Nick Snow
Washington Editor
WASHINGTON, DC, Feb. 25 -- Flowserve Corp. agreed to pay $10.5 million in fines to settle federal charges that a subsidiary paid kickbacks to Iraqi government officials in 2002 and 2003, the US Department of Justice and Securities and Exchange Commission announced.
The company agreed to pay a $4 million fine to settle DOJ allegations that between July 2002 and February 2003 employees of subsidiary Flowserve Pompes SAS paid $604,651 to the Iraqi government and offered to pay a further $173,758 in kickbacks to obtain contracts for large-scale water pumps and spare parts for oil refineries.
The subsidiary allegedly inflated the contracts' prices by 10% before submitting them to the United Nations for approval and concealed from the UN that the contract prices contained kickbacks to Iraq's government, DOJ said. It charged Flowserve Pompes with conspiracy to commit wire fraud and to violate the Foreign Corrupt Practices Act's books-and-records provisions.
The Dallas oil field equipment and services supplier also settled US Securities and Exchange Commission charges stemming from the kickback allegations. Under that agreement, it will pay a $3 million fine and a $3.5 million disgorgement of all profits, including prejudgment interest, in connection with the contracts.
DOJ said it would defer prosecution of Flowserve Pompes for three years in recognition of Flowserve's thorough review of the improper payments and its introduction of enhanced compliance policies and procedures. If the company and its subsidiary abide by the agreement's terms, DOJ said it would dismiss the criminal charges.
The SEC also acknowledged that Flowserve moved quickly to remedy the situation and cooperated with investigators in resolving the matter.
In a separate statement, Flowserve confirmed the settlements and said the amounts were in line with accruals it took for this purpose, which it disclosed in its 2007 third quarter financial statements.
Contact Nick Snow at [email protected].
