By Krista Scheirer
Sept. 23 (Westlaw Journals) - Industrial products manufacturer Bridgestone has agreed to plead guilty in Texas federal court and pay a $28 million fine for bribing Latin American government officials to secure sales of marine hose and for rigging bids on the product worldwide.
The Tokyo-based manufacturer is charged with conspiring to violate the Foreign Corrupt Practices Act, 18 U.S.C. § 371, and the Sherman Act, 15 U.S.C. § 1, through its alleged involvement in a manufacturing cartel.
Bridgestone said in a statement that it cooperated with a Justice Department investigation into the bribery and bid-rigging and has entered into a plea agreement with the government to end the case against it.
The deal calls for the company to pay a $28 million fine, enhance its compliance procedures and cooperate with the government’s ongoing cartel investigation.
According to a criminal information filed in the U.S. District Court for the Southern District of Texas, Bridgestone’s U.S. subsidiary, Bridgestone Industrial Products of America, obtained millions of dollars in sales between January 1999 and May 2007 through bribes in violation of the FCPA.
BIPA’s Houston office sold industrial products like marine hose (used to transfer oil between tankers and storage facilities) to customers in Latin America. Federal prosecutors said the company secured business in Mexico and other Latin American countries through corrupt payments to employees of state-owned entities.
The FCPA designates these employees as “foreign officials” and makes it illegal for a U.S. company to bribe them.
Bridgestone’s international industrial products division allegedly developed relationships with sales agents and employees of state-owned entities in the countries where it sought business. When the company paid sales agent commissions, the payments included bribe money for the state officials, prosecutors said.
Bridgestone attempted to conceal these payments by communicating primarily by phone and destroying faxes and letters, according to the criminal information.
During the eight-year span, prosecutors said, Bridgestone also violated the Sherman Act by agreeing not to compete with other manufacturing companies for marine hose customers internationally.
According to the Justice Department, Bridgestone is the fifth co-conspirator charged in an ongoing antitrust investigation conducted by the FBI, the U.S. Department of Defense and the U.S. Navy.
Federal prosecutors said the cartel companies, with the help of a jointly paid coordinator, apportioned the worldwide marine hose market among themselves to eliminate competition.
In order to maintain the scheme, the companies agreed to a fixed price list and sometimes submitted intentionally high bids to certain customers. Consequently, the cartel affected prices for hundreds of millions of dollars worth of marine hose worldwide, according to the criminal information.
By eliminating competition, Bridgestone and its co-conspirators sold marine hose at noncompetitive prices to customers involved in offshore drilling or the transportation of petroleum products, including the U.S. Department of Defense, the criminal information said.
A violation of the Sherman Act carries a maximum fine of $100 million, and a violation of the FCPA could cost $500 million.
Bridgestone’s statement said the company will withdraw from the marine hose business, terminate “many” third-party agents and take “remedial action” against an unspecified number of employees.
The company also said its cooperation with federal investigators resulted in an agreement with the government that reduced its fine to $28 million.
In the statement, Bridgestone said it is committed to conducting business “in compliance with the competition and anti-corruption laws around the world.”
United States v. Bridgestone Corp., No. 11-CR-651, guilty plea entered (S.D. Tex., Houston Div. Sept. 15, 2011).