ABB to pay $39.3m FCPA violation charge to US SEC

The US Securities and Exchange Commission has charged ABB with violations of the Foreign Corrupt Practices Act (FCPA) for using subsidiaries to pay bribes to Mexican officials to obtain business with government-owned power companies, and to pay kickbacks to Iraq to obtain contracts under the UN Oil for Food Program.

The SEC alleged that the company’s subsidiaries made at least $2.7m (£1.7m) in illicit payments in the schemes to obtain contracts that generated more than $100m in revenues.

Without admitting or denying the allegations, ABB has agreed to pay more than $39.3m to settle the SEC’s charges.

The SEC alleged that, from 1999 to 2004, ABB Network Management (ABB NM) bribed officials in Mexico to obtain and retain business with two government owned electric utilities − Comision Federal de Electricidad (CFE) and Luz y Fuerza del Centro (LyFZ). The bribes were funnelled through ABB NM’s agent and two other companies in Mexico.

The SEC alleged that ABB improperly recorded the bribes on its books as payments for commissions and services on projects in Mexico. Illicit payments included checks and wire transfers to relatives of CFE officials, cash bribes to CFE officials and a Mediterranean cruise holiday for CFE officials and their wives. As a result of this bribery scheme, ABB NM was awarded contracts with CFE and LyFZ that generated more than $90m in revenues and $13m in profits for the company.

It also alleged that, from approximately 2000 to 2004, ABB participated in the UN Oil for Food Program through six subsidiaries that developed various schemes to pay secret kickbacks to the former regime in Iraq to obtain contracts under the programme.

ABB’s Jordanian subsidiary acted as a conduit for other ABB subsidiaries by making the kickback payments on their behalf. Some of the kickbacks were made in the form of bank guarantees and cash payments.

ABB improperly recorded these kickbacks on its books as legitimate payments for after-sales services, consultation costs and commissions. Oil for Food contracts obtained as a result of the kickback schemes generated $13.5m in revenues and $3.8m in profits for ABB.