Okla. company resolves Chinese bribery allegations

Michael P. Tremoglie Jul. 19, 2012, 6:00am

WASHINGTON (Legal Newsline) - The NORDAM Group Inc., a provider of aircraft maintenance, repair and overhaul services based in Tulsa, Okla., will pay a $2 million fine for violating the Foreign Corrupt Practices Act, the Department of Justice announced Tuesday.

According to the DOJ, "NORDAM, its subsidiaries and affiliates paid bribes to employees of airlines created, controlled and exclusively owned by the People's Republic of China in order to secure contracts to perform MRO services for those airlines."

The alleged bribes were paid both directly and indirectly to the Chinese officials. Three employees of NORDAM's Singapore subsidiary contracted with fictitious entities for sales representation services, the DOJ said. The money was then allegedly paid by NORDAM to the fictitious entities to pay bribes to the airline employees.

NORDAM, in addition to the monetary penalty, will also cooperate with DOJ for the three-year term of the agreement. It will make periodic reports concerning NORDAM's compliance efforts. It will continue to implement an enhanced compliance program and internal controls designed to prevent and detect FCPA violations.

Because of NORDAM's "timely, voluntary and complete disclosure of the conduct, its cooperation with the department and its remedial efforts," DOJ will not prosecute. Furthermore, the agreement recognizes that while the penalty assessed to NORDAM is less than normal according to the U.S. Sentencing Guidelines, it is appropriate because NORDAM fully demonstrated that a fine exceeding $2 million would substantially jeopardize the company's continued viability.

Kenneth Lackey, Chairman of The NORDAM Group, Inc. commented about the case. He reinforced that the company fully cooperated with the Justice Department.

"(W)e acted as soon as we learned of the violation," he said. "The employees directly involved were part of our Singapore subsidiary. We also think that there were some employees here in the United States who knew what was going on or should have been knowledgeable."

According to Lackey, employees at the Singapore subsidiary set up a fictitious sales company which represented NORDAM's interests in dealing with China. The Singapore subsidiary made payments to this company, "but, instead of using the money for ethical and legitimate interests," Lackey remarked, "these funds were used to bribe Chinese airlines' officials. The employees were also pocketing money for their own purposes."

"We found out about it from the Singapore Internal Revenue Authority," Lackey said. "We immediately recognized that it was a violation of the Foreign Corrupt Practices Act. We reported it to the authorities in Singapore and the United States.

"The DOJ allowed us to conduct our own investigation, was done in cooperation with DOJ and was conducted by an independent law firm. Our major shortcoming was a failure to appropriately select, train, and monitor/audit our agents. We have also outsourced our internal audit function to gain skills, capabilities, experience and greater independence."

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