armor also acknowledged that it falsely recorded the commission payments on its books and records. In addition, Armor admitted that it kept off its books and records approximately $4.4 million in additional payments to agents and other third-party intermediaries used by its Products Group to assist it in obtaining business from foreign government customers. Armor acknowledged that it failed to devise and maintain an appropriate system of internal accounting controls.
Armor Agreed to Pay Over $5.69M in Related Settlement with SEC
In a related matter, Armor reached a settlement with the U.S. Securities and Exchange Commission (SEC) and agreed to pay more than $5.69 million in disgorgement of profits, including pre-judgment interest, and a civil money penalty.
(DOJ and the SEC jointly enforce the FCPA, generally with DOJ investigating and prosecuting the FCPA's anti-bribery violations and the SEC enforcing the accounting provisions.)
DOJ Recognizes Armor's Voluntary Disclosure, No Corporate Monitor Required
The Justice Department’s agreement recognizes Armor’s complete voluntary disclosure of the conduct; its internal investigation and cooperation with DOJ and the SEC; the fact that the conduct took place prior to the acquisition of Armor by BAE; and Armor’s extensive remedial efforts undertaken before and after its acquisition by BAE.
Due to Armor’s implementation of BAE’s due diligence protocols and review processes, its application of BAE’s compliance policies and internal controls to all Armor businesses, its extensive remediation and improvement of its compliance systems and internal controls, as well as the enhanced compliance undertakings included in the non-prosecution agreement, Armor is not required to retain a corporate monitor.
Armor to Pay $10.29M Penalty, Implement Rigorous Internal Controls
As part of the non-prosecution agreement, Armor will pay a $10.29 million penalty. The agreement also requires that Armor continue to implement rigorous internal controls and that it cooperate fully with DOJ. Armor will also be required to report to DOJ on the implementation of its remediation and enhanced compliance efforts every six months for the duration of the agreement.
(See ITT's Online Archives or 07/12/11 news, 11071250, for BP summary of the District Court ruling in favor of Armor Holdings regarding false claims, fraud, etc. by Honeywell International Inc.
See ITT's Online Archives or 07/01/11 news, 11070109, for BP summary of DOJ explaining liability for FCPA violations for illegal payments made through intermediaries, and to pre- and post-acquisition and merger conduct.
See ITT’s Online Archives or 05/10/11 news, 11051032, for BP summary of DOJ detailing this “facilitation payments” exception to the FCPA anti-bribery provisions.)