Econosto Mideast, Econosto, ERIKS, CMK and Mammoet Salvage reach settlement agreements with the Netherlands Public Prosecution Service
Five companies have accepted settlement agreements offered to them by the Netherlands Public Prosecution Service (NPPS) for a total amount of 41,621,000 euros. The NPPS accuses the companies of bribery of public officials and commercial bribery, falsification of documents and violation of international trade sanctions.
Criminal offences committed by Econosto Mideast, Econosto and ERIKS
In December 2016, SHV Holdings N.V. (SHV), also on behalf of its subsidiary companies Econosto Mideast B.V. (Econosto Mideast), Econosto N.V. (Econosto) and ERIKS N.V. (ERIKS), reported to the NPPS that irregularities had been observed at these three subsidiary companies. Based on this report, the suspicion arose that Econosto Mideast had been guilty of the offence of commercial bribery and that Econosto Mideast, Econosto and ERIKS had been guilty of the offence of falsification of documents. Under the direction of the NPPS, the Anti Corruption Centre of the Dutch Fiscal Information and Investigation Service (FIOD) launched a criminal investigation at the end of December 2016.
This investigation revealed that employees of Econosto Mideast had promised and paid cash commission payments to persons employed by or for (potential) clients, namely companies in the Middle East and Asia. In exchange for the commissions, these persons ensured that orders were awarded to Econosto Mideast by these companies. The NPPS concludes that there were 294 cases of commercial bribery in the period between 2009 and 2015.
The NPPS observes that the commission payments and the recipients were recorded outside the company administration of Econosto Mideast in a parallel administration. In the official company administration, the payments were wrongfully recorded as bonus payments to own staff of Econosto Mideast. Furthermore, on the basis of the findings of the FIOD, the NPPS noted that hundreds of falsified cash forms, dozens of falsified invoices and two falsified Letters of Representation from the management of Econosto were created and used for the external accountant and that two sets of falsified annual accounts for Econosto Mideast were filed with the Chamber of Commerce. In these documents, too, the payments were recorded as bonus payments to own staff, whereas in reality they represented bribes paid to third parties.
The company policy at Econosto Mideast was, amongst others, directed at obtaining orders through the payment of bribes. The NPPS observes that the management of Econosto Mideast itself approved a proportion of the cash payments to employees of clients. The investigation revealed that senior staff within Econosto and ERIKS were also aware of the cash commission payments and the incorrect recording of these payments in the company administration of Econosto Mideast, and that they had taken no measures to prevent or halt this behaviour. This method of doing business was only halted in 2015, following an intervention by SHV.
The NPPS concludes that the acts of criminal bribery can be attributed to Econosto Mideast and that Econosto Mideast, Econosto and ERIKS were jointly and repeatedly guilty of falsification of documents.
The investigation finally revealed that Econosto Mideast undertook transactions with Iranian banks and an Iranian company despite being aware of the fact that international sanctions were in force against Iran.
Commercial bribery by CMK
At the start of 2017, the FIOD received information from the Financial Intelligence Unit (FIU) among others about unusual transactions by the company CMK Mammoth Gulf B.V. (CMK). The information from the FIU led to the launching of a criminal investigation. This investigation revealed that in exchange for promises and payment of bribes to a project director of a Korean company, CMK was awarded an order by this company. To be able to account for the payments to the project director, a falsified service agreement and falsified invoices were drawn up and used.
Bribery of a member of the Iraqi parliament by Mammoet Salvage
In response to a series of indications relating to possible bribery, at the start of 2017, the FIOD launched a criminal investigation into Mammoet Salvage B.V. (Mammoet Salvage). The investigation by the FIOD revealed that Mammoet Salvage had transferred funds to the private Swiss bank account of a member of the Iraqi parliament so that via him, they could come into contact with the Iraqi Minister for Oil, in order to solve a conflict with an Iraqi State oil company. In the administrative records of Mammoet Salvage, invoices in the name of the MP’s company were entered, with a description of services that did not match the real situation and which were therefore falsifications.
Serious nature of the facts
In their business activities, these companies were guilty of the offence of bribery of public officials and commercial bribery abroad. The NPPS views this behaviour as particularly objectionable for a number of reasons.
Econosto Mideast and CMK were improperly awarded orders, which led to the generation of turnover. Actions of this kind disrupt the level playing field that is essential for a smoothly functioning economy. The payment of bribes to employees of clients damages the trust of the employer in the employee, leads to social disruption and seriously hinders fair (international) competition between parties operating in the same sector. In addition, Mammoet Salvage made payments to a member of the Iraqi parliament. The payment of bribes to a highly placed foreign public official can have a corrupting influence on the political system and undermines confidence in the rule of law.
By using large numbers of falsified documents, the companies were guilty of harming the confidence placed according to generally accepted standards in the accuracy of such documents.
By doing business with entities subject to sanctions, Econosto Mideast undermined the aim and effectiveness of international sanctions.
The NPPS is of the opinion that in all three investigations into senior company officials, there is a suspicion that within these companies they were actively involved in committing criminal offences.
Considerations for offering a settlement
The NPPS considers payment of 41,621,000 euros to be an appropriate and effective settlement. SHV reported the observed irregularities relating to commission payments on behalf of Econosto Mideast, Econosto and ERIKS to the NPPS. All the companies cooperated fully in the criminal investigation and issued relevant information to the FIOD. In addition, both SHV and its subsidiary companies have taken remediation measures and compliance measures to prevent the committing of criminal offences in the future. None of the employees directly involved are still employed at Econosto Mideast, Econosto, ERIKS, CMK and Mammoet Salvage. The companies in question have acknowledged the facts and have expressed their regrets. None were previously convicted of criminal offences.
The three investigations were concluded with a settlement. The settlement agreements with Econosto Mideast, Econosto, ERIKS and CMK respectively include both a penalty and a confiscation component. The settlement agreement with Mammoet Salvage consists only of the obligation to pay a fine, because the investigation did not show that the bribery led to unlawfully obtained gains.
In determining the level of the fines, the NPPS took into account the seriousness of the facts, the scale of the payments, the period in which the offences were committed and the involvement of management.
The fine for the bribery offences and falsification of documents committed by Econosto Mideast, Econosto and ERIKS includes a 25% discount because the facts were reported to the NPPS by the companies themselves.
All companies cooperated fully in the investigation into all the investigated offences. For this reason, in determining the fines, the NPPS applied an (additional) 25% discount.
The companies have paid the Dutch State a total of 12,110,000 euros in fines.
By committing bribery, Econosto Mideast, Econosto, ERIKS and CMK obtained unlawful gains. These gains totalling 29,511,000 euros have been confiscated by the NPPS.
Following the settlement, the NPPS considers these cases closed.
Natural persons and accounting firm
The criminal investigation revealed that within the ERIKS group, CMK and Mammoet Salvage, various natural persons were suspected of involvement in the committed criminal offences. The investigation into these natural persons has almost been concluded. The NPPS is of the opinion that with regard to a number of persons there is sufficient evidence that they committed criminal offences, and intends to prosecute these natural persons for those offences. It is up to the courts to identify the facts with regard to those natural persons, and to determine whether any and if so which of them are guilty of said offences.
In addition, an accounting firm is suspected of involvement in the committed criminal offences. The investigation into this firm has not yet been concluded.