The corruption cases databases are a product of the staff of the International Bank for Reconstruction and Development / The World Bank. It is intended for general information purposes only. The findings, interpretations, and conclusions expressed in the Database do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. Neither the World Bank Group nor its officers or employees shall be liable for any losses that may result directly or indirectly from the use of or reliance upon such information.
Securities and Exchange Commission
Iraq (UN Oil-for-Food)
Consent to Permanent Injunction
Disgorgement of Profits, Prejudgment Interest, Civil Penalty
Internal controls violations, Falsification of books and records
No admission or denial of allegations
According to the US Securities and Exchange Commission Litigation Release, the "Commission today filed Foreign Corrupt Practices Act books and records and internal controls charges against Flowserve Corporation ("Flowserve") in the U.S. District Court for the District of Columbia. Flowserve is a Texas-based manufacturer of pumps, valves, seals, and related automation and services to the power, oil, gas, and chemical industries. The Commission's complaint alleges that from 2001 through 2003, two of Flowserve's subsidiaries entered into a total of twenty contracts in which $646,488 in kickback payments were made and another $173,758 were authorized in connection with sales of industrial equipment to Iraqi government entities under the U.N. Oil for Food Program (the "Program"). The kickbacks were characterized as "after-sales service fees" ("ASSFs"), but no bona fide services were performed. The Program was intended to provide humanitarian relief for the Iraqi population, which faced severe hardship under international trade sanctions. The Program allowed the Iraqi government to purchase humanitarian goods through a U.N. escrow account. The kickbacks paid by Flowserve's subsidiaries diverted funds out of the escrow account and into an Iraqi slush fund. The contracts submitted to the U.N. did not disclose that the illicit payments were included in the inflated contract prices. [ ] Flowserve, without admitting or denying the allegations in the Commission's complaint, consented to the entry of a final judgment permanently enjoining it from future violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934, ordering it to disgorge $2,720,861, in profits, plus $853,364 in pre-judgment interest, and to pay a civil penalty of $3,000,000. Flowserve will also pay a $4,000,000 fine pursuant to a deferred prosecution agreement with the U.S. Department of Justice, Fraud Section. Flowserve B.V. will enter into a criminal disposition with the Dutch Public Prosecutor pursuant to which it will pay a fine." (Source: US Securities and Exchange Commission Litigation Release No. 20461 / February 21, 2008, Securities and Exchange Commission v. Flowserve Corporation, Civil Action No. 08 CV 00294 (D.D.C.) (EGS), "SEC Files Settled Books and Records and Internal Controls Charges Against Flowserve Corporation For Improper Payments to Iraq Under the U.N. Oil for Food Program ? Company Agrees to Pay Over $6.5 Million in Civil Penalties, Disgorgement of Profits, and Prejudgment Interest.")
US Securities and Exchange Commission Litigation Release No. 20461 / February 21, 2008, Securities and Exchange Commission v. Flowserve Corporation, Civil Action No. 08 CV 00294 (D.D.C.) (EGS), "SEC Files Settled Books and Records and Internal Controls Charges Against Flowserve Corporation For Improper Payments to Iraq Under the U.N. Oil for Food Program -- Company Agrees to Pay Over $6.5 Million in Civil Penalties, Disgorgement of Profits, and Prejudgment Interest," accessed at http://www.sec.gov/litigation/litreleases/2008/lr20461.htm; Complaint filed February 21, 2008, accessed at http://www.sec.gov/litigation/complaints/2008/comp20461.pdf
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