General Electric Co. (GE) has agreed to pay $23.5 million to settle charges levied by the U.S. Securities and Exchange Commission, which alleged the conglomerate was involved in a $3.6 million kickback scheme with Iraqi government agencies.
The SEC said two GE subsidiaries and two other public companies that have since been bought by GE made illegal payments---which included cash, computer equipment, medical supplies and services--to the Iraqi Health Ministry and Iraqi Oil Ministry in order to obtain contracts to supply medical and water purification-equipment under the United Nations' Oil for Food program. The scheme ran from about 2000 to 2003.
GE agreed to pay the fees without admitting or denying the SEC's allegations. The company said in a statement the SEC identified 18 contracts under the program that weren't accounted for or controlled properly, 14 of which involving businesses that weren't owned by GE at the time.
The other four relate to GE Healthcare units in Europe, which GE said "declined to make cash payments to the Iraqi Ministry of Health, but they acquiesced when their agent offered instead to make in-kind payments of computer equipment, medical supplies and services to the Iraqi Health Ministry, and then failed to reflect the transactions accurately in their books and records." GE said those units' conduct "did not meet our standards."
The payment is comprised of a $1 million penalty and $22.5 million in profits plus interest the subsidiaries were estimated to have earned on the transactions, GE said.
A host of companies--including Agco Corp. (AGCO), Chevron Corp. (CVX), Ingersoll-Rand Co. (IR) and Textron Inc. (TXT)--have in recent years settled cases with the SEC related to the scandal-ridden program. The SEC said it has now taken 15 enforcement actions against companies involved in Oil for Food-related kickback schemes with Iraq, recovering more than $204 million.
"GE failed to maintain adequate internal controls to detect and prevent these illicit payments by its two subsidiaries to win Oil for Food contracts, and it failed to properly record the true nature of the payments in its accounting records," said Cheryl J. Scarboro, chief of the SEC's Foreign Corrupt Practices Act Unit.
Grandpa: who could forget GE's "Evil Ways" in 2009
Washington, D.C., Aug. 4, 2009 — The Securities and Exchange Commission today filed civil fraud and other charges against General Electric Company (GE), alleging that it misled investors by reporting materially false and misleading results in its financial statements.
Result: Without admitting or denying the SEC's allegations, GE agreed to the financial penalty ($50 million) and consented to the entry of an order permanently enjoining it from violating the antifraud, reporting, record-keeping and internal controls provisions of the federal securities laws.
SEC's GE theme Song:You've got to change your evil ways, baby,
before I stop lovin' you.
You've got to change, baby,
and every word that I say is true.
You got me runnin' and hidin' all over town,
you got me sneakin' and a-peepin' and runnin' you down.
This can't go on, Lord knows you got to change, baby.