GE to Pay $23.5 Million to Settle Oil-for-Food Kickback Charges

General ElectricGeneral Electric (GE) today announced that it had reached a settlement with the Securities and Exchange Commission over charges of illegal kickbacks its subsidiaries paid to win contracts in the United Nations' Oil-for-Food Program. As a result, GE has agreed to pay a $1 million penalty and give up the estimated $22.5 million in profits plus interest earned on the transactions.

The SEC charged GE with violations of the Foreign Corrupt Practices Act for its involvement in a $3.6 million kickback scheme with Iraqi government agencies to win contracts to supply medical equipment and water purification equipment.

The Oil-for-Food program was established in 1995 by the Security Council to provide Iraq with another opportunity to sell oil to finance the purchase of humanitarian goods, and various mandated United Nations activities concerning Iraq. It operated until 2003.

In order to obtain valuable contracts from the Iraqi government, then under Saddam Hussein regime, the SEC alleges that two GE Healthcare units in Europe, as well as two companies later acquired by GE -- Amersham and Ionics -- made illegal kickback payments in the form of cash, computer equipment, medical supplies, and services to the Iraqi health and oil ministries.

"Bribes and kickbacks are bad business, period," said Robert Khuzami, Director of the SEC's Division of Enforcement. "This case affirms that law enforcement is active across the globe - offshore does not mean off-limits."

GE said it is "committed to the highest standards of conduct in all transactions in all of the jurisdictions where we do business throughout the world. In this case, the SEC has identified 18 contracts under the Oil-for-Food Program that it alleges were not accounted for or controlled properly. Fourteen of these transactions involve businesses that were not owned by GE at the time of the transactions."

And while the European units first declined to make cash payments to the Iraqi Ministry of Health, they acquiesced when their agent offered instead to make in-kind payments of computer equipment, medical supplies, and services to the Iraqi Health Ministry, and then failed to reflect the transactions accurately in their books and records, GE explains.

GE says this concludes the SEC's investigation and related Department of Justice review of GE regarding the Oil-for-Food Program. It neither admits, nor denies the allegations.

Increase your money and finance knowledge from home

Intro to different retirement accounts

What does it mean to have a 401(k)? IRA?

View Course »

Intro to Retirement

Get started early planning for your long term future.

View Course »

Add a Comment

*0 / 3000 Character Maximum