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Business

Innospec Pleads Guilty

Kickbacks: Firm to pay $40 million in fines stemming from UN oil-for-food program and other violations

by Marc S. Reisch
March 29, 2010 | APPEARED IN VOLUME 88, ISSUE 13

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Credit: Innospec
Innospec headquarters and fuel additives manufacturing site in Cheshire, England.
8813innospec.jpg
Credit: Innospec
Innospec headquarters and fuel additives manufacturing site in Cheshire, England.

Specialty chemicals maker Innospec has pled guilty to long-pending bribery and trade violation charges in U.S. and U.K. courts and has agreed to pay more than $40 million in fines.

Innospec admitted in U.S. federal court that it paid kickbacks to the Iraqi government under the United Nations' oil-for-food program and violated the Foreign Corrupt Practices Act by bribing Iraqi officials. In addition, the firm admitted to selling fuel anti-knock compounds to Cuba in violation of the U.S. embargo against Cuba.

As part of an agreement with the U.S. Department of Justice, Innospec will pay a $14 million criminal fine. The company agreed to retain an independent monitor for a minimum of three years to oversee its compliance with export and ethics requirements. In addition, Innospec will pay a fine of $2 million for violating the Cuba embargo and will turn over $11 million in profits for violating Securities & Exchange Commission rules.

Separately, Innospec pled guilty in Southwark Crown Court, England, to charges of bribing Indonesian officials. The firm expects to pay a fine of about $13 million for its infraction.

Innospec CEO Patrick Williams says in a statement that his firm "is hugely relieved that all of the work that it has done during this long investigation to put right the faults of previous management has been recognized by the courts."

Innospec has long expected the government charges and fines. A year ago, CEO Paul W. Jennings resigned under the weight of the U.S. and British investigations (C&EN, March 30, 2009, page 9). And just about a month ago, the firm increased to $40 million the reserves it set aside to pay government-related penalties (C&EN, March 1, page 25).

Among the infractions Innospec admitted to in court was paying $1.5 million in bribes, cash, and travel to the Iraqi Ministry of Oil between 2004 and 2008. The funds were meant to assure that products competing with the firm's tetraethyl lead would not be approved for use in Iraqi refineries. Innospec also admitted to paying $4 million in kickbacks to Iraqi government officials between 2000 and 2003 to secure contracts to sell tetraethyl lead to Iraqi refineries under the U.N. oil-for-food program.  

Lanny A. Breuer, assistant attorney general for DOJ's criminal division, says the action against Innospec levels the playing field for businesses competing in the international marketplace. "Fraud and corruption cannot be viewed simply as a cost of doing business," he says.

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