International Law Advisory - Monsanto Pays $1.5 million to the SEC and DOJ to Settle FCPA Allegations

On  January 6, 2005, Monsanto Company settled a U.S. Securities and Exchange Commission (SEC) compliant for $500,000.  The company also entered into a Deferred Prosecution Agreement (DPA) with the United States Department of Justice (DOJ) whereby the company agreed to pay a fine of $1 million and to hire an independent compliance consultant.

The SEC complaint and DOJ charges stemmed from activities taken by a U.S.-based Monsanto senior manager, and a consultant to Monsanto affiliates in  Indonesia.  The  U.S. government investigation was initiated after Monsanto filed a related voluntary disclosure with the SEC and DOJ.  The investigation resulted in allegations that in 2002, a U.S.-based Monsanto manager approved a $50,000 payment by an Indonesian consulting firm to a senior official in the Indonesian Ministry of Environment.  The payment was intended to influence the official to waive the requirement for an environmental impact statement related to Monsanto’s proposed cultivation certain genetically modified crops.  Although the Indonesian official accepted the illegal payment, the official did not perform the requested waiver.  The Monsanto manager and the Indonesian consultants, improperly processed the bribe as a “consulting fee” in order to obtain reimbursement, and recorded the payment as such in Monsanto’s books and records.  Furthermore, the Monsanto manager agreed to pay the consulting company for Indonesian taxes that the company would owe as a result of reporting income from the supposed consulting fees.  An Indonesian subsidiary of Monsanto distributed the reimbursement to the consultants.   Several other books and records violations were alleged by the SEC, including approximately $700,000 of illegal or questionable payments made by Monsanto between 1997 and 2002 to at least 140 current and former Indonesian government officials and their family members in conjunction with a product registration scheme undertaken by two Indonesian entities owned or controlled by Monsanto.

The SEC brought civil enforcement charges and issued an administrative order against Monsanto.  Monsanto settled the charges by paying a fine of $500,000 and consenting to the issuance of the administrative order finding that Monsanto had violated the anti-bribery, books-and-records, and internal-controls provisions of the FCPA.  Monsanto was ordered to cease and desist from such violations, and was required to retain a consultant to review and make recommendations concerning the company’s FCPA compliance policies and procedures.  Monsanto was not required to admit or deny the charges made by the SEC.  

In addition, the Department of Justice brought criminal charges against Monsanto for violating the FCPA.  The DPA that Monsanto negotiated with the DOJ provided for the payment by Monsanto of a $1 million fine.  Under the terms of the agreement, Monsanto will also adopt new internal policies and procedures, and will appoint an independent compliance expert to audit the company’s compliance program and monitor its implementation.  In exchange, DOJ has agreed to defer prosecution of Monsanto for three years, and to dismiss criminal charges against Monsanto altogether if Monsanto fully complies with the terms of the DPA.  

We will continue to keep you apprised of sanctions, export controls, and FCPA developments.  If you have any questions, please feel free to contact  Ed  Krauland at 202.429.8083 or Meredith  Rathbone at 202.429.6437.