Ferrostaal is a global provider of industrial services in plant construction and engineering. As a technology-independent system integrator, company business is focused around strong core business units in the competence areas of projects, trading, assembly solutions. Customers' projects are turned into reality by over 5,000 personnel. The foundation of the business is formed by a worldwide presence with subsidiaries in more than forty countries in growth regions. Key markets include South America, Europe, South-East Asia and the Middle East/North Africa.
Ferrostaal, originating from the Dutch company Ferrostaal N.V. and the German company Gutehoffnungshütte Aktienverein für Bergbau und Hüttenbetrieb (GHH), developed into an industrial service provider with an international distribution network. In 1968, in cooperation with HDW Werft in Kiel, Ferrostaal became a sales partner for frigates and submarines. In 2004 the name of Ferrostaal AG was changed to MAN Ferrostaal AG, which developed itself into the sales and distribution platform of the MAN Group. Ferrostaal had no meaningful compliance function and no internal audit function. It relied on its parent, MAN AG for such central functions.
In 2009, Abu Dhabi-government owned investment company International Petroleum Investment Company (IPIC) took over 70 % of the shares of Ferrostaal AG from MAN AG, and MAN Ferrostaal AG changed its name to Ferrostaal AG. MAN exercised a put option for the remaining 30 percent at the beginning of 2010. An ensuing scandal over bribery payments made by a large number of MAN's former businesses, including Ferrostaal, and the legal fines that resulted, prompted IPIC to back out of the deal entirely.
In or around May 2009, the Munich Prosecutor began investigating allegations of corruption at MAN (and later MAN Turbo AG). Evidence gathered in the investigation pointed to possible corrupt payments at Ferrostaal AG. In July 2009, the Munich Prosecutor raided Ferrostaal' s offices in Essen and Geisenheim and arrested the fonner head of Merchant Marine and the former Vorstand [management board] member responsible for Marine. The former head of Merchant Marine began cooperating with the Munich Prosecutor.
On 19 March 2010, the Munich Prosecutor conducted a second raid at Ferrostaal headquarters in Essen, ostensibly as a result of new investigative leads and suspicions involving the Marine/governmental business units (particularly the Greek, Portuguese and South African submarine projects, a tugboat project in Egypt and offshore patrol vessel projects in Argentina and Colombia) as well as the Indonesian business~ based on incriminating testimony by the former head of Merchant Marine.
In February 2011 a top Portuguese judge ruled that three German executives and seven Portuguese businessmen must face trial for robbing the Portuguese state of €34 million. Carlos Alexandre, from the Portuguese Criminal Court (Tribunal Central de Instrução Criminal), decideed that the former executives from the Man Ferrostaal and Portuguese businessmen from the ACECIA group of automotive companies would answer charges of fraud and falsifying documents to do with a billion Euro submarine deal. The accusations specifically have to do with offsets which the German company promised to provide for Portuguese industry but never or rarely materialised. it is alleged, Portuguese company directors were bribed to issue false invoices based on pre-existing business orders that had nothing to do with the German company. The entire submarines case had been clouded by accusations of CDS-PP party bankrolling by the supplier company.
On March 18, 2011, prosecutors indicted two executives from Ferrostaal AG, accusing them of bribing foreign officials with €62 million ($87 million) in conjunction with the sale of submarines to Greece and Portugal.
On 28 November 2011 Commercial vehicle and engineering group MAN and International Petroleum Investment Company (IPIC) signed an agreement that comprises a settlement of their dispute regarding Essen-based industrial services provider Ferrostaal. The two shareholders have agreed that IPIC will retransfer to MAN, and MAN will repurchase from IPIC, all of IPIC’s shares in Ferrostaal. MAN is to pay €350 million under the settlement. The deal ended a year-long dispute, prevented further related losses and removed the last remaining legal risks for shareholders from the bribery scandal that rocked the group.
Separately, MAN also signed the same day an agreement with Hamburg based MPC Group, whereby MPC Group will acquire 100 percent of the Ferrostaal shares from MAN immediately after completion of the settlement with IPIC. This transaction is also subject to clearance by relevant antitrust authorities. The MPC Group is to take over Ferrostaal from MAN for up to €160 million. The MPC group of companies is engaged in financial services, shipping and shipbuilding as well as in commodity trading and machinery business. Ferrostaal will amend and substantially expand MPC´s industrial services division.
According to the company's website, "Only clean and unassailable business is Ferrostaal business. Our claim: We want to belong to the “Best Class in Compliance and Integrity” in our industry. With a comprehensive Compliance Programme in our worldwide organisation, we will achieve this." But previously, the overwhelming lack of substantive compliance-related discussions and action at the senior managemnt level was striking, particularly in view of (i) Ferrostaal's history of paying bribes prior to Germany's adoption of the Organization for Economic Cooperation and Development ("OECD") 1997 Anti-Bribery Convention, (li) its operations in many countries prone to corruption and in business areas at risk of being affected by corruption and (iii) numerous red flags indicating potential instances of corrupt practices.
Ferrostaal made questionable or improper payments on many of its largest and highest profile projects. In German corporations such as Ferrostal bribes were referred to as "NA" -- a German abbreviation for the phrase "nutzliche Aufwendungen," which means "useful money." These projects ranged across many business sectors and countries. Questionable or improper payments do not appear to have been systematic, in that they were not centrally coordinated or controlled but rather the result of various schemes operating independently of each other. However, many of these payments appear to have been systemic, in that they occurred repeatedly throughout the Company on projects of all sizes. Some of the schemes were similar in approach and execution. For most payments the available evidence does not establish their ultimate destination. Even in those cases where the circumstances suggest the possibility of bribery, an analysis of the facts may still permit different legal conclusions to be drawn.
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