Bribes linked to NHAI contracts: CDM Smith to pay the US Treasury over $4 Million for FCPA Violations
Washington: The US Department of Justice, Criminal Division, Fraud Section, has closed its investigation of CDM Smith Inc. (CDM Smith), a privately held engineering and construction firm, incorporated and headquartered in Boston, Massachusetts, concerning violations of the Foreign Corrupt Practices Act (the “FCPA”) in the second fortnight of June 2017.
Investigation by the US Department of Justice found that CDM Smith, through its employees and agents, and those of its wholly owned subsidiary in India (“CDM India”), paid approximately $1.18 million in bribes to government officials in India in exchange for highway construction supervision and design contracts and a water project contract resulting in approximately $4 million in net profits.
India’s Transport minister Nitin Gadkari has asked NHAI to conduct an enquiry into this matter.
Moneylaundering.com had flashed the exclusive news on June 29, 2017 that the U.S. Justice Department had entered into a declination of prosecution agreement with the Boston, MA-based engineering and construction firm that requires the company to pay a penalty of $4,037,138 for violations of the Foreign Corrupt Practices Act related to bribes paid to government officials in India.
From approximately 2011 until approximately 2015, employees of CDM Smith’s division responsible for India operations and CDM India illegally paid bribes to officials in the National Highways Authority of India (“NHAI”), India’s state-owned highway management agency and an “instrumentality” under the FCPA, in order to receive contracts from NHAI.
The bribes generally were 2-4% of the contract price and paid through fraudulent subcontractors, who provided no actual services and understood that payments were meant to solely benefit the officials. In addition, CDM Smith’s division responsible for India and CDM India paid $25,000 to local officials in the Indian state of Goa in relation to a water project contract. All senior management at CDM India (who also acted as employees and agents of CDM Smith and signed contracts on behalf of CDM Smith, including CDM India’s country manager) were aware of the bribes for CDM Smith and CDM India contracts, and approved or participated in the misconduct.
The Department’s decision to close its investigation of this matter has been based on a number
of factors, including but not limited to: (1) CDM Smith’s timely, voluntary self-disclosure ofthe
matters described above; (2) CD,M Slnith’s thorough and comprehensive investigation; (3) CDM
Smith’s full cooperation itl this matter (including its provision of all known relevant facts about
the individuals involved in or responsible for the misconduct); (4) CDM Smith’s agreelnent to
disgorge to the .Department all profits it made from the illegal conduct; (5) the steps CDM Smith
has taken and continues to take to enhance its compliance program and its internal accounting
controls; and (6) CDM Smith’s full remediation, including but not litnited to terminating all of
the executives and employees who were involved in or directed the misconduct
Under an agreement with the U.S. Department of Justice, CDM Snith has agreed to disgorge $4,037,138 USD (the “Disgorgement Amount”), which represents the profit to CDM Smith from the illegally obtained contracts in India. COM Smith shall pay $1,037,138 of the Disgorgement Amount to the United States Treasury within ten business days of execution of a letter of agreement signed between Nicola J. Mrazek, Senior Litigation Counsel Daniel Kahn, Chief Foreign Corrupt Practices Act Unit, Fraud Section and Stephen J. Hickox, Chairman of the Board and Chief Executive Officer of CDM Smith on June 29, 2017.
The company will pay $1,000,000 by August 1, 2017, $1,000,000 by September 1, 2017, and $1 ,000,000 by October 1, 2017. CDM Smith acknowledges that no tax deduction may be sought in connection with’any part of its payment of the Disgorgement Amount. CDM Smith further agrees that it will not seek or accept directly or indirectly reimbursement or indemnification from any source with regard to the Amount
The letter of agreement does not provide any protection against prosecution of any
individuals, regardless of their affiliation with CDM Smith.
Click here for CDM Smith declination letter