SEC Charges Two Global Tobacco Companies With Bribery
FOR IMMEDIATE RELEASE
Washington, D.C., Aug. 6, 2010 — The Securities and Exchange Commission today charged two global tobacco companies with violations of the Foreign Corrupt Practices Act (FCPA) for paying more than $5 million in bribes to government officials in Thailand and other countries to illicitly obtain tobacco sales contracts.
The SEC alleges that Richmond, Va.-based Universal Corporation Inc. and two competitors who have since merged to form Alliance One International Inc. engaged in a coordinated bribery scheme in Thailand. Universal paid approximately $800,000 in bribes to officials with the government-owned Thailand Tobacco Monopoly (TTM) in exchange for securing approximately $11.5 million worth of tobacco sales contracts for its subsidiaries in Brazil and Europe. The companies that became Alliance One — Dimon Inc. and Standard Commercial Corporation — paid more than $1.2 million in bribes to TTM officials to obtain more than $18.3 million in sales contracts.
The SEC further alleges that Dimon and Standard (now Alliance One) made improper payments in China, Greece, Indonesia, and Kyrgyzstan while failing to properly record the true nature of the payments in its accounting records. Universal made improper payments in Malawi and Mozambique and failed to properly record them in their books and records.
To settle the SEC's charges against them, Universal agreed to pay disgorgement of more than $4.5 million and Morrisville, N.C.-based Alliance One agreed to pay $10 million in disgorgement. Universal agreed to pay a criminal fine of $4.4 million and Alliance One agreed to pay a criminal fine of $9.45 million in separate criminal proceedings announced today by the U.S. Department of Justice.
"These large tobacco merchants used secret payments to improperly win business and curry favor with foreign government officials around the globe," said Christopher Conte, Associate Director in the SEC's Division of Enforcement.
In separate complaints filed in the U.S. District Court for the District of Columbia, the SEC alleges that Universal and Alliance One violated the anti-bribery, books and records, and internal control provisions of the FCPA through their misconduct, which began as early as 1996 in Kyrgyzstan. The bribery scheme in Thailand took place between 2000 and 2004.
According to the SEC's complaint, Universal also made a series of payments from 2004 to 2007 to government officials in Mozambique through corporate subsidiaries in Belgium and Africa. Universal made these payments — totaling more than $165,000 — primarily to secure an exclusive right to purchase tobacco from regional growers and procure legislation beneficial to the company's business. Between 2002 and 2003, Universal subsidiaries paid a total of $850,000 to high-ranking Malawian government officials that were not accurately recorded in Universal's books and records.
The SEC's complaint alleges that a Dimon subsidiary — Dimon International Kyrgyzstan (DIK) — paid more than $3 million in bribes to Kyrgyzstan government officials to purchase Kyrgyz tobacco for resale to Dimon's customers. Most of these payments were delivered in bags filled with $100 bills to a high-ranking government official. DIK also made improper payments to Kyrgyzstan tax officials.
Dimon also made improper payments to tax officials in Greece and Indonesia, according to the SEC's complaint. Standard made an improper payment to a political candidate and provided gifts, travel, and entertainment expenses to foreign government officials in Asia, including China and Thailand. Dimon and Standard failed to accurately record these payments in the companies' books and records.
Without admitting or denying the SEC's allegations, Universal and Alliance One consented to the entry of final judgments permanently enjoining each of them from violating the anti-bribery, books and records, and internal control provisions of the FCPA, codified as Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934. In addition to paying disgorgement, each company has agreed to retain an independent monitor for three years. The proposed settlements are subject to court approval.
In the related criminal proceedings, the Justice Department filed criminal actions against a Universal subsidiary and two Alliance One subsidiaries charging each of them with one count of conspiring to violate the FCPA and one count of violating the anti-bribery provisions of the FCPA. Universal and Alliance One have entered into non-prosecution agreements with the DOJ to pay the criminal penalties and retain independent monitors for a period of three years.
The SEC charged four former Dimon employees earlier this year for their roles in the scheme. The SEC's investigation was conducted by Amybeth Garcia-Bokor, Paul Gumagay, Michael Hoess, Uta Von Eckartsberg, and Christine Neal. The SEC acknowledges and appreciates the assistance of the Department of Justice's Fraud Section and the Federal Bureau of Investigation.
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For more information about this enforcement action, contact:
Associate Director, SEC Division of Enforcement
Charles E. Cain
Assistant Director, SEC Division of Enforcement