Rob Sequin | Havana Journal
Innospec Inc, a Delaware corporation, has agreed to pay $2.2 million to settle allegations of violations of the Cuban Assets Control Regulations.
OFAC’s settlement of the apparent violations is part of a $40.2 million comprehensive criminal and civil settlement between Innospec and OFAC, the Department of Justice, the Securities and Exchange Commission, and the United Kingdom’s Serious Fraud Office.
OFAC alleged that, after Innospec’s acquisition of a foreign corporation that maintained a local sales office in Cuba, Innospec conducted business in Cuba through its acquired subsidiary, including conducting transactions in which the government of Cuba and/or Cuban nationals had an interest in apparent violation of the Cuban Assets Control Regulations.
Specifically, OFAC alleged that: Innospec maintained a local sales office in Cuba and incurred general operating expenses for such routine items as real property, business personal property, automobiles and travel; employed Cuban nationals who were paid a salary through a Cuban government agency; entered into contracts with Cuban power companies; and held bank accounts with financial institutions located in Cuba. The base penalty amount for the alleged violations was $4,447,878.
Although Innospec was under active investigation by other U.S. government agencies for other reasons, OFAC first received information concerning the apparent violations when Innospec brought them to OFAC’s attention. Therefore, OFAC considers the apparent CACR violations to have been voluntarily self-disclosed.
OFAC does not consider this to be an egregious case.
Innospec received mitigation because it cooperated with OFAC’s investigation of the apparent CACR violations, including entering into a statute of limitations tolling agreement, as well as with the investigations of other U.S. and U.K. agencies. Innospec has taken remedial measures by selling the foreign subsidiary with operations in Cuba to a non-U.S. third party and enhancing its compliance program. The settlement amount also accounted for the global nature of the settlement agreement and the other fines and penalties Innospec agreed to pay.
As part of this comprehensive settlement, Innospec pleaded guilty to a twelve-count indictment in the U.S. District Court charging wire fraud in connection with the payment of kickbacks to the Iraqi government under the United Nations Oil for Food Program (OFFP), as well as violations of the Foreign Corrupt Practices Act (FCPA) in connection with bribe payments to officials in the Iraqi Ministry of Oil and the Indonesian government. Innospec also admitted that, from 2001 to 2004, a subsidiary sold nearly $20 million in oil soluble fuel additives to state-owned Cuban power plants without a license, conduct that in part formed the basis for the settlement with OFAC. As part of the plea agreement with DOJ, Innospec agreed to pay a $14.1 million criminal fine, to retain an independent compliance monitor, and to continue fully cooperating with DOJ and other authorities in ongoing investigations of corrupt payments by company employees and agents.
Innospec also settled a civil complaint filed by the SEC charging Innospec with violating the FCPA anti-bribery, internal controls, and books and records provisions by engaging in widespread bribery of foreign government officials in Iraq and Indonesia to obtain and retain business. Innospec’s internal controls failed to detect the illicit conduct, which continued for nearly a decade. As agreed with the SEC, and based on its financial condition, Innospec will disgorge $11.2 million of total profits to the SEC.
In another related matter brought by the United Kingdom’s Serious Fraud Office, Innospec’s British subsidiary, Innospec Ltd., pleaded guilty in U.K. court to having made corrupt payments to Indonesian officials as inducements to secure, or as rewards for having secured, contracts from the Government of Indonesia for the supply of specialized chemicals to the Government of Indonesia by Innospec Ltd. As a result of the plea, Innospec Ltd. will pay a criminal penalty of $12.7 million.
OFAC acknowledges assistance from the U.S. Department of Justice, Fraud Section, the Securities and Exchange Commission, the Federal Bureau of Investigation, and the United Kingdom’s Serious Fraud Office.
Structured Settlement Agreement
This Settlement Agreement is made by and between the U.S. Department of the Treasury’s Office of Foreign Assets Control and Iimospec, Inc., a Delaware corporation (“Innospec” or “Respondent”).
In or about June 2001, Irmospec acquired Bycosin, a Swedish corporation with a local sales office in Cuba. OFAC alleges that between the date of the acquisition and through the date of the sale of this entity to a non-U.S. third person on or about November 15, 2004, Innospec violated the Cuban Assets Control Regulations, 31 C.F.R. Part 515, by (a) maintaining a local sales office in Cuba; (b) engaging in sales and services to a business in Cuba and dealing in property in which a Cuban national had an interest relating to the general operation of real property, business personal property, automobiles, and business travel; (c) employing Cuban nationals; (d) entering into contracts with Cuban power companies; and (e) holding bank accounts with financial institutions located in Cuba (collectively, the “Alleged Violations”).
OFAC and Respondent agree as follows
1. In consideration of the undertakings of Respondent in paragraph 2 below, OFAC agrees to release and forever discharge Respondent, without any finding of fault, from any and all civil liability in connection with the Alleged Violations, or any other Cuba sanctions-related conduct disclosed or known to OFAC prior to the date of this Agreement arising under the legal authorities that OFAC administers.
2. In consideration of the undertakings of OFAC in paragraph 1 above, Respondent agrees:
A. Within 30 days of the date Respondent receives the unsigned copy of this Agreement (the “Receipt Date’”), to:
(i) sign, date and mail an original signed copy of this Agreement to the Office of Foreign Assets Control, U.S. Department of the Treasury, 1500 Pennsylvania Avenue, NW, Washington, DC 20220, Attn.: Assistant Director for Enforcement II. Respondent should retain a copy of the signed Agreement and a receipt or other evidence which shows the date on which the signed Agreement was mailed to OFAC; and
(ii) pay to the U.S. Department of the Treasury the total amount of $2,200,000.00 to be paid on the following installment schedule:
$700,000 within 30 days from the date of this Settlement Agreement;
$450,000 on or before December 31,2010;
$450,000 on or before December 31,2011;
$300,000 on or before December 31,2012;
$300,000 on or before December 31,2013.
Respondent’s payments must be made either by an electronic funds transfer in accordance with the attached “Electronic Funds Transfer (EFT) Instructions” or by check payable to the “U.S. Treasury” and referencing OFAC No. CU-236089.
B. To waive any claim by or on behalf of Respondent, whether asserted or unasserted, against OFAC, the U.S. Department of the Treasury, and/or its officials and employees, arising out of the facts giving rise to the civil penalty matter that resulted in this Agreement, including but not limited to OFAC’s investigation of the Alleged Violations, and of any possible legal objection to this Agreement at any future date.
This Agreement shall not in any way be construed as an admission by Respondent that Respondent engaged in any of the Alleged Violations.
This Agreement has no bearing on any past, present, or future OFAC actions, including the imposition of civil penalties, with respect to any activities by Respondent other than those set forth in paragraph
OFAC may, in its sole discretion, post the facts of this Agreement, including the identity of any entity involved, the settlement amount, and a brief description of the Alleged Violations on OFAC’s website. OFAC also may issue or participate in a press release including this information. This Agreement consists of three pages, plus an attachment, and expresses the complete understanding of OFAC and Respondent regarding resolution of OFAC’s civil penalty matter involving the Alleged Violations. No other agreements, oral or written, exist between OFAC and Respondent regarding resolution of this matter.
This Agreement shall inure to the benefit of and be binding on each party, as well as its respective successors or assigns.
signatures by Innospec General Counsel and OFAC Director
Read the entire Settlement Agreement between OFAC and Innospec.