Innospec Inc. OFAC Settlement: $2.2M (2010)

After acquiring a foreign corporation that maintained a local sales office in Cuba, Innospec conducted business in Cuba through its acquired subsidiary, including conducting transactions in which the government of Cuba and/or Cuban nationals had an interest, in apparent violation of § 515.201(b) of the CACR. Specifically, OFAC alleged that Innospec maintained a local sales office in Cuba and incurred general operating expenses for such routine items as real property, business personal property, automobiles, and travel; employed Cuban nationals who were paid a salary through a Cuban government agency; entered into contracts with Cuban power companies; and held bank accounts with financial institutions located in Cuba. Innospec also admitted that, from 2001 to 2004, a subsidiary sold nearly $20 million in oil soluble fuel additives to state-owned Cuban power plants without a license, conduct that in part formed the basis for the settlement with OFAC.

The base penalty amount for the alleged violations was $4,447,878. Although Innospec was under active investigation by other U.S. government agencies for other reasons, Innospec brought the apparent CACR violations to OFAC's attention first; therefore OFAC considers them voluntarily self-disclosed. OFAC does not consider this to be an egregious case. Innospec received mitigation because it cooperated with OFAC's investigation, including entering into a statute of limitations tolling agreement, as well as with the investigations of other U.S. and U.K. agencies. Innospec also took remedial measures by selling the foreign subsidiary with operations in Cuba to a non-U.S. third party and enhancing its compliance program. The $2,200,000 settlement amount further accounted for the global nature of the settlement agreement and the other fines and penalties Innospec agreed to pay.

As part of the comprehensive settlement, Innospec pleaded guilty to a twelve-count indictment in the U.S. District Court charging wire fraud in connection with the payment of kickbacks to the Iraqi government under the United Nations Oil for Food Program, as well as violations of the Foreign Corrupt Practices Act (FCPA) in connection with bribe payments to officials in the Iraqi Ministry of Oil and the Indonesian government. Under the plea agreement with DOJ, Innospec agreed to pay a $14.1 million criminal fine, to retain an independent compliance monitor, and to continue fully cooperating with DOJ and other authorities in ongoing investigations of corrupt payments by company employees and agents.

Innospec also settled a civil complaint filed by the SEC charging Innospec with violating the FCPA anti-bribery, internal controls, and books and records provisions by engaging in widespread bribery of foreign government officials in Iraq and Indonesia. Innospec's internal controls failed to detect the illicit conduct, which continued for nearly a decade. Based on its financial condition, Innospec will disgorge $11.2 million of total profits to the SEC.

In a related matter brought by the United Kingdom's Serious Fraud Office, Innospec's British subsidiary, Innospec Ltd., pleaded guilty in U.K. court to having made corrupt payments to Indonesian officials as inducements to secure, or as rewards for having secured, contracts from the Government of Indonesia for the supply of specialized chemicals. As a result of the plea, Innospec Ltd. will pay a criminal penalty of $12.7 million.

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