AGCO Reaches Settlement In Alleged Iraq Kickback Scheme
According to a recent article in The Wall Street Journal AGCO Corp., Duluth, GA, will have to pay more than $20 million in fines stemming from an illegal kickback scheme on farm machinery purchased by the Iraqi government.
The sales were between 2000 and 2003, under a United Nations-managed program called oil-for-food, that allowed Iraq to avoid international trade sanctions by using its oil proceeds to purchase food, medicine and related humanitarian goods, including farm machinery.
Investigations by both the U.S. Justice Department, the U.S. Securities and Exchange Commission (SEC) and Danish government prosecutors alleged that the company and its subsidiaries paid about $6.4 million in kickbacks to Iraqi officials in exchange for the government’s purchase of AGCO machinery.
The WSJ reported that investigators said some of the payments were embedded in inflated prices for AGCO machinery. The U.S. Justice Department said the company inflated the price of at least three contracts by 13% to 21% before submitting them to the U.N. for approval. AGCO funneled the proceeds from the inflated contracts to the Iraqi Ministry of Agriculture, describing them as “after sales service fees.”
AGCO, brands names include Massey Ferguson, Challenger and Fendt, agreed to deferred prosecution with the Justice Department, and pay a $1.6 million fine. If the company abides by the terms of the deal for three years, the department will dismiss the criminal case against the company. AGCO will pay more than $18.3 million to settle charges from the SEC and agreed to pay Danish officials about $630,000 to settle charges in Denmark.
AGCO said it had already reserved money for a settlement and got its penalty lowered because of its cooperation with the investigation. It settled the matters without admitting or denying guilt. The company earlier this month slashed its 2009 expectations and projected third-quarter results below estimates, citing weaker-than-expected international performance.