Whether a unit of Fokker Technologies Holding B.V wins approval for its settlement with the U.S. over illegal sales to Iran now depends on a federal judge.
U.S. District Judge Richard Leon has called for a hearing in Washington today to review the proposed settlement, an unusual step that signals he has questions about the terms.
Prosecutors intend to support their decision on the $21 million deferred prosecution deal with Fokker Services B.V., a unit of the Pentagon F-35 subcontractor, by arguing that the company voluntarily disclosed its illegal sales of aviation parts and services to Iran.
In a memorandum filed in federal court in Washington July 7, prosecutors said that the Dutch company didn’t deserve the harshest of punishments for supplying aviation services to Iranian customers, including the military, because it voluntarily disclosed the problems in 2010.
Three people with direct knowledge of the matter told Bloomberg News that government investigators first learned of wrongdoing by Fokker in late 2007 and early 2008, more than two years before the company’s disclosure. The people asked not to be named because details of the probe are confidential.
The Commerce Department’s Bureau of Industry and Security, which is a party to the settlement, said June 5 that the agreement stemmed from U.S. authorities’ own investigation. The department didn’t mention any self-reporting by the company.
William Miller, a spokesman for U.S. Attorney Ronald Machen, declined to comment. Marianne Mulder, a spokeswoman for Papendrecht, Netherlands-based Fokker, declined to comment beyond a June 5 statement in which the company said it disclosed the transactions in 2010, took remedial action and cooperated fully with U.S. authorities. Peter Carr, a Justice Department spokesman and Eugene Cottilli, a spokesman for the Commerce Department’s Bureau of Industry and Security, declined immediate comment.
The Justice Department said in its court filing that there was no U.S. investigation underway at the time Fokker self-reported, saying there was no indication that the company’s disclosure was anything other than voluntary.
The hearing today before U.S. District Judge Richard Leon takes place one hour before French bank BNP Paribas (BNP) SA is scheduled to enter a guilty plea in Manhattan federal court as part of an $8.97 billion settlement of charges that it violated the same law broken by Fokker, the International Emergency Economic Powers Act.
BNP’s punishment, which includes a criminal conviction, stemmed from allegations that the bank moved $8.8 billion through the U.S. financial system as part of transactions involving individuals and entities in sanctioned countries.
The bank agreed to pay that amount back to state and federal authorities. The BNP settlement also called for a penalty of $140 million, or twice the amount of the $70 million profit Paris-based BNP earned from the illicit transactions.
In Fokker’s case, the $21 million penalty represents the total amount of revenue the company generated from the wrongful transactions, with no additional fine, according to court papers.
The severity of BNP’s penalty stemmed in part from the view held by Preet Bharara, the U.S. Attorney in Manhattan, that previous settlements reached by the Justice Department with European banks accused of sanctions violations were too lenient, and relied too heavily on the banks’ internal investigations, a person familiar with the matter told Bloomberg earlier this year.
Like Fokker, BNP claimed to have disclosed its own wrongdoing voluntarily. Prosecutors from Bharara’s office and the office of Cyrus Vance Jr., the Manhattan District Attorney, thought otherwise, people briefed on the BNP investigation have told Bloomberg News.
The BNP probe began with information developed by prosecutors in the office of Vance’s predecessor, Robert Morgenthau. After Vance became district attorney in 2010, his office continued the investigation.
In its defense of the Fokker settlement, Machen’s office cited several deferred prosecution accords reached by his own office to show the agreement is in line with other sanctions violation cases.
The cases cited in Monday’s brief included settlements with ING Bank N.V., which agreed in 2012 to pay $619 million and entered into a deferred prosecution agreement, and ABN Amro Bank N.V., which agreed in 2010 to pay $500 million as part of its deferred prosecution agreement.
The Fokker case grew out of an investigation into Aviation Services International B.V., a Dutch company headed by Robert Kraaipoel and his son Neils, according to the three people with direct knowledge of the matter.
The Kraaipoels and their company pleaded guilty to IEEPA violations in 2009 and cooperated with prosecutors.
Because the deferred prosecution agreement was struck with Fokker Services, which had no direct involvement with the Pentagon’s F-35 project, the parent company is unlikely to lose its eligibility to work on the project, according to Pentagon guidelines for contractors.
Fokker Services isn’t involved in the F-35 project and the infractions didn’t involve materials related to the program, the company said. Fokker, which has been a contractor with the F-35 since 2002, supplies in-flight opening doors and flaps and electrical wiring systems.
The F-35 program is a $392 billion weapons system being produced by Lockheed Martin Corp. Laurie Tortorello, a spokeswoman for Lockheed Martin, didn’t respond to an emailed request for comment about its contracts with Fokker.
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