SEC Files Two More Settled FCPA Cases

FCPA enforcement continues to accelerate with the Commission filing two overlapping, settled cases against tobacco companies. Both actions involve claims that competitors Universal Corporation, Inc. and Alliance One International, Inc. (formed from a merger of Dimon, Inc. and Standard in May 2005) paid bribes in Thailand. Each case also contains allegations of additional FCPA violations. SEC v. Universal Corporation, Inc., Civil Action No. 01:10-cv-01318 (D.D.C. Filed Aug. 6, 2010); SEC v. Alliance One International, Inc., Civil Action No. 01:10-cv-01319 (D.D.C. Filed Aug. 6, 2010). See also Litig. Rel 21618 (Aug. 6, 2010).

Each case centers on an agreement between Universal and Alliance One to obtain business from the Thailand Tobacco Monopoly. According to the Commission, Universal, in coordination with Alliance, paid about $800,000 million in bribes to the Thailand Tobacco Monopoly to secure approximately $11.5 million in sales contracts for its Brazilian and European subsidiaries. The payments were made between 2000 and 2004. During the same period, Dimon and Standard paid bribes to government officials of the Thailand Tobacco Monopoly of $1.2 million to obtain about $18.3 million in sales contracts. Each company failed to properly record the payments in its books and records.

Each case also contains additional allegations of FCPA violations. In Universal the company is alleged to have violated the Act by:

• Making a series of payments from 2004 through 2007 totaling about $165,000 to government officials in Mozambique through its subsidiaries in Belgium and Africa. The purpose of the payments was to secure an exclusive right to purchase tobacco from regional growers and obtain beneficial legislation.
• Paying about $850,000 to high ranking officials of the Malawian government between 2002 and 2003. The payments were made through a subsidiary and not properly recorded on its books and records.

In Alliance One the company is also alleged to have violated the FCPA by:

• Making payments totaling more than $3 million in bribes to officials of the Kyrgyzstan government to purchase Kyrgyz tobacco. The payments were made from 1996 through 2004 by Dimon International Kyrgyzstan, a wholly owned subsidiary of Dimon. They were authorized by Dimon's Regional Financial Director. The International Controller of the company formalized an accounting methodology for making the payments, according to the complaint.
• Making improper payments to tax officials in Greece and Indonesia. The payments were made in Greece in exchange for an agreement under which tax officials would not pursue certain irregularities discovered during an audit thereby reducing the tax liability of the company. The payments in Indonesia were made in exchange for a tax refund.
• Furnishing gifts, paying travel and entertainment expenses and making improper payments to officials in the Asian Region, including China and Thailand. These payments were not properly recorded in the books and records of the company.

Each company agreed to settle with the SEC. Each consented to the entry of a permanent injunction prohibiting future violations of Exchange Act Sections 30A, 13(b)(2)(A) and 13(b)(2)(B). In addition, Universal agreed to pay disgorgement of $4,581,276. 51 while Alliance One agreed to pay $10,000,000.00. Each company will also retain an independent monitor.

Universal and Alliance One also agreed to settle criminal charges with the Department of Justice. Each entered into a non-prosecution agreement. Universal will pay a $4.4 million criminal fine while Alliance One will pay a $9,450,000 fine. Each company will retain an independent monitor for three years.

The Commission previously filed a settled enforcement action against four former employees of Dimon, Inc., discussed here.

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