Honeywell: Commissions for Influence, an Invoice for Nothing

In the Honeywell FCPA case, Honeywell International agreed to pay $81,158,193 in its Securities and Exchange Commission settlement over alleged bribery schemes involving refinery business in Brazil and Algeria. The SEC described a sales commission intended to buy influence over a Brazilian bid and an Algerian consulting payment for work the agent never performed.

The SEC announced the settlement on December 19, 2022. Its Foreign Corrupt Practices Act case concerned Honeywell’s U.S. subsidiary Honeywell UOP and its Belgian subsidiary, whose books fed into the parent’s accounts. The business was industrial technology for oil refineries, where the customer’s decisions about price, construction schedules and contract changes could determine whether the supplier won or kept the work.

Brazil’s Refinery Bid Had an Inside Adviser

The SEC alleged that Honeywell UOP used a sales consultant to offer as much as $4 million to a Brazilian official for help winning Petrobras‘s Premium refinery project. Petrobras, Brazil’s state-owned oil company, planned two new refineries to process heavy oil. The competition moved through technical ranking, design competition and commercial valuation, giving the bidders several decisions to influence before an award.

According to the Commission’s order, UOP had already made it through the technical ranking when its executives began looking for a sales intermediary in April 2010. They believed they needed higher-level contacts at Petrobras. Their account manager recommended a small oil and gas consulting firm whose owner said he could reach the downstream director responsible for the project.

The Approval Request Hid the Official Contact

The Commission alleged that the request to hire the Brazilian agent called for a 3% sales commission but omitted the agent’s planned dealings with government officials and falsely said UOP had known the agent for two years. High-level Honeywell executives approved the request, including executives at UOP and its business segment.

The SEC’s account shows third-party due diligence built on a sales description that left out the relationship’s purpose. It alleged that the approvers were presented with a familiar consultant while the account manager arranged access to the official who could influence the bid. The alleged agreement took shape at a Rio de Janeiro shopping mall: the director would help UOP in exchange for a percentage of the contract.

The Director Became the King

The SEC order describes bid updates in which UOP’s account manager and his supervisors called the Petrobras director the “King.” An email pressing for the agent’s agreement to be signed put the contract and the official’s intervention in the same sentence:

According to the Commission’s order, Petrobras’s technical buyer rejected UOP’s initial commercial bid of $425 million as far too high. The Commission alleged that UOP then submitted a revised bid of $348 million based on the downstream director’s guidance. The technical buyer accepted it, and UOP expected the director to prevent further price reductions before Petrobras awarded the project.

The bid had a technical buyer, but sales wanted a king. The influence allegedly bought here reached the commercial terms of a public company’s purchase, including the price its buyer could negotiate.

Commissions Without the Agent’s Invoice

The Commission alleged that UOP paid the Brazilian agent $10.4 million in commissions from a U.S. bank account. In many instances, the employee processing those payments calculated the commission from UOP’s own invoice and sent the payment request to accounting without asking for an invoice from the agent. When the agent changed the company name and requested payments to a Swiss account under the new name, the requests went forward without question.

The payment file therefore held a second set of decisions, after the decision to hire the agent. A finance employee could see the missing invoice and changed beneficiary even without having seen the bid emails. Those records connect the commission approved inside Honeywell to the destination of its money. The order places UOP’s last payment to the agent in November 2014.

Petrobras’s own 2018 criminal non-prosecution agreement shows the customer’s side of another contract-kickback scheme. Petrobras admitted that inflated contracts funded kickbacks to executives and political recipients, while the inflated costs entered its accounts as assets. That separate case shows how a state-owned buyer can lose money through overbilling while its own accounts conceal the cost.

Algeria’s Consultant Had No Work to Show

In Algeria, the Securities and Exchange Commission alleged that Honeywell Belgium used an intermediary payment to help resolve a refinery contract dispute. Honeywell Belgium was modernizing instrumentation and control systems at the Arzew refinery, and the work on Zone 4 had stalled over the construction schedule and the amount owed for delays. Sonatrach, Algeria’s state-owned oil company, controlled the customer decision.

The Commission alleged that a consultant working unofficially for Honeywell Belgium paid a Sonatrach official $75,000 in bribes from a Swiss bank account in 2011. Sonatrach had threatened to move the work to a competitor, and the parties signed a contract amendment after the first payment. The official was a key decision-maker on the disputed issues.

