Thursday, March 18, 2010

Gov't says chemical maker Innospec pleads guilty to bribery, violating US embargo against Cuba

Gov't says chemical maker Innospec pleads guilty to bribery, violating
US embargo against Cuba
By MARCY GORDON , Associated Press
Last update: March 18, 2010 - 4:23 PM

WASHINGTON - Specialty chemicals maker Innospec Inc. pleaded guilty
Thursday to federal charges of bribery, defrauding the United Nations
and violating the U.S. embargo against Cuba, U.S. authorities said.

The Justice Department said Innospec entered a guilty plea before a
federal judge in Washington to charges of wire fraud in connection with
kickbacks it paid to the former Iraqi government under the UN
oil-for-food program and bribes to officials in the Iraqi Oil Ministry.

Innospec also admitted to selling chemicals to Cuban power plants in
violation of the U.S. embargo, Justice and other law enforcement
agencies said.

The company, which has manufacturing plants and sales operations around
the world, offices in the U.S. and Britain and is incorporated in
Delaware, also agreed to pay $40.2 million in a settlement with the
Justice Department, the Treasury Department's Office of Foreign Assets
Controls, the Securities and Exchange Commission and Britain's Serious
Fraud Office.

Innospec is said to be the world's only manufacturer of the anti-knock
compound tetraethyl lead, used in leaded gasoline. The additive is sold
to oil refineries around the world and generates a large part of the
company's sales. It also makes chemicals used in personal care and
photographic markets, among others.

Innospec's Swiss subsidiary, Alcor, was awarded five contracts from 2000
to 2003 worth more than 40 million euros to sell tetraethyl lead to
refineries run by the Iraqi Oil Ministry under the UN oil-for-food
program, according to documents filed with the court.

To secure the contracts, Innospec admitted, Alcor paid or promised to
pay at least $4 million in kickbacks to the former Iraqi government,
according to the documents. They say Alcor inflated the price of the
contracts by about 10 percent to cover the cost of the kickbacks before
submitting them to the UN for approval, and then recorded the payments
on the company's books as "commissions" paid to Ousama Naaman, its agent
in Iraq.

In London Thursday, the company's British subsidiary Innospec Ltd.
pleaded guilty in Southwark Crown Court to paying bribes to Indonesian
officials and agreed to pay a $12.7 million criminal penalty.

Innospec's president and CEO, Patrick Williams, said in a statement the
company "is hugely relieved that all of the work that it has done during
this long investigation, to put right the faults of previous management,
has been recognized by the courts in both England and Wales and in the U.S."

Included in the $40.2 million settlement is a $14.1 million criminal
fine. Innospec will also hire an independent monitor for at least three
years to oversee a new program of anti-corruption and export-control
measures. The company also agreed to cooperate with the authorities in
ongoing investigations into bribes by Innospec employees and agents,
Justice said in a news release.

"Today's case is a win for law-abiding companies trying to compete
fairly in the marketplace," Assistant Attorney General Lanny Breuer said
in a statement. "Fraud and corruption cannot be viewed simply as a cost
of doing business."

The SEC accused Innospec of paying or promising more than $9.2 million
in illegal bribes to officials in Iraq and Indonesia to obtain or keep
business. Innospec agreed to pay $11.2 million in restitution to the
SEC, which is also included in Thursday's settlement. The company
neither admitted nor denied the SEC's allegations but did agree to
refrain from future violations of the securities laws.

The company's stock rose 48 cents, or 4.4 percent, to close at $11.30 in
Nasdaq trading Thursday.

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