SEC Fines GE over "Oil to Food" Program Corruption

SEC Fines GE over "Oil to Food" Program Corruption

For years, conservatives and constitutionalists have called for the United States to withdraw from the United Nations for a variety of reasons, specifically the United Nations’ notorious anti-Americanism and inefficient-at-best handling of world crises. There is no better example of the UN’s ineptitude than the Oil for Food program, which has been an ample breeding ground for corruption by large organizations, including General Electric. In July, the Securities and Exchange Commission fined General Electric $23.5 million for its corrupt dealings in Iraq during the Oil for Food program. According to the Securities and Exchange Commission, General Electric violated the Foreign Corrupt Practices Act by illegally offering equipment and services in exchange for contracts with Iraqi officials.

The complaint by the SEC reads:

From approximately 2000 to 2003, two subsidiaries of the General Electric Company (“GE”) — Marquette-Hellige (“Marquette”) and OEC-Medical Systems (Europa) AG (“OEC-Medical”) — made approximately $2.04 million in kickback payments in the form of computer equipment, medical supplies, and services to the Iraqi Health Ministry under the Program. Prior to GE’s acquisition of their parent companies, two other current GE subsidiaries –Ionics Italba. S.r.L. (“Ionics Italba”), and Nycomed Imaging AS, currently GE Healthcare AS (”Nycomed”) – made approximately $1.55 million in cash kickback payments under the Program. Nycomed was a subsidiary of publicly-registered Amersham plc, which was acquired by GE after the conduct at issue in this Complaint and is currently known as GE Healthcare Ltd. Ionics Italba was a subsidiary of publicly-registered Ionics, Inc., which was acquired by GE after the conduct at issue in this Complaint and is currently known as GE Ionics, Inc.

Marquette, OEC-Medical, Ionics Italba, and Nycomed each authorized and paid kickbacks to Iraqi government ministries through agents in the form of ‘aftersales service fees’ (ASSF) on sales of products to Iraq. All four subsidiaries knew that such kickbacks were prohibited by the Oil for Food Program and U.S. and international trade sanctions on Iraq.

While “working through third-party agents,” the two companies that were actual GE subsidiaries during the relevant time period “made ASSF kickback payments of approximately $3,584,842.”

Corporatecomplianceinsights.com adds, “As to the acquired subsidiaries, the SEC simply alleges, without any elaboration, that GE acquired the liabilities of Amersham and Ionic, along with assets, in the acquisitions and that ‘GE Ionics, Inc. and GE Healthcare Ltd., both subsidiaries of GE, are the respective successors to the liability of Ionics and Amersham’.”

In total, “The four subsidiaries earned profits of approximately $18,397,949 as a result of their illegal kickbacks.”

SEC’s Cheryle J. Scarboro said, “G.E. failed to maintain adequate internal controls to detect and prevent these illicit payments by its two subsidiaries to win oil-for-food contracts, and it failed to properly record the true nature of the payments in its accounting records.”

In total, the SEC identified 18 unaccounted for contracts, 14 of which pertained to businesses not owned by GE at the time of the transactions, but were acquired by GE when it took over the companies.

In a statement released by the SEC, “The SEC has now taken 15 Foreign Corruption Practices Act enforcement actions against companies involved in the Oil for Food-related kickback schemes with Iraq, recovering more than $204 million.”

Of the 15 enforcement actions include those against Innospec , AGCO Corporation, and Novo Nordisk A/S, all of which involved information provided by the Department of Justice.

The Oil for Food program began in 1995 as a humanitarian effort allowing Iraq to sell oil under UN supervision in exchange for purchasing food and medicine. The program came in response to the UN sanctions imposed on Iraq after Saddam Hussein ordered the invasion of Kuwait and refused to report on Iraq’s nuclear program.  The United Nations faced international pressure as claims arose that the sanctions resulted in increased malnutrition and infant mortality rates, prompting the creation of the Oil for Food program.

Despite the original intentions of the Oil for Food program, however, it has been a hotbed for corruption ever since its inception. (See: http://www.heritage.org/Research/Reports/2004/04/Investigate-the-United-Nations-Oil-for-Food-Fraud)

General Electric is no stranger to corruption, however. Just last year, the Securities and Exchange Commission fined the Connecticut-based company $50 million for misleading investors and committing violations of antifraud provisions. (See: (http://www.nytimes.com/2009/08/05/business/05electric.html)

What’s most interesting is the mainstream media’s failure to report on General Electric’s most recent settlement with the SEC.  Perhaps it does not hurt that General Electric was a top contributor to the 2008 Barack Obama presidential campaign, (See: http://www.opensecrets.org/pres08/contrib.php?cycle=2008&cid=n00009638)  Nor would the media be inspired to report negatively on General Electric given the company’s close relationship to President Obama through his connections to George Soros’ Center for American Progress. (See: http://www.rightpundits.com/?p=6457)

Regardless of GE’s corrupt practices in the Oil for Food program, General Electric continues to tout, “GE is committed to the highest standards of conduct in all transactions in all of the jurisdictions where we do business throughout the world.”

Evidently, Iraq was the exception to their rule.

On that note, I did a little more research and found this:

GE has a lengthy record of criminal, civil, political and ethical transgressions, some of them shocking in disregard for the integrity of human beings. Here are a few examples:

In 1995, with the establishment of a Presidential Advisory Commission, the full extent of GE’s human experiments with nuclear radiation were revealed. General Electric ran the Hanford Nuclear Reservation in Richland, Washington as part of the U.S. weapons program. Beginning in 1949, General Electric deliberately released radioactive material to see how far downwind it would travel. One cloud drifted 400 miles, all the way down to the California-Oregon border, carrying perhaps thousands of times more radiation than that emitted at Three Mile Island.

In 1986, Representative Edward Markey, D-Massachusetts, held hearings in which it was disclosed that the United States and General Electric had conducted experiments on hundreds of United States citizens who became “nuclear calibration devices for experimenters run amok.” According to Markey: “Too many of these experiments used human subjects that were captive audiences or populations ... considered ‘expendable’ ... the elderly, prisoners and hospital patients who might not have retained their full faculties for informed consent.”

One of GE’s most gruesome experiments — disclosed in the Markey hearings — was performed on inmates at a prison in Walla Walla, Washington, near Hanford. Starting in 1963, 64 prisoners had their scrotums and testes irradiated to determine the effects of radiation on human reproductive organs. Although the inmates were warned about the possibility of sterility and radiation burns, the forms said nothing about the risk of testicular cancer. Markey’s committee heard allegations that, at the time of the experiments, General Electric violated both civil and criminal laws.

 GE’s nuclear testing is merely one example of a lengthy corporate history of malfeasance that includes conviction of criminal price-fixing in the 1960s and many equivalent deeds. This article highlights only General Electric’s recently adjudicated or settled criminal or civil violations.
Environment 

You can read more here. It's a very, very lengthy article about GE violations over the years:

http://www.corpwatch.org/article.php?id=7846