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GE settles kickback charges, fined US$23m

Published:Wednesday | July 28, 2010 | 12:00 AM

General Electric (GE) Company will pay US$23.4 million to settle federal charges that some of its subsidiaries paid illegal kickbacks to the Iraqi government in order to win contracts under a United Nations programme.

The Securities and Exchange Commission (SEC) said in a civil complaint filed Tuesday in federal court that GE subsidiaries gave cash, computers, medical supplies and other goods worth US$3.6 million to the Iraqi health and oil ministries from 2000 to 2003.

The SEC alleged the kickbacks were in return for contracts to supply medical and water-purification equipment under the United Nations' oil-for-food programme, which provided humanitarian aid to pre-war Iraq.

Cheryl Scarboro, head of the SEC's Foreign Corrupt Practices Act unit, said GE "failed to maintain adequate internal controls to detect and prevent these illicit payments."

GE agreed to pay a US$1-million penalty and give up about US$22.5 million in profit and interest earned from the transactions. The company does not admit or deny wrongdoing under the settlement.

GE also said the Department of Justice has closed its own investigation into the matter.

"This conduct does not meet our standards, and we believe it is in the best interests of GE and its shareholders to resolve this matter now," the company said in a statement.

Rife with corruption

The UN's oil-for-food programme was meant to allow aid, such as medical supplies and food, to flow into Iraq despite tough international sanctions against the government of Saddam Hussein.

Iraq sold US$64.2 billion of crude oil and bought US$34.5 billion of supplies through the programme.

But it was also rife with corruption. According to the SEC, all Iraqi ministries demanded a 10 per cent kickback on each contract. The federal government has brought similar charges against several other companies, including Chevron, Textron and Ingersoll-Rand.

The SEC said the GE case involves four subsidiaries, two owned by the conglomerate at the time of the alleged kickbacks and two that GE acquired after 2003. Two of the units, Ionics Inc of Burlington, Massachusetts, and the British firm Amersham PLC, are also named as defendants.

In some cases, the subsidiaries made payments while, in others, they provided goods and services instead, according to GE. A total of 18 contracts were involved.

GE said 14 of the contracts were awarded before GE was involved, but that it assumed liability when it acquired the subsidiaries.

Company shares were unfazed, rising three cents to US$16.17 in late-morning trading.

- AP