The Securities and Exchange Commission (SEC) charged Germany-based insurance and asset management company Allianz SE with violating the books and records and internal controls provisions of the Foreign Corrupt Practices Act (FCPA) for improper payments to government officials in Indonesia during a seven-year period.
Allianz was represented before the SEC by Joel Cohen of Gibson Dunn in New York.
The SEC’s investigation uncovered 295 insurance contracts on large government projects that were obtained or retained by improper payments of $650,626 by Allianz’s subsidiary in Indonesia to employees of state-owned entities.
Allianz made more than $5.3 million in profits as a result of the improper payments.
Allianz, which is headquartered in Munich, will pay more than $12.3 million to settle the SEC’s charges.
“Allianz’s subsidiary created an ‘off-the-books’ account that served as a slush fund for bribe payments to foreign officials to win insurance contracts worth several million dollars,” said Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit.
The SEC said that two complaints brought the misconduct to Allianz’s attention.
The first complaint submitted in 2005 reported unsupported payments to agents, and a subsequent audit of accounting records at Allianz’s subsidiary in Indonesia uncovered that managers were using “special purpose accounts” to make illegal payments to government officials in order to secure business in Indonesia. The misconduct continued in spite of that audit.
The second complaint was made to Allianz’s external auditor in 2009.
Allianz failed to properly account for certain payments in their books and records.
The improper payments were disguised in invoices as an “overriding commission” for an agent that was not associated with the government insurance contract.
In other instances, the improper payments were structured as an overpayment by the government insurance contract holder, who was later “reimbursed” for the overpayment.
Excess funds were then paid to foreign officials who were responsible for procuring the government insurance contracts.
Allianz lacked sufficient internal controls to detect and prevent the wrongful payments and improper accounting.