AB Volvo's Iraq kickbacks penalty

http://news.bbc.co.uk/go/rss/-/1/hi/business/7307432.stm

Version 0 of 1.

The Swedish lorry maker AB Volvo has agreed to pay millions of dollars in fines in connection with an inquiry into Iraq's UN oil-for-food programme.

It will pay a $7m (£3.5m) fine to the US Department of Justice (DOJ) and $4m in civil fines to the Securities and Exchange Commission.

The firm will also pay $8.6m - the amount two of its subsidiaries had made in profits from the programme.

In return, the units will not face prosecution for at least three years.

The DOJ will drop the prosecution completely if the two units - Renault Trucks and Volvo Construction Equipment - abide by the terms of an agreement.

The details of the deals were not disclosed.

Kickbacks demanded

The oil-for-food programme was established by the UN to limit the humanitarian impact of the international sanctions on Iraq.

But the Iraqi government began demanding kickbacks from companies seeking to sell products under the scheme - usually amounting to 10% of the total contract.

"Today's acknowledgement by AB Volvo of its subsidiaries' wrongdoing in making illegal payments to the former Iraqi government in exchange for contracts is one more step in holding accountable those companies who conspired to deceive the United Nations," said Assistant Attorney General Alice Fisher.

Volvo's chief executive Leif Johansson described the incident as regrettable.

"But we do note with some satisfaction that the authorities spoke favourably of the co-operation by Volvo as well as Volvo's own investigation and measures," he said.

AB Volvo is not the company that makes Volvo cars. It sold the carmaking division to Ford in 1999.