Aon Settles With SEC, DOJ Over Alleged Bribes

Aon Corp. has reached a $16.3 million settlement with the U.S. Securities and Exchange Commission and the Department of Justice over improper payments in other countries. The payments were made between 1983 and 2007 to obtain or retain business in those countries, according to the SEC.

The SEC complaint alleges some of the improper payments were made directly or indirectly to foreign government officials who could:

-- Award business directly to Aon subsidiaries.

-- Were in a position to influence others who could award business to Aon subsidiaries.

-- Could otherwise provide favorable business treatment for the company's interests.

The complaint alleges these payments were not accurately reflected in Aon's books and records, and Aon failed to maintain an adequate internal control system reasonably designed to detect and prevent the improper payments.

Aon subsidiaries made these payments in countries around the world, including Costa Rica, Egypt, Vietnam, Indonesia, United Arab Emirates, Myanmar, and Bangladesh, according to the SEC. Aon realized more than $11.4 million in profits from these improper payments, the complaint alleges.

Aon's U.K. subsidiary, Aon Ltd., handled training and education funds in connection with its reinsurance business with Instituto Nacional De Seguros, Costa Rica's state-owned insurance company, the DOJ said. The funds were to provide education and training for INS officials, but instead Aon Ltd. allegedly used a significant portion of the funds between 1997 and 2005 to reimburse INS officials for non-training related activity, including travel with spouses to overseas tourist destinations, or for uses that could not be determined from Aon's books and records. The DOJ said "the expenses were clearly not related to a legitimate business purpose."

Aon has agreed to pay $1.76 million to the DOJ as part of a non-prosecution agreement and about $14.55 million to the SEC in disgorgement and interest to settle a civil action. The company said it expects no impact on fourth-quarter results as the settlement amounts were accrued for in prior periods.

In addition to the monetary penalty, the DOJ agreement requires that Aon adhere to rigorous compliance, bookkeeping and internal controls standards and cooperate fully with the department.

Aon said it began an internal review of these issues in 2007 and has since put in place a comprehensive, global and robust anti-corruption program designed to prevent and detect improper conduct.

"Aon has invested a significant amount of time and resources in anti-corruption compliance and transparency to greatly enhance our controls and processes," said Greg Case, Aon president and chief executive officer, in a statement.

In 2009, U.K. Financial Services Authority fined broker Aon Ltd. 5.25 million pounds ($8.2 million) for what the regulator said was Aon's failure to maintain effective procedures against bribery overseas (Best's News Service, Jan. 8, 2009). Between Jan. 14, 2005, and Sept. 30, 2007, Aon failed to measure the risks in connection with business it conducted with people and organizations overseas with the goal of winning more business, according to the FSA. Due to the environment that existed within Aon, the FSA said, the firm made "suspicious" overseas payments of about $7 million during that period.

Aon said it cooperated fully with all relevant agencies, including the DOJ, the SEC and the FSA. In fact, the DOJ said it entered into a non-prosecution agreement with Aon because of the broker's "extraordinary cooperation" with the department and the SEC. The department also noted Aon's timely and complete disclosure of improper payments in Costa Rica and other countries; its early and extensive remedial efforts; the prior financial penalty Aon Ltd. paid to the FSA; and the FSA's close and continuous supervisory oversight over Aon Ltd. The DOJ said the factors also led to a substantially reduced monetary penalty.

Aon is not the only global broker to run into trouble with alleged improper payments. Earlier this year, the FSA fined broker Willis Ltd. 6.9 million pounds "for failings in its anti-bribery and corruption systems and controls" (Best's News Service, July 21, 2011).

With 2010 revenues of $8.51 billion, Aon is the second-largest global insurance broker, according to Best's Review.

In morning trading on Dec. 21, Aon's (NYSE: AON) stock was trading at $46.25, up 1% from the previous close.

(By Rick Cornejo, managing editor, BestWeek: rick.cornejo@ambest.com)