Chemical Company Innospec Pleads Guilty to Indonesia Bribery

Jakarta Globe, March 19, 2010

Innospec pleaded guilty to paying bribes in Indonesia to secure contracts for a gasoline additive. (AP Photo/Rick Bowmer, file)

Innospec Inc., a producer of fuel additives and specialty chemicals, agreed to pay more than $40 million in fines after pleading guilty in the U.K. and the U.S. to charges related to bribes paid in Indonesia and Iraq to secure sales contracts.

On Thursday, subsidiary Innospec Ltd. admitted in a London court to conspiring to pay bribes to agents of the government of Indonesia from 2002 to 2006. Innospec Inc. also pleaded guilty in Washington to bribing officials in Iraq, defrauding the United Nations and violating the U.S. embargo against Cuba, the Justice Department said in a statement.

In Indonesia, the bribes were paid to secure contracts for the supply of the fuel additive tetraethyl lead, which was becoming less lucrative for the company as governments encouraged the use of unleaded gasoline, Andrew Mitchell, a lawyer for the U.K. Serious Fraud Office, told the court today.

The firm will pay $11.2 million to the U.S. Securities and Exchange Commission, a $14.1 million criminal fine to the Justice Department and $12.7 to the U.K.’s Serious Fraud Office, the SEC said in a statement on Thursday. The company also agreed to pay $2.2 million to the U.S. Treasury.

Nicholas Purnell, a lawyer representing Innospec, made the U.K. guilty plea on behalf of the company. In settling the SEC’s claims, the company didn’t admit or deny the allegations.

“There has been a fundamental sea change in the company, in its product base, management structure, compliance procedures and future conduct,” Purnell said. “The management changes have been so fundamental, it’s now a completely different company.”

Innospec paid kickbacks to Iraq from 2001 to 2003 to obtain contracts through the United Nations Oil for Food Program, according to the SEC complaint. Innospec allegedly continued to bribe Iraqi officials through late 2007.

The UN set up the oil-for-food program in 1996, five years after coalition forces ousted Iraqi troops from Kuwait, to let Iraq sell oil to raise cash for humanitarian needs. The SEC has brought cases against at least 12 companies involved in the program, recovering more than $150 million, the agency has said.

Innospec’s former management “authorized and encouraged” improper payments to Indonesian officials, the SEC said. The company made more than $6 million in illicit payments to Iraqi and Indonesian officials in exchange for contracts worth about $177 million in revenue, according to the complaint.

In one instance, the company paid an Iraqi official $155,000 to ensure that a competitor’s product would fail a trial test, the SEC said. An Innospec manager approved part of the bribe, saying it was payment “for additional technical support and security operations required to nurture and protect” business in Iraq, according to the complaint.

Innospec also admitted to selling chemicals to Cuban power plants, in violation of a U.S. embargo, the Justice Department said.

Justin Griffiths, an outside spokesman for Innospec, declined to immediately comment.

Innospec, based in Ellesmere Port, England, and incorporated in Delaware, has set aside $40.2 million to settle government investigations by the SFO, U.S. Department of Justice and U.S. Securities and Exchange Commission, according to a filing with the SEC.

Bloomberg