Feb. 6 (Bloomberg) -- ABB Ltd. won dismissal of a racketeering suit brought by Iraq that alleged a unit of the world’s biggest electricity-networks builder conspired with Saddam Hussein’s regime over an oil-for-food program.
The Republic of Iraq sued the unit, ABB AG, in federal court in New York in 2008, alleging that its people lost more than $7 billion worth of humanitarian goods as a result of the Hussein government’s corruption of the United Nations Oil-for-Food program.
The UN set up the oil-for-food program in 1996, five years after coalition forces ousted Iraqi troops from Kuwait, enabling Hussein’s government to sell oil to raise cash for humanitarian needs.
U.S. District Judge Sidney Stein in New York today dismissed the suit saying that while Iraqi people had seen their natural resources “plundered and sold at fire-sale prices” and had legal standing to attempt to recover damages, Iraq couldn’t recover for wrongdoing and actions that occurred outside the U.S.
“The grave allegations of the complaint paint a picture of a people oppressed and of a repressive government resolved to frustrate the international community’s efforts to intervene to assist the Iraqi people,” Stein said.
The judge said that the suit’s claims, which included violations of the Racketeer Influenced and Corrupt Organization Act, or RICO, as well as violations of the Foreign Corrupt Practices Act, had to be dismissed.
The acts of the Hussein regime as alleged by the plaintiffs in their suit, describe a pattern of racketeering that was “concentrated abroad,” Stein said. The UN, which operated the program, wasn’t a place which the U.S. “has sovereignty or has some measure of legislative control.”
“The scheme described by Iraq is primarily foreign, focused on a multinational organization, engineered by a foreign government, and concerned with Iraqi oil, goods and contracts,” Stein said.
“Applying the RICO statute to these allegations would be applying the statute to extraterritorial conduct, which is not permitted.”
In 2010, ABB agreed to pay about $58.3 million to resolve claims by U.S. prosecutors and regulators that its units made corrupt payments to win business in Mexico and Iraq and violated the Foreign Corrupt Practices Act, which bars companies from paying foreign officials to gain a business advantage.
In separate settlements, the company agreed to pay criminal penalties of $19 million and U.S. Securities and Exchange Commission civil penalties of more than $39.3 million.
“ABB is very pleased that Judge Stein has followed the arguments presented in the defendants’ papers closely and ruled, we think appropriately, to dismiss the action,” said James Gillespie, a lawyer for the company.
Christian Siebott, a lawyer for Iraq, didn’t immediately return a voice-mail message seeking comment about the ruling. Antonio Ligi, a spokesman for ABB, didn’t immediately return an e-mail sent to his office after business hours seeking comment about the ruling.
The case is Republic of Iraq v. ABB AG, 08-cv-5951, U.S. District Court, Southern District of New York (Manhattan).
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