British chemical firm Innospec fined for Indonesia bribes

The British arm of an international chemical firm was fined £8.3 million today after reaching an agreement with prosecutors over bribery charges.

Innospec prolonged the use of harmful lead-based fuel in Indonesia by giving corrupt payments totalling more than 8.5 million US dollars (£5.6 million) to local officials.

The firm was fined at Southwark Crown Court today following a controversial transatlantic plea bargain.

Sentencing judge Lord Justice Thomas said the fine was "wholly inadequate" but he did not want to make the company insolvent, affecting its innocent employees.

He also said the director of the Serious Fraud Office had no power to enter into the arrangements made and no such arrangements should be made again.

Sitting last week, Lord Justice Thomas said: "To mark the gravity of corruption of a foreign government, massive fines seem to me to be absolutely essential."

It was expected he would hand down the maximum sentence thought to be available if the company was to remain viable.

Lord Justice Thomas said at last week's hearing: "It's not going to be less than 12.7 million dollars, it can't be. It will be capped at 12.7 million."

Any higher would threaten the firm's almost 400 jobs at Ellesmere Port on Merseyside, it was claimed.

The plea agreement was the culmination of more than two years of transatlantic negotiations between the UK's Serious Fraud Office (SFO), the US Department of Justice, the US Securities and Exchange Commission and Innospec.

The deal earmarked 40.2 million US dollars (£26.3 million) as being available for fines and confiscation.

Around two-thirds of this sum is set to go to US authorities.

Innospec is thought to have benefited to the tune of 770 million US dollars (£505 million) as a result of the bribes that were paid out between February 2002 and December 2006.

The payments were in relation to the supply of the firm's anti-knock fuel additive Tetraethyl Lead (Tel), a major source of income for the company before health and environmental concerns led to its withdrawal in the US and Europe by 2000.

The judge said that though Innospec Inc was based in Delaware, it has offices in Cheshire and the corruption in Indonesia was organised by executives of Innospec Ltd based in the UK.

"Through agents in Indonesia, the directing minds of the company engaged in systematic and large-scale corruption of senior government officials."

Innospec in the US was involved in bribery in Iraq and in September 2008 discussions began with American prosecuting authorities to achieve a "global settlement".

The SFO and the US Department of Justice agreed that, in the light of Innospec's full admission and co-operation, they should not seek to impose a penalty which would drive the company out of business.

Eventually a deal was arranged, subject to the approval of the courts in the US and UK.

The judge said the SFO could not enter into an agreement under the laws of England and Wales with an offender as to the penalty for the offence charged, and it was for the court to decide on the penalty.

The sum of 12.7 million dollars would have been "wholly inadequate" to reflect the criminality displayed, he added.

"This was corruption involving the payment of very substantial amounts to the most senior officials of the government of Indonesia over a long period of time.

"A major part of the purpose was not merely to procure contracts that benefited the company, but to delay the phasing out of Tel in Indonesia and therefore to prolong damage to the people of Indonesia and the environment."

But he said he had indicated last week after Innospec pleaded guilty that he would not impose a higher amount, if the US Federal District Court approved the plea agreement entered into.

"As it has done so, 12.7 million dollars will therefore be the fine I will impose."

He said he had regard to the plea of guilty, and limiting the fine to an amount which would enable the company to remain in business and to pay the fine over a period of years.

He said the court had been faced with an agreement made between the various authorities as to the division of the sum they considered Innospec able to pay.

But it was for the court ultimately to determine the sanction to be imposed for criminal conduct.

"I have concluded that the director of the SFO had no power to enter into the arrangements made and no such arrangements should be made again."