Goodyear settles bribery charges for $16.2 million

Feb. 25, 2015

Goodyear Tire & Rubber Co. has agreed to pay more than $16.2 million to settle charges by the U.S. Securities and Exchange Commission (SEC) that two of the global tire maker’s subsidiaries in Africa bribed employees of government and private companies, as well as police, tax and other officials, to secure tire sales.

Goodyear did not admit to or deny the SEC’s findings. The company has since divested its ownership of one of the subsidiaries and is in the process of doing the same with the other, according to the SEC order. The agency says Goodyear reported the issue when it became aware of it in 2011 and “provided significant cooperation” with the SEC investigation.

The case centers on payments made by Treadsetters in Kenya, and Trentyre in Angola from 2007 to 2011.

The SEC says Treadsetters’ general manager and finance director were at the center of the bribery scheme. “They approved payments for phony promotional products and then directed the finance assistant to write out the checks to cash.” Staff then cashed those checks and used the money to pay the employees of customers, including government-owned and private businesses. During the four-year timeframe, Treadsetters paid more than $1.5 million in bribes. Among the payees: the Kenya Ports Authority, the Kenyan Air Force, the Ministry of Roads and the Ministry of State for Defense. An additional $14,457 was paid to local government officials, including city council employees, police and building inspectors.

The case against Trentyre is similar. During the same time period the company paid more than $1.6 million in bribes to obtain tire sales. As Trentyre primarily sells tires for the mining industry, the payees in Angola include the company’s largest customer, the Catoca Diamond Mine. The mine is owned by a consortium of mining interests, including Angola’s national mining company and a Russian mining business. During the same time, an additional $64,713 was paid as bribes to local officials, including police and tax personnel.

The Trentyre bribing system was put in place by the company’s former general manager. To hide the payments, the company marked up the costs of its tires by adding  fake freight and customs clearing costs to its invoice. Then, each month as tires were sold, the phony charges were reclassified to a balance sheet account. “As bribes were paid, the amounts were debited from the balance sheet account and falsely recorded as payments to vendors for freight and clearing costs,” the SEC order says.

In both countries, the SEC says Goodyear didn’t prevent or notice the illegal payments because the company “failed to implement adequate Foreign Corrupt Practices Act (FCPA) compliance training and controls.”

In addition to the $16.2 million penalty, Goodyear also for the next three years must provide a status report of its remediation and compliance measures to the SEC.

Goodyear issued this statement in response to the SEC’s findings and order:

“In 2011, Goodyear received an allegation through its confidential ethics hotline regarding improper payments in Kenya and from an employee in Angola about improper payments in Angola. Goodyear immediately launched an investigation.

"The company voluntarily disclosed the results of its investigation to the DOJ and SEC and cooperated with those agencies in the review of the allegations. As a result of its review, the company has implemented, and is continuing to implement, appropriate remedial measures. Goodyear divested its ownership interest in the Kenyan business in 2013 and the company is in the process of selling the Angolan business.

"The settlement with the SEC fully resolves all outstanding issues related to these investigations.

"Goodyear has a comprehensive anti-corruption compliance program and continues to improve and enhance its ability to monitor, detect, investigate and address potential issues. Goodyear encourages its associates and others to speak up and to contact its confidential ethics hotline when they are aware of or suspect inappropriate behavior.“