WASHINGTON—Legal experts are divided as to the significance of the agreement reached between Goodyear and the U.S. Securities and Exchange Commission (SEC) to settle allegations of bribery in Kenya and Angola.
Some attorneys specializing in the Foreign Corrupt Practices Act (FCPA) describe Goodyear's actions as a model for any company accused of FCPA violations. Others, however, claim the agreement is merely routine.
Goodyear agreed to pay a disgorgement (remedial civil fine) of $14.1 million and prejudgment interest of $2.1 million in the cease-and-desist order issued by the SEC Feb. 24. The payment was due within 10 days of the order to avoid further interest, the SEC said.
The Akron-based tire maker also agreed to report to the SEC at least once a year for the next three years about the implementation of its remedial and compliance measures.
Goodyear acquired a majority interest in Treadsetters Tyres Ltd.—a retail tire distributor in Kenya—in 2006, according to the cease-and-desist order.
Between 2007 and 2011, the SEC said, the management of Treadsetters routinely bribed employees of government-owned or -affiliated companies and private firms to obtain business.
According to Treadsetters' website, the company offers “a wide range of all new Bridgestone tires, retreads and stock tires, mounting and demounting tools and all wheel accessories.” It lists locations in Nairobi and Ruaraka, Kenya.
The bribes, totaling about $1.3 million during the four-year period, generally were paid in cash and falsely recorded as expenses for promotional products, according to the SEC.
The bribe system apparently began before Goodyear acquired Treadsetters, the agency said. “Goodyear did not detect or prevent these improper payments because it failed to conduct adequate due diligence when it acquired Treadsetters, and failed to implement adequate FCPA compliance training and controls after the acquisition,” the order said.
TrenTyre (Pty) Ltd., a wholly owned subsidiary of Goodyear, was incorporated in Angola in 2007, according to the SEC, which said the company's primary business is selling new tires for mining equipment.
Between 2007 and 2011, TrenTyre paid approximately $1.4 million in bribes to government-owned or -affiliated entities in Angola, and more than $200.000 in bribes to private firms in the country, the SEC said.
“The bribery scheme was put in place by TrenTyre's former general manager,” the agency said. “To hide the scheme and generate funds for the improper payments, TrenTyre falsely marked up the costs of its tires by adding to its invoice price phony freight and customs clearing costs.”
On its website, www.trentyre.co.za, TrenTyre describes itself as “one of the largest tire service providers in Southern Africa.” Established in 1948, the company said it “sells/manufactures new multi-brand tires, retreaded tires, wheels and allied services to cater for its customer needs.
“TrenTyre delivers these products and services via an extensive countrywide branch and retread factory network, on-site facilities and a 24/7 network coordinated through a central call center.
“The company has representation in Sub-Sahara Africa through Magister Ltd. Its objective is to minimize the tire operation cost per kilometer/hour for customers by providing a full package of products and services and ensuring maximum tire life, safety and fleet efficiency, and is known as the pioneer and innovator of the 'Total Service Package' to all truck, mining and construction groups in South Africa....”
As in Kenya, Goodyear in Angola failed to implement adequate FCPA compliance training, the SEC said.
Goodyear halted the bribery schemes as soon as it discovered them, according to the cease-and-desist order. It also cooperated with the SEC investigation, divested its interest in Treadsetters and is in the process of divesting TrenTyre, the SEC said.
The tire maker disciplined executives in Europe, Africa and the Middle East who failed to stop the bribery, instituted regular audits specifically to uncover bribery schemes, expanded anti-corruption training for executive, sales and finance personnel in its subsidiaries, and undertook other remedial actions, the SEC said.
Because of this, the agency said it did not seek punitive civil fines against Goodyear.
In a statement, Goodyear said it “has implemented and is continuing to implement appropriate remedial measures.” The agreement with the SEC fully resolves all outstanding issues related to the bribery investigations, it said.
Goodyear's actions were exemplary of what a company should do when faced with allegations of FCPA violations, according to Michael Weinstein, head of the White Collar Defense and Investigations practice group within the Hackensack, N.J.-based law firm of Cole Schotz P.C.
“Goodyear was able to show it took all the right steps, early and aggressively,” Mr. Weinstein told Tire Business. “It self-reported the bribery, took remedial action and cooperated fully with the SEC.”
Marcus A. Asner, a partner at the law firm Arnold & Porter in New York, concurred with Mr. Weinstein.
Because Goodyear stepped up early to do the right thing, Mr. Asner said, it faced much lower penalties than companies in previous FCPA actions. Also, he noted that the Justice Department apparently was not involved in the investigation, as it has been in previous FCPA investigations.
“This case highlights how hard it is to conduct business in some of these countries and maintain your corporate culture of zero tolerance for bribery,” Mr. Asner said.
“But it also highlights that zero tolerance needs to be part of your corporate culture in every country.”
But Mike Koehler, law professor at the University of Southern Illinois and proprietor of the “FCPA Professor” website, at www.fcpaprofessor.com, was less impressed.
“There is nothing noteworthy or special about the Goodyear FCPA enforcement action,” Mr. Koehler told Tire Business. “The media and law firm coverage of this otherwise ordinary settlement is just the latest example of FCPA Inc. using enforcement actions as opportunities to market FCPA compliance services.”
Meanwhile, there were news reports from Kenya that two of the companies Goodyear allegedly bribed there—East Africa Portland Cement Co. and Telkom Kenya—have launched internal investigations into the bribery allegations.
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