The reckoning for rampant corruption under the United Nation's "oil-for-food" programme in Iraq under Saddam Hussein reached the icon of American capitalism, General Electric, which agreed to pay $23.4m to settle charges – without admitting or denying them – under US bribery laws.
The scandal, in which the SEC says some $3.6m was paid in kickbacks to win medical equipment contracts with the Iraqi health and oil ministries, involved not just divisions of GE but also two healthcare companies it has since acquired, including the British company Amersham. According to charges laid by the Securities and Exchange Commission yesterday, Amersham made $5m in wrongful profits from nine Iraqi government contracts, for which it paid $750,000 in bribes between 2000 and 2002, when it was a FTSE 100-listed company. GE acquired the company for £5.7bn in 2004.
Ionics, which was also acquired by GE, won contracts to supply water purification equipment in Iraq thanks to bribery, the SEC charged. And two of GE's European subsidiaries, Marquette-Hellige and OEC-Medical Systems, were also involved in the scheme.
The revelation of widespread corruption under the oil-for-food programme, which had been designed to ease the humanitarian burden of sanctions on the Saddam Hussein regime, severely tarnished the United Nations. An inquiry into the scheme by Paul Volcker, former chairman of the Federal Reserve, in 2005 listed 2,253 companies believed to have paid kickbacks to secure contracts in Iraq.
The SEC has now taken 15 enforcement actions under the US Foreign Corrupt Practices Act against companies involved in Iraq, recovering more than $204m. Even while unveiling the charges against GE, it promised more. "Bribes and kickbacks are bad business, period," said Robert Khuzami, a director of the SEC's enforcement division. "This case affirms that law enforcement is active across the globe. Offshore does not mean off-limits."
The company did not admit the allegations. It will pay $18.4m in disgorgement of profits, $4.1m in interest, and a penalty of $1m.
GE said last night that it had been told a criminal investigation by the US Department of Justice had been closed and that the SEC settlement resolves "the oil-for-food matter" once and for all. It said: "The SEC has identified 18 contracts 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."