Litigation Release No. 20000 / February 13, 2007

Accounting and Auditing Enforcement Release No. 2554 / February 13, 2007

Securities and Exchange Commission v. The Dow Chemical Company, Civil Action No. 07CV00336 (D.D.C.)

SEC Files Settled Enforcement Action Against The Dow Chemical Company for Foreign Corrupt Practices Act Violations

The Securities and Exchange Commission today filed a settled civil action in the United States District Court for the District of Columbia alleging that The Dow Chemical Company (Dow) violated the books and records and internal controls provisions of the Foreign Corrupt Practices Act (FCPA) [Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 (Exchange Act)], in connection with an estimated $200,000 in improper payments made by a fifth-tier foreign subsidiary of Dow to Indian government officials from 1996 through 2001. Without admitting or denying the allegations in the Commission's complaint, Dow consented to pay a $325,000 civil penalty.

The complaint alleges that the Dow subsidiary, DE-Nocil Crop Protection Ltd. ("DE-Nocil"), headquartered in Mumbai, India, manufactured and marketed pesticides and other products primarily for use in the Indian agriculture industry. According to the complaint, beginning in 1996, DE-Nocil made approximately $39,700 in improper payments to an official in India's Central Insecticides Board to expedite the registration of three DE-Nocil products. Most of these payments were made through agreements with contractors which added fictitious charges on its bills, or issued false invoices, to DE-Nocil. The contractors then disbursed these extra funds, at DE-Nocil's direction, to the CIB official. The complaint also alleges that from 1996 and to 2001, DE-Nocil made $87,400 in improper payments to state officials in order to distribute and sell its products.

The complaint alleges that, in addition to these payments, DE-Nocil also made improper payments to Indian government officials consisting of an estimated $37,600 for gifts, travel, entertainment and other items; $19,000 to government business officials; $11,800 to sales tax officials; $3,700 to excise tax officials; and $1,500 to customs officials. In sum, over a six-year period, DE-Nocil distributed an estimated total of $200,000 in improper payments through federal and state channels. According to the complaint, none of these payments were accurately reflected in Dow's books and records, and Dow's system of internal accounting controls failed to prevent the payments.

In a related proceeding, the Commission today issued a settled cease-and-desist order against Dow finding that that Dow violated the books and records provisions and internal controls provisions of the Exchange Act in connection with the improper payments made by DE-Nocil. Without admitting or denying the Commission's findings, Dow consented to the entry of the order that requires Dow to cease and desist from violating those provisions.