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Engineering / Construction
Zurich, Switzerland
Nationality of Foreign Officials: Iraq
Summary of Allegations:
ABB Ltd.'s Jordanian subsidiary, ABB Near East Trading Ltd., allegedly paid over USD 300,000 in kickbacks from 2000 to 2004 to the former Iraqi government during the U.N.'s Oil-for-Food program. The subsidiary paid the kickbacks, on behalf of itself and five other ABB subsidiaries, in order to secure contracts with the General Company for Electricity Energy Production, the Baghdad Mayoralty and the State Company Baghdad Electricity Distribution, all of which were regional companies of the Iraqi Electricity Commission. ABB improperly recorded the kickbacks on its books as legitimate payments for after sales services, consultation costs and commissions.
Approximate Alleged Payments to Foreign Officials: USD 300,000
Business Advantage Allegedly Obtained: Oil-for-Food contracts worth USD 13.5 million in revenues (USD 3.8 million in profits)
Agencies: Internal Investigation
Results:
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:
In its Form 6-K filed with the U.S. Securities and Exchange Commission ("SEC") on 8 February 2017, ABB announced that the company self-reported allegations of improper payments to third parties in the company's past dealings between ABB's subsidiaries and Unaoil to the U.S. Department of Justice ("DOJ"), the SEC and the U.K. Serious Fraud Office ("SFO"). The company is cooperating with the relevant authorities.
Agencies: United Kingdom: Serious Fraud Office
Results:
Year Resolved: 2020
Compliance Monitor:
Ongoing: No
Details:
In its Form 6-K filed with the SEC on 8 February 2017, ABB announced that the company self-reported allegations of improper payments to third parties in the company's past dealings between ABB's subsidiaries and Unaoil to the SFO. The company is cooperating with the relevant authorities.
On 10 February 2017, the SFO confirmed that it has launched an investigation into the activities of ABB's UK subsidiaries, officers, employees, and agents for suspected offenses of bribery and corruption in relation to the SFO's ongoing investigation into Unaoil's activities.
On 19 May 2020, the SFO announced to close the investigation into ABB as the case did not pass the relevant test of prosecution.
Discovery Method: Voluntary Disclosure
Details:
ABB Ltd. and ABB Inc. voluntarily disclosed the matter to the DOJ, SEC and Italian authorities. ABB provided the following description of the investigations in its 2009 SEC Form 20-F:
"In June 2004, we disclosed to the SEC and the Italian authorities the preliminary results of our inquiry conducted with the assistance of outside counsel and forensic accountants. Those results showed that from the first quarter of 1998 through the first quarter of 2004, the medium voltage business of our Power Products division overstated its earnings before interest and taxes (operating income) and net income through the early recognition of certain revenue from incomplete projects, improper capitalization of costs on certain projects, unrecorded liabilities and borrowings, and other improper journal entries. As a result, the financial statements and certain financial data were restated in September 2004. The inquiry also uncovered improper payments to an employee of an Italian power generation company. The Company has reported this matter to the Italian authorities, who have initiated formal criminal proceedings, as well as to the SEC and the U.S. Department of Justice (the DoJ). The Company cannot reasonably predict the outcome of the criminal proceedings or what action, if any, the SEC or the DoJ may take.
"In April 2005, we made the first of a series of voluntary disclosures to the DoJ and the SEC of certain suspect payments made by employees of ABB. The first disclosure concerned our U.S.-based network management business unit. Subsequently, we made additional voluntary disclosures regarding suspect payments by employees in several countries, including countries in the Middle East, Asia, South America, and Europe. These suspect payments were discovered as a result of our internal audit and compliance program. These payments may be in violation of the FCPA or other applicable laws. If we are found to have violated any of these laws, we could be liable for penalties and other costs and the violations could otherwise negatively impact our business. We are cooperating on these issues with the relevant authorities and are continuing our internal investigations and compliance reviews.
"On 27 October 2005, the United Nations Independent Inquiry Committee issued its final report on the United Nations Oil-for-Food Program. This report alleges that certain ABB subsidiaries made illicit payments to the Iraqi government under contracts for humanitarian goods. We are cooperating on a voluntary basis with the SEC in its ongoing investigation of the matters raised in the report.
"In August 2007, we made a voluntary disclosure to the SEC and the DoJ about suspect payments made by employees of ABB's recently divested Lummus Global business. These suspect payments were discovered as a result of our internal audit and compliance program. These payments may be in violation of the FCPA or other applicable laws. In connection with ABB's sale of the Lummus Global business, ABB retained certain liabilities, including for potential fines and penalties relating to these suspect payments. We are cooperating on these issues with the relevant authorities. In connection with these suspect payment matters we anticipate an unfavorable outcome and expect that fines will be imposed."
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