U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21615 / August 5, 2010
Accounting and Auditing Enforcement Release No. 3167 / August 5, 2010
SEC FILES SETTLED CHARGES AGAINST DAVID P. TURNER AND OUSAMA M. NAAMAN FOR ENGAGING IN BRIBERY
Securities & Exchange Commission v. David P. Turner and Ousama M. Naaman., Civil Action No. 1:10-CV-01309 (D.D.C.) (RMC)
The Securities and Exchange Commission filed a settled enforcement action on August 5, 2010, in the U.S. District Court for the District of Columbia, charging David P. Turner, a former Business Director at Innospec, Inc., and Ousama M. Naaman, Innospec’s agent in Iraq, with violating the Foreign Corrupt Practices Act (FCPA) by paying bribes to numerous government officials to obtain and retain business.
The SEC’s complaint alleges that:
Turner and Naaman engaged in widespread bribery of Iraqi government officials to obtain contracts under the United Nations Oil for Food Program, and in order to continue selling Tetra Ethyl Lean (TEL) to Iraq after the Oil for Food Program ended. Turner also violated the FCPA by paying bribes to Indonesian officials to sell TEL to Indonesian state owned oil companies.
From 2000 to 2008, Innospec, Inc., a manufacturer and distributor of fuel additives and specialty chemicals, routinely paid bribes to government officials in Iraq and Indonesia to sell TEL. The bribery activities in Iraq began with Innospec’s participation in the United Nations (“UN”) Oil for Food Program in 2001, and extended all the way until at least 2008. Turner, the Business Director of Innospec’s TEL group, and Naaman, Innospec’s agent, both actively participated in the bribery and kickback schemes in Iraq. Innospec also paid bribes to government officials in Indonesia beginning as early as 2000, and continued until 2005, when Indonesia’s need for TEL ended. Turner actively participated in the bribery scheme in Indonesia. In all, Innospec made illicit payments of over $6.3 million and promised an additional $2.8 million in illicit payments to Iraqi ministries and government officials as well as Indonesian government officials. The contracts that Innospec obtained in exchange for the bribes were worth approximately $176 million.
Naaman paid kickbacks to Iraq on Innospec’s behalf so that Innospec could obtain five Oil-for-Food Program contracts for the sale of TEL to the Iraqi Ministry of Oil and its component oil refineries. Naaman aided Innospec in obtaining the Oil for Food contracts by paying kickbacks equaling 10 percent of the contract value on three of the contracts. When the Oil-for-Food Program ended shortly before Innospec was to pay promised kickbacks on the two remaining contracts, Innospec kept the promised payments as part of its profit. When Innospec’s internal auditors questioned Turner about the nature of the commission payments that were made to Naaman under the U.N. Oil for Food Program, Turner made false statements to the auditors and concealed the fact that the commission payments to Naaman included kickbacks to the Iraqi government in return for Oil for Food contracts.
After the Oil for Food Program ended in late 2003, Turner and Naaman paid bribes to Iraqi officials in order to secure TEL business contracts from Iraq. Turner and senior officials at Innospec directed and approved the bribery payments. From at least 2004 through 2008, Innospec made payments totaling approximately $1,610,327 and promised an additional $884,480. In one e-mail, Naaman informed management, including Turner, that Iraqi officials were demanding a 2% kickback related to one TEL order. Naaman also stated: “We are sharing most of our profits with Iraqi officials. Otherwise, our business will stop and we will lose the market. We have to change our strategy and do more compensation to get the rewards.” In his response to the e-mail, Turner confirmed that the requested kickback would be paid through an additional 2% “commission” to Naaman.
Turner and senior officials at Innospec also directed Naaman to pay a bribe of $155,000 to Iraqi officials to ensure the failure of a 2006 field trial test of MMT, a fuel product manufactured by a competitor of Innospec. Turner and other Innospec officials also authorized payments, through Naaman, to fund lavish trips for Iraqi officials, including the seven-day honeymoon of one official. Innospec officials and Turner also arranged for Naaman to pay thousands of dollars in cash to Iraqi officials for “pocket money” on trips funded by Innospec.
Turner and senior officials at Innospec authorized and directed the payment of bribes to Indonesian government officials to win contracts for Innospec. More than $2.8 million in bribes was funneled through an Indonesian agent. One scheme involved bribes paid annually to a senior official at BP Migas, another scheme involved “special commissions” paid to a Swiss account; and another involved a “one off” payment of $300,000. On another occasion, a Managing Director of Innospec informed Turner that Innospec had provided payments to its Indonesian Agent to fund the purchase of a Mercedes for a Pertamina official.
Without admitting or denying the SEC’s allegations, Turner and Naaman have consented to the entry of final judgments that permanently enjoin them from violating Exchange Act Sections 30A and 13(b)(5) and Rule 13b2-1 thereunder, and from aiding and abetting Innospec’s violations of Exchange Act Sections 30A, 13(b)(2)(A) and 13(b)(2)(B), and as to Turner, from violating Rule 13b2-2. Turner will also disgorge $40,000. No civil penalty was imposed based on, among other things, Turner’s extensive and ongoing cooperation in the investigation. Naaman will disgorge $810,076 plus prejudgment interest of $67,030, and pay a civil penalty of $438,038, which will be deemed satisfied by a criminal order requiring Naaman to pay a criminal fine that is at least equal to the civil penalty amount. After his extradition to the United States, Naaman cooperated.
The SEC appreciates the assistance of the DOJ’s Fraud Section, the Federal Bureau of Investigation, and the United Kingdom Serious Fraud Office in this matter.
See Also: SEC Complaint