PANUPS: Monsanto Fined Over Bribes in Indonesia
Last week, the U.S. Department of Justice revealed that Monsanto has paid more than US $700,000 in illegal bribes to Indonesian officials, including $50,000 to an environmental ministry employee to forestall environmental reviews of the biotech company’s genetically engineered (GE) cotton. While these payments did not lift controls on Monsanto’s GE cotton in Indonesia, they did result in criminal and civil charges against Monsanto in U.S. courts under the Foreign Corrupt Practices Act, which prohibits bribing foreign officials.
On Thursday, January 6, 2005, Monsanto and the Justice Department announced a settlement in which Monsanto would pay penalties and fines of US $1.5 million to the Justice Department and the Securities and Exchange Commission (SEC). Monsanto will also submit to independent audits of its business practices for the next three years. Under the Foreign Corrupt Practices Act, companies paying bribes to foreign officials can be fined a maximum of $2 million for each violation, and responsible corporate executives can face up to five years in prison.
The Justice Department and SEC court filings describe a “slush fund” created by Monsanto’s Indonesian affiliates for the purpose of paying bribes that was funded by inflated invoices to U.S.-Monsanto for pesticides sales and false product registration fees. The SEC charges that this fund was used to make payments to at least 140 current and former Indonesian government officials and their family members. Newspapers report the largest payment was $373,990, paid to the wife of a senior official at the Ministry of Agriculture and used to design and build a house. Smaller payments went to Indonesian officials for cell phones, golf-club memberships, travel and gifts.
Monsanto has argued that the political situation in Indonesia prevented company executives from visiting the nation and performing full audits of its subsidiaries. But the Justice Department filings reveal a closer involvement. In one documented instance, a Monsanto executive in the U.S. instructed Indonesian consultants to “incentivize” an environmental official and described how the consultant should conceal the bribe in a bill to the parent company.
Monsanto claims the violations occurred because the company failed to perform proper control and auditing procedures, and points out that by reporting the failure to audit, the company essentially turned itself in. An SEC official described Monsanto’s violations as a type that are commonly associated with bribery schemes. “The company failed to establish internal controls and that leads the company down the road of potentially being able to do wrong” said Paul Berger of the SEC.
In Indonesia, Monsanto sells hybrid corn seed and its glyphosate herbicide, Roundup, and also manufactures the herbicide for distribution in other parts of Asia. In January of 2003, Monsanto announced that it would not continue with sales of its GE cotton in Indonesia, due to “regulatory uncertainties.”
Monsanto accounts for 91% of the genetically engineered food and fiber crops sown worldwide, and has also tried to gain approval for GE cotton in Bolivia, Thailand and India. Herbicide resistance is one of the traits most frequently modified in GE crops, and represents 77% of all GE plantings. Herbicide tolerant crops allow farmers to spray broad-spectrum herbicides to control weeds while leaving crops unharmed. A January 2004 report found that farmers growing herbicide resistant crops in the U.S. incrementally spray more herbicides to keep up with increasingly resistant weeds.
In addition to fiber, GE cotton provides cottonseed oil, which is used for a variety of foods and food products, including cooking oils, salad dressing, peanut butter, chips, crackers, cookies, and pastries.
Sources: St. Louis Post Dispatch, January 6, 2005, Wall Street Journal, March 22, 2004, BBC News, January 7, 2005, Greenpeace International Genetic Engineering Campaign, http://www.greenpeace.org; Impact of GE Crops on Pesticide Use in the U.S., Ag BioTech Info, http://www.biotech-info.net/technicalpaper6.html.
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