According to the SEC, Honeywell’s regional general manager had arranged a relationship with a Monaco-based oil and gas intermediary. The Commission alleged that the manager falsely told the refinery project manager that this agent had an agreement to work on Zone 4, although the agent had played no part in resolving the dispute or in any other aspect of the refinery contract.

According to the Commission, the later sales consultancy agreement said the agent would promote business in Algeria and made no mention of Zone 4. The agent neither achieved the required milestones nor obtained new business as the agreement contemplated. It nevertheless received $300,000, supported by an invoice for the refinery change order.

The order describes the project manager questioning the basis and size of that lump-sum payment. According to the Commission, the regional general manager repeated that it was the agreed amount, after which the project manager stopped questioning it and the invoice went to finance. The Commission alleged that Honeywell Belgium approved the payment and falsely recorded it as a sales commission.

The Commission alleged that, through intermediary transfers involving correspondent banks in New York, the Monaco agent used part of the payment to reimburse the consultant who had paid the official. In that account, the invoice described a project service, the ledger described a commission, and the transfers reached the person who had funded the bribes.

What the Approval and Payment Files Reveal

The Honeywell allegations show how a payment trail can connect information held in different departments. In the Commission’s account, sales sought a change in the customer’s decision, the agent approver saw the claimed relationship, and finance saw the payment instructions. The project manager could question whether the fee had a basis in the work.

The Justice Department’s September 2024 evaluation of compliance programs asks about a third party’s business purpose, compensation, actual performance and continuing oversight. Those questions follow the commercial relationship beyond the day an agent passes screening. The SEC order describes Honeywell completing and approving a due diligence review of the Monaco agent before paying the later Algerian invoice.

The SEC order also describes Honeywell changing the payment controls that mattered to these files: wires to sales intermediaries were to go to an account belonging to the same party and to a bank where the intermediary resided. Honeywell introduced digital payment controls and a program to eliminate UOP’s sales agents, addressing how an approved commission became a transfer.

For an insider, the useful connection may be the difference between the service described in the contract and the service the project actually received. It may instead be a bid change following a private conversation with the customer’s official, or a payment sent to a new account without the agent’s invoice. We work with that specific knowledge to connect the decision, payment and false record.

What the SEC Required Honeywell to Pay

Most of the civil settlement was money the Commission said Honeywell had made from the conduct: it required the company to surrender $64,672,563 in profits. The settlement total included that disgorgement and prejudgment interest. Its order allowed an offset of up to $38,712,216 for qualifying payments to Brazilian authorities, supported by evidence of payment. The required payment of $42,445,977 to the SEC for transfer to the U.S. Treasury represented the balance of the settlement total after the full permitted Brazilian offset.

Honeywell International was the company in the Securities and Exchange Commission proceeding, which addressed bribery, inaccurate books and inadequate accounting controls under the Foreign Corrupt Practices Act in both countries. The SEC order separately identifies UOP as the company that entered a deferred prosecution agreement with the Justice Department and acknowledged criminal responsibility for conduct in Brazil.

What an Insider’s Account Adds

Knowing that an invoice was approved is different from knowing why it was created. The Honeywell allegations put that difference in ordinary business records: an agent request that concealed official contact, a bid email asking for intervention and an invoice for work the SEC said the agent never did. Someone who handled one of those decisions may explain a discrepancy that the accounting entry alone cannot.

The 2019 working paper Do Corporate Whistleblower Laws Deter Accounting Fraud?, hosted by MIT Sloan, found that exposure to state False Claims Acts reduced the likelihood of accounting fraud by 5% to 9% among the firms studied. The study examined companies held by state pension funds and connected the effect to a higher risk of whistleblowing. Its finding gives weight to the person who can explain what happened behind an apparently approved transaction.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. Foreign-bribery information has a separate SEC whistleblower award route. Our whistleblower experts assess how the information you hold fits that program and bring in FCPA whistleblower lawyers for your case.

You Know What the Agent Actually Did

If you handled the refinery bid, questioned the consulting fee or saw payments leave under a different company name, speak to one of our whistleblower experts about what the agent was really paid for. We connect your knowledge of the work to the approvals and money, build the case with you, and bring in FCPA whistleblower lawyers who understand intermediary payments and public-sector contracts. We stay beside you as your account becomes a case the government can act on.