GE Settles Saddam Case

http://www.futureofcapitalism.com/2010/07/ge-settles-saddam-case

Last August, GE paid $50 million to settle an accounting fraud case with the SEC. Yesterday, the SEC announced another settlement with GE, this one for $23.4 million, involving alleged violations of the Foreign Corrupt Practices Act in a kickback scheme with the Iraqi government of Saddam Hussein.

From the SEC release: "The SEC alleges that two GE subsidiaries — along with two other subsidiaries of public companies that have since been acquired by GE — made illegal kickback payments in the form of cash, computer equipment, medical supplies, and services to the Iraqi Health Ministry or the Iraqi Oil Ministry in order to obtain valuable contracts under the U.N. Oil for Food Program."

More context for Timothy Carney's observation:

Except for maybe Google, no company has been closer and more in synch with the Obama administration than General Electric.

First, there's the policy overlap: Obama wants cap-and-trade, GE wants cap-and-trade. Obama subsidizes embryonic stem-cell research, GE launches an embryonic stem-cell business. Obama calls for rail subsidies, GE hires Linda Daschle as a rail lobbyist. Obama gives a speeech, GE employee Chris Matthews feels a thrill up his leg. I could go on.

Then there's the personal connections: CEO Jeff Immelt sits on the President's Economic Recovery Advisory board and was asked by Obama's Export-Import Bank to the opening act for the President at the most recent Ex-Im conference.

An Assistant Professor of Business Law at Butler University, Mike Koehler, who keeps a blog about the Foreign Corrupt Practices Act, writes that it is odd for such a case to be settled without a parallel criminal investigation:

The GE enforcement action is also an outlier of sorts in that it is merely a SEC enforcement action with no parallel DOJ enforcement action - a fact mentioned in GE's press release detailed below.

For instance, the March 2010 enforcement action against Innospec (which was part Iraqi Oil For Food) involved a DOJ criminal information as to those allegations (see here); the September 2009 enforcement action against AGCO Corporation involved a DOJ criminal information and deferred prosecution agreement (see here); and the May 2009 enforcement action against Novo Nordisk A/S involved a DOJ criminal information and deferred prosecution agreement (see here).

So much for substantively similar conduct being resolved in a similar fashion.

by Ira Stoll  |  Jul 28, 2010 at 10:47 am Related Topics:  General Electric, SEC receive the latest by email: subscribe to the free futureofcapitalism.com mailing list