UPDATE 1-Ex-CEO of Innospec admits corruption in UK court

Mon Jun 11, 2012 5:47pm IST

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* Chemicals firm Innospec paid bribes to secure sales

* Third senior executive admits corruption

* Case has bearing on UK plans for new type of plea bargain

By Estelle Shirbon

LONDON, June 11 (Reuters) - The former boss of a U.S. chemicals firm that bribed Iraqi and Indonesian officials to buy its products pleaded guilty to corruption charges in London on Monday, in a closely watched case that may influence plea bargaining rules in Britain.

Innospec admitted in 2010 that it had paid millions of dollars in bribes between 2002 and 2008 to secure contracts to sell the two countries tetraethyl lead (TEL), a fuel additive that has been phased out from industrialised countries because of health and environmental concerns.

The case has a high profile in British legal circles because of an unusual plea bargain agreement struck in 2010 between U.S. and British prosecuting authorities and Innospec, a deal which was criticised at the time by a senior British judge.

His critique is likely to feature prominently in an upcoming debate over government proposals to give British prosecutors new plea bargaining powers.

Paul Jennings, former CEO of Innospec, pleaded guilty at Southwark Crown Court to two counts of conspiracy to corrupt in relation to bribes paid in both Indonesia and Iraq. He will enter pleas on two other charges at a hearing on July 2.

Two other former senior executives, Dennis Kerrison and Miltiades Papachristos, pleaded not guilty to one count of conspiracy to corrupt Indonesian officials.

Their trial is set to begin in April 2013 and last several weeks.

Jennings had already agreed to pay $230,000 to settle a claim against him by the U.S. Securities and Exchange Commission. His guilty plea in London makes him the third former Innospec executive to have admitted corruption in court.

David Turner, a former sales and marketing director, pleaded guilty at Southwark Crown Court on Jan. 17 and is awaiting sentencing. Innospec's Iraq agent, Ousama Naaman, was sentenced in December 2011 by a U.S. federal court in Washington D.C. to 30 months in prison for his role in the corrupt deals.

By 2000, TEL had been banned in many countries and Indonesia was one of Innospec's four main remaining customers for the product. The company paid bribes to secure sales and to hinder legislative moves in Jakarta to ban the substance.

"WHOLLY INADEQUATE"

The investigation into the case began in 2005 and was carried out jointly by U.S. and British anti-fraud agencies. Innospec was incorporated in the U.S. state of Delaware but its executive offices were in the British county of Cheshire and the Indonesian bribes were organised from there.

After complex negotiations, prosecuting authorities on both sides of the Atlantic reached a plea bargain agreement with the company in 2010 under which it paid fines of $27.5 million in the United States and $12.7 million in Britain.

John Thomas, the senior British judge who sentenced Innospec at the time, reluctantly upheld the terms of the agreement but he said the $12.7 million fine was "wholly inadequate". He also said Britain's Serious Fraud Office did not have the power to make such arrangements and it should not happen again.

Thomas said he went along with the agreement partly because a U.S. court had already endorsed it. In the United States, plea bargaining in cases of corporate crime is common, but as things stand the British legal system makes it very hard.

The government wants to change that and on May 17 it launched a public consultation on plans to introduce deferred prosecution agreements (DPAs) in cases of fraud, bribery, corruption or money laundering by companies. The consultation runs until Aug. 9.

Under a DPA, a company charged with a criminal offence could avoid a trial by meeting tough requirements such as fines, reparation for victims, confiscation of the proceeds of wrongdoing or measures to prevent a repeat.

Advocates of DPAs say they encourage companies to come clean about their illegal activities by allowing them to avoid the bad publicity of a public trial. They also say that avoiding the time and expense of a full trial is in the interest of taxpayers and of hard-pressed criminal courts.

But critics say DPAs carry the risk that companies will cut deals to save money and avoid negative publicity even though their offences may be unproven. Those deals then become benchmarks for other settlements.

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