SOURCE: AFI
In a significant revelation in the realm of international business ethics, the United States Department of Justice has reported that the US-based research and design firm, Moog Inc., engaged in bribery to secure contracts with India’s state-owned aerospace and defense company, Hindustan Aeronautics Limited (HAL). According to the orders issued on October 11, 2024, by the Securities and Exchange Commission (SEC), Moog Inc., through its Indian subsidiary Moog Motion Controls Private Limited (MMCPL), orchestrated payments to HAL officials.
The SEC’s detailed investigation into the matter uncovered that in April 2021, HAL had announced a public tender for aerospace actuators, valued at over $1.3 million. Following this announcement, by May 2021, MMCPL employees were actively discussing the logistics of bribing an HAL official. Internal communications revealed a plan to pay a 2.5% commission, with considerations for immediate and staggered payments to ensure the disqualification of other bidders. “By any means, we must take the order of HAL,” was a sentiment echoed among the employees, highlighting the desperation to win the tender.
By November 2021, MMCPL successfully secured the contract from HAL, valued at $1,399,328 for parts and services linked to the April tender. It was during this transaction that the bribe, amounting to more than half a million dollars, was paid. The method involved creating inflated and false invoices to generate the necessary funds. An invoice for INR 10 lakhs (approximately $13,333) was raised by Distributor B for the supposed construction of a specialized table, which was never actually commissioned or delivered. This transaction was a front for transferring the bribe money to the HAL official.
Further details from the SEC order indicate that in January 2022, MMCPL instructed its finance manager to facilitate payment to Distributor B, acknowledging their assistance in this scheme. By March 2022, MMCPL had paid around $18,614 to Distributor B, which was then used to make the promised improper payment to the HAL official. These transactions were deceitfully recorded in Moog’s books as legitimate expenses, further masking the true nature of these payments.
This case highlights significant breaches of the Foreign Corrupt Practices Act (FCPA), emphasizing the need for robust compliance systems within multinational corporations to prevent such corrupt practices. The SEC’s actions against Moog Inc. underscore the global commitment to fighting corruption, especially in high-stake industries like defense and aerospace, where the implications of such misconduct can extend beyond financial losses to national security concerns.
The repercussions for Moog Inc. include not only substantial fines but also a tarnished reputation, which might affect future business dealings and partnerships. This incident serves as a stern reminder of the consequences of unethical business practices and the importance of transparency and integrity in international trade.