Busting an Embargo Buster

Swedish truck maker AB Volvo is the latest company snared in the seemingly interminable investigation of improper payments made to Iraq under the United Nations Oil for Food Program.

The company agreed to pay $12.6 million to settle Securities and Exchange Commission charges, and another $7 million as part an agreement with the U.S. Justice Department.

Volvo, which sold its carmaking division to Ford in 1999, was accused of allowing — or ignoring — a decision by two of its subsidiaries to pay millions of dollars in kickbacks to get business in Iraq while the country was under international trade sanctions.

According to the complaint filed in federal court in the District of Columbia, no services were rendered for the fees, which went to bank accounts in Jordan. Volvo did not admit or deny the allegations.

Under the oil-for-food program, Volvo's subsidiary, Renault Trucks SAS, paid some $5 million in kickbacks in connection with contracts to provide trucks to Iraq's government between 2000 and 2003.

The kickbacks were covered by inflating the price of the contracts by 10 percent, or hidden in subcontractor invoices, according the complaint against Volvo.

Earlier, Volvo Construction Equipment International, another subsidiary, had paid more than $1.3 million in kickbacks to Iraqi ministries — also by inflating the price of contracts by 10 percent before submitting them to the United Nations for approval, the government said.

The S.E.C. concluded that Volvo either knew or was reckless in not knowing that illegal payments were offered or paid in connection with the sales. It added that the company's internal controls were not adequate to detect problem.

The company agreed to disgorge $8.6 million in ill-gotten profit plus interest, and pay a $4 million civil penalty to the S.E.C. It also paid the $7 million to the Justice Department, which agreed to defer prosecution for three years if Volvo and its subsidiaries abide by terms of the agreement.

by Elizabeth Olson

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