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Titan Settles Federal Overseas Bribery
March 01, 2005 7:35 PM ET



By SETH HETTENA


SAN DIEGO (AP) - Titan Corp. pleaded guilty Thursday to violating federal anti-bribery laws and agreed to pay more than $28 million to settle allegations that it sought to influence elections in the West African nation of Benin in exchange for higher management fees on a telecommunications project.

The penalty is the largest combined criminal and civil penalty in the 28-year history of the Foreign Corrupt Practices Act.

Titan, a San Diego-based defense contractor, entered a guilty plea in U.S. District Court in San Diego to three felony counts, including Foreign Corrupt Practices Act violations, falsifying company books and aiding in the filing of a false tax return.

U.S. District Judge Roger Benitez placed Titan on three years of probation and fined it $13 million in criminal penalties on the anti-bribery count. Titan also agreed to pay $15.5 million to settle a lawsuit by the U.S. Securities and Exchange Commission.

"All U.S. companies should take note that attempting to bribe foreign officials is criminal conduct and will be appropriately prosecuted," said U.S. Attorney Carol Lam, who noted the bribery investigation is ongoing.

Stephen M. Cutler, director of the SEC's division of enforcement, said illicit payments to government officials were "inconsistent with fair play and vigorous competition and are a violation of U.S. law."

David W. Danjczek, Titan's vice president for compliance and ethics, expressed relief that the chapter was drawing to a close.

"Titan will not tolerate ethical breaches or violations of the law," Danjczek said.

Court filings by the SEC and Justice Department state that Titan funneled $2.1 million in 2001 in "social payments" to the election campaign of Benin's president, Mathieu Kerekou. Some of the money paid for T-shirts adorned with both Kerekou's face and a message to vote for him in the upcoming election.

Runoff elections were postponed for four days that year when the second-place finisher complained of widespread fraud. Four days after Kerekou was declared the winner, Benin government officials agreed to quadruple Titan's management fee for developing the country's new telephone network from 5 percent to 20 percent, according to a plea deal filed by the U.S. Justice Department.

Titan later claimed the 20 percent fee was worth at least $9.1 million.

The payments were made through Titan's Benin agent _ Kerekou's business adviser. A former senior Titan official told the business adviser to falsely invoice the "social payments" as consulting services, according to the SEC's complaint against the company.

The complaint does not name either the company official or the business adviser, who between 1999 and 2001 collected a total of $3.5 million from Titan.

The Justice Department noted that no charges have been brought against Kerekou, a former Marxist dictator who ruled Benin for years until a democratic transfer of power in 1991. He was elected five years later and remains in office.

Titan discontinued its Benin operations in 2002.

Concerns of Titan's possible overseas bribery first surfaced in 2003 during Lockheed Martin Corp.'s attempted merger with Titan. The allegations helped lead to the deal's collapse and dragged down company earnings. Titan, the largest provider of translators to the U.S. government, has projected revenues in 2004 of more than $2 billion.

Titan said it has negotiated an administrative settlement with the U.S. Navy that will it to continue to receive government contracts.

The investigation by the SEC and U.S. Justice Department also found that although Titan did business in more than 60 countries, the company had no policy on overseas bribery, disregarded the limited policies in effect and failed to oversee its 120 agents around the world.

The SEC found the lax rules led to a series of problems between 1999 and 2003:

_ Titan falsified documents that allowed its agents to underreport local commission payments in Nepal, Bangladesh and Sri Lanka;

_ Underreported commission payments on equipment exported to Sri Lanka, France and Japan in documents presented to the U.S. government;

_ Paid a World Bank Group analyst in cash to assist Titan in its project.

_ Gave an $1,850 pair of earrings to Kerekou's wife in 1999.

Titan said it expanded its ethics, anti-bribery and arms exporting practices last year.



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