On August 6, 2010, two subsidiaries of Alliance One International ("Alliance One") and a subsidiary of Universal Corporation ("Universal") agreed to plead guilty to FCPA-related criminal charges while the parent entities entered into non-prosecution agreements with the Department of Justice and settled charges filed by the Securities & Exchange Commission. Alliance One and its subsidiaries agreed to pay aggregate fines and disgorgement of $19.45 million, while Universal and its subsidiary paid $8.9 million.1
Alliance One was formed in 2005 as a result of a merger of Dimon Incorporated and Standard Commercial Corporation. The conduct charged by the Department occurred prior to the merger.
The two Alliance One subsidiaries, Alliance One International AG of Switzerland ("Alliance One AG") and Alliance One Tobacco Osh LLC ("Alliance One Osh"), together with Universal Leaf Tabacos Ltda. ("Universal Brazil"), a subsidiary of Universal, agreed to plead guilty to separate three-count criminal Informations filed in United States District Court for the Western District of Virginia, charging them with conspiracy to violate the FCPA, and substantive violations of the anti-bribery and books and records provisions of the Act. The companies admitted that from 2000 to 2004 they had, either directly or indirectly through agents, collaborated to apportion among themselves tobacco sales to the Thailand Tobacco Monopoly, a government agency, and coordinate the prices of those sales. In order to secure their respective market shares and prices, they paid kickbacks to the Thai government officials. Dimon allegedly paid a total of $542,590 in bribes, Standard approximately $696,160, and Universal Brazil approximately $697,000. In addition, Universal Brazil falsely recorded these payments in its books and records as "commissions" to their sales agents.
Alliance One Osh agreed to the government's charges that its predecessor entity, Dimon International Kyrgyzstan ("DIK"), had paid bribes to government officials in Kyrgyzstan between 1996 and 2004.2 The majority of these payments, which totaled more than $3 million, were made to representatives of Kyrgyzstan's tobacco regulator in order to obtain export licenses and gain access to government-owned tobacco facilities. In addition, smaller payments were made to other officials, including $254,262 to five provincial officials in return for access to locally grown tobacco. Approximately $82,000 was also paid to local tax authorities to avoid time-consuming and potentially costly tax inspections.
Under its plea agreement, Alliance One AG agreed to pay a criminal fine of $5,250,000, while Universal Brazil agreed to pay one of $4.4 million. Alliance One Osh agreed to pay $4.2 million in criminal penalties.3
At the same time, Alliance One and Universal, as well as Universal Brazil, each entered into non-prosecution agreements with the Department requiring them to cooperate with the government's ongoing investigations and engage independent compliance monitors for periods of three years.
Alliance One and Universal also settled civil complaints filed by the SEC covering the same above-mentioned conduct in addition to other improper payments by each entity in other foreign markets. According to the Commission's complaint against Alliance One, the company's predecessors provided sightseeing trips and other gifts to Chinese tobacco officials, and made cash payments to tax officials in Greece and Indonesia.4 Universal's subsidiaries were alleged to have provided approximately $330,000 to Mozambican government officials and their family members, as well as a total of $850,000 in cash payments to two high-ranking government officials and one opposition leader in Malawi.5 Both entities agreed, without admitting or denying the factual allegations, to the entry of injunctions prohibiting them from further violations of the FCPA's anti-bribery, books and records, and internal control provisions. Under their settlements with the Commission, Alliance One and Universal were required to disgorge $10 million and $4.5 million in profits respectively to the Commission. According to the Commission, Alliance One and Universal had allegedly earned between $18.5 million and $11.5 million, respectively, from sales contracts with the Thailand Tobacco Monopoly as a result of their alleged bribe payments.6
In a related matter, Bobby Jay Elkin Jr., a former DIK country manager, pleaded guilty on August 3, 2010, to having conspired to make the illegal payments to Kyrgyz tobacco, provincial, and tax officials on behalf of his employer.7 Earlier, on April 28, 2010, the Commission had settled a civil complaint against Elkin and three other Dimon employees related to their conduct in the Kyrgyzstan and Thailand matters.8 At that time, Elkin and his co-defendants had consented to the entry of final judgments permanently enjoining them from further violations of the FCPA's anti-bribery provisions, and from aiding and abetting violations of the FCPA's books and records and internal control provisions. While two of Elkin's co-defendants were required to pay civil penalties of $40,000 each, Elkin avoided any fine because, according to the Commission, "his cooperation with the . . . investigation" was taken into account. Elkin faces a maximum penalty of five years in prison and a $250,000 fine as a result of his guilty plea.
The editors would like to thank James Treanor for his contribution to this FCPA Alert.
1 Press Release, Department of Justice, Alliance One International Inc. and Universal Corporation Resolve Related FCPA Matters Involving Bribes Paid to Foreign Government Officials, Aug. 6, 2010, available at http://www.justice.gov/opa/pr/2010/August/10-crm-903.html.
2 Id. See also SEC v. Alliance One Int'l, Inc., No. 1:10-cv-01319 (D.D.C. Aug. 6, 2010), available at http://www.sec.gov/litigation/complaints/2010/comp21618-alliance-one.pdf.
3 Press Release, supra note 20.
4 See SEC v. Alliance One Int'l, Inc., supra note 21.
5 See SEC v. Universal Corp., No. 1:10-cv-01318 (D.D.C. Aug. 6, 2010), available at http://www.sec.gov/litigation/complaints/2010/comp21618-universal.pdf.
6 Press Release, Securities and Exchange Commission, SEC Charges Two Global Tobacco Companies With Bribery, Aug. 6, 2010, available at http://www.sec.gov/news/press/2010/2010-144.htm.
7 Press Release, Department of Justice, North Carolina Businessman Pleads Guilty to Role in Foreign Bribery Scheme, Aug. 4, 2010, available at http://www.justice.gov/opa/pr/2010/August/10-crm-894.html.
8 SEC Litigation Release No. 21509, Apr. 29, 2010, available at http://www.sec.gov/litigation/litreleases/2010/lr21509.htm.