Ball Corporation: A Company Car in the Interest Expense Account

In the Ball Corporation FCPA case, the company agreed to a $300,000 civil penalty over allegations that its Argentine subsidiary paid customs bribes and disguised them in its books. One alleged reimbursement took the form of a company car, recorded first as interest expense and then as miscellaneous expense. For an accountant who knows why an entry was changed, that difference can be the heart of the case.

Ball manufactured metal packaging for food, beverages and household products. Its wholly owned Argentine subsidiary, Formametal, manufactured aerosol cans, and its results flowed into Ball’s consolidated financial statements. The Securities and Exchange Commission’s March 24, 2011 order under the Foreign Corrupt Practices Act alleged that Formametal offered and paid at least ten bribes, totaling at least $106,749, from July 2006 through October 2007 to obtain prohibited used machinery and seek reduced export duties.

Used Machinery Behind Ordinary Customs Fees

The order alleged that Formametal used customs bribes to bring equipment into Argentina for its manufacturing process. In most instances, the alleged purpose was to get customs officials to bypass Argentine restrictions on importing used equipment and parts.

The order’s equipment-import account puts the alleged payments on invoices from Formametal’s private customs agent. They appeared as separate line items alongside other customs charges, with descriptions including “fees for customs assistance,” “customs advisory services” and “verification charge.” Some were in rounded peso amounts. The agency alleged that Formametal then recorded the payments as customs advice or professional fees in an “Other Expenses” account, or in an account named for the equipment.

That gave the payment a plausible home in the factory’s paperwork. Someone reading only the agent’s invoice would see a customs service. Someone who knew the equipment, the import restriction and the official’s decision could explain what the fee allegedly bought. The transaction crosses purchasing, customs and accounting, and the person who understands it may work in any of those departments.

A customs-service label also appeared in Scoular’s case. In the Justice Department’s account of its deferred prosecution agreement, Scoular admitted using brokers to bribe Mexican officials so agricultural shipments could pass inspections despite dirt, soil and other impurities. The brokers billed the payments as reinspection fees. The shared pattern is a service description attached to a payment for an official’s decision.

A Copper Scrap Waiver With a Much Larger Payoff

The raw-material tariff issue ran in the other direction: Formametal wanted to export copper scrap without the usual duty. According to the order, Argentina generally imposed a duty of 40% of the copper’s value to discourage exports of domestically produced copper and copper scrap. Formametal’s president estimated that exporting with a waiver would produce approximately $1.5 million in additional annual profit compared with selling inside Argentina.

The agency alleged that Formametal had unsuccessfully sought government approval for duty-free exports before turning to an improper payment. On October 18, 2007, it allegedly disbursed $4,821, the first of five authorized installments, through its customs agent. The subsidiary recorded the payment as “Advice fees for temporary merchandise exported” in an expense account.

The order says no copper scrap shipments resulted from that payment. The alleged payment bought an attempt to change the tariff treatment, with an anticipated payoff far larger than the first installment.

A Company Car Recorded as Interest

The Securities and Exchange Commission alleged that Formametal reimbursed an executive’s personally funded machinery bribe by giving him a company car. By February 2007, two Ball accountants had learned about the transaction, and their questions exposed the difference between the asset transfer and its accounting description.

According to the order, Formametal’s vice president of institutional affairs, its former president and owner, paid the bribe from his own funds. Formametal initially recorded the car transfer as interest expense. When the accountants pressed for details, the subsidiary’s president told them the car reimbursed the vice president for the bribe. The order describes what happened next:

We see the absurdity in that correction: the account changed, while the purpose stayed hidden. The agency’s allegation makes the car-transfer record, the original entry and the revised entry parts of the same story. An insider who knows the explanation behind a reclassification can supply what the revised ledger still leaves out.

The Warnings Reached Ball’s Accountants

The Securities and Exchange Commission alleged that Ball had warning signs soon after buying Formametal in March 2006. In June, a financial analyst from Ball’s packaging division visited the subsidiary to learn about its operations and reported concerns to the division’s accounting director.

The analyst’s report identified questionable customs fees, used machinery declared as new, other dishonest customs declarations and destruction of documents. According to the order, several senior divisional executives saw the report.

The order’s account of the control failures also describes machinery entering Argentina without appropriate invoices and documentation. The agency alleged that improper payments continued after Ball accountants learned about the machinery bribe.

This is why we look at what happened after a warning reached the parent company. In the order’s account, the analyst’s report, the accountants’ questions and the later payments connect knowledge to decisions inside the business. The useful evidence includes what management learned and what it allowed to continue.

What the SEC Said the Books Concealed

Ball’s Foreign Corrupt Practices Act resolution addressed books and records and internal accounting controls. The agency alleged that misleading customs invoices, journal entries and the car reimbursement reached Ball’s consolidated accounts through Formametal. It separately alleged that Ball failed to maintain controls that could prevent and detect the subsidiary’s improper payments, including after senior personnel received warnings.

The books told one story about the transactions while the alleged purposes told another. The agency’s accounting case focused on that gap and the failures to address it.

The same divide appears in Deere & Company’s machinery business. In its September 2024 order concerning Wirtgen Thailand, the Securities and Exchange Commission alleged that a third-party consultant served as a conduit for payments to officials in connection with machinery tenders:

The agency also alleged that one commission agreement directed payment to a senior highway official’s bank account. In Ball’s alleged machinery-import scheme, the customs agent’s invoice supplied the business description. In Deere’s, the commission agreement did that work. The comparison turns on the service supposedly purchased, the recipient and the decision the company wanted.

The Records an Insider Can Connect

The strongest FCPA whistleblower evidence connects the official decision, the money or asset transferred, the explanation given and the accounting entry. For the conduct alleged at Formametal, that means reading the machinery documents alongside the customs agent’s invoices, the copper scrap waiver request alongside the payment authorization, and the company-car transfer alongside its successive expense entries. A subsidiary ledger and a parent-company warning report answer different parts of the same question.

An import employee may understand why a used machine was described as new. A finance employee may know why an executive received a car or why an expense was moved between accounts. We work with that business knowledge to explain the transaction and who understood its real purpose.

The March 2019 working paper Do Corporate Whistleblower Laws Deter Accounting Fraud?, hosted by MIT Sloan, studied companies exposed to state False Claims Acts through state pension-fund ownership. It reported a 5% to 9% reduction in estimated accounting-fraud probability after that exposure.

The Civil Resolution and the Whistleblower Question

The Securities and Exchange Commission’s order required Ball to pay the civil penalty to the United States Treasury. We see a modest penalty beside the company’s scale: the same order reported Ball’s 2009 consolidated net income of $387.9 million. In accepting the settlement, the agency credited Ball’s remedial efforts, voluntary disclosure and cooperation.

Foreign-bribery matters have their own whistleblower programs, and we assess that route with you against the transactions and records you know. Separately, a whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know Why the Entry Changed

If you know what a customs fee purchased or why a subsidiary changed an expense entry, talk with our whistleblower experts. We connect your knowledge of the business to the payments, approvals and books, and bring in FCPA whistleblower lawyers who understand subsidiary accounting and customs transactions. We stay alongside you to build your strongest case from the transactions you know.