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Case 3:06-cr-00398-KI Document 11 Filed 10/16/06 Page 1 of 65 Page ID#: 38
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
UNITED STATES OF AMERICA, Case No. CR 06-398-lU
Plaintiff,
vs.
SSI INTERNATIONAL FAR EAST, LTD.,
Defendant.
PETITION TO ENTER PLEA OF GUILTY, CERTIFICATE OF COUNSEL, AND ORDER ENTERING PLEA.
Kenneth M. Novack, Chairman, SSI International Far East, Ltd. ("SSI Korea"), represents
to the court:
I. My name is Kenneth M. Novack. I have been authorized by SSI Korea to waive
indictment and plead guilty to the Information.
2. SSI Korea's attorneys are George Terwilliger and William Currier of White & Case,
LLP.
3. SSI Korea's attorneys and I have discussed the case fully. I have received a copy of
the Information. I have read the llnforrnation and have discussed it with SSI Korea's attorneys. SSI
Korea's attorneys have counseled and advised me concerning the nature of each charge, any lesser-
included offenses, and the possible defenses that SSI Korea might have in this case. I have been
advised and understand that the elements of the charges alleged against SSI Korea to which SSI
Korea is pleading "GUILTY" are as follows:
Page 1 - PETITION TO ENTER PLEA OF GUILTY
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Count One - An agreement between SSI Korea and another person to commit at least one of the crimes charged in Counts Two through Four. SSI Korea became a member of the conspiracy knowing at least one of its objects and intending to help accomplish it. One member of the conspiracy committed an overt act for the purpose of carrying out the conspiracy. Count Two - SSI Korea, while in the territory of the United States, used means and instrumentalities of interstate commerce to corruptly induce a foreign public official to give Schnitzer Steel and SSI Korea an improper advantage to obtain future business in Asia. SSI Korea acted willfully. Count Three - SSI Korea made up a scheme or plan for obtaining money or property by making false promises or statements. SSI Korea knew that the promises or statements were false. The promises or statements were material. SSI Korea acted with the intent to defraud. SSI Korea used or caused to be used a wire communication in interstate or foreign commerce to carry out or attempt to carry out an essential part of the scheme. Count Four - Schnitzer Steel Industries, Inc. ("Schnitzer Steel") was at all material times an issuer within the meaning of the Securities and Exchange Act of 1934 and therefore was required to make and keep books, records and accounts which, in reasonable detail, accurately and fairly reflected the transactions and disposition of its assets. SSI Korea was a wholly owned subsidiary of Schnitzer Steel. SSI Korea assisted Schnitzer Steel in falsifying its accounts, books, records relating to a payment to a foreign public official. SSI acted willfully.
I have had a full and adequate opportunity to disclose to my attorney all facts known tome that relate
to the case.
4. 1 know that if SSI Korea pleads "GUILTY," I will have to answer any questions that
the judge asks me about the offenses to which SSI Korea is pleading guilty. I also know that if I
answer falsely, under oath, and in the presence of SSI Korea's attorneys, my answers could be used
against rue in a prosecution for perjury or false statement.
I am not under the influence of alcohol or drugs. lam not suffering from any injury,
illness or disability affecting my thinking or my ability to reason except as follows: None. I have
not taken any drugs or medications within the past seven (7) days except as follows: None.
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Page 2 - PETITION TO ENTER PLEA OF GUILTY
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7. I know that SSI Korea may plead "NOT GUILTY" to any crime charged against it.
I know that if SSI Korea pleads "NOT GUILTY" the Constitution guarantees it:
a. The right to a speedy and public trial by jury, during which SSI Korea will be presumed to be innocent unless and until SSI Korea is proven guilty by the government beyond a reasonable doubt and by the unanimous vote of twelve jurors;
b. The right to have the assistance of an attorney at all stages of the proceedings;
C. The right to use the power and process of the court to compel the production of evidence, including the attendance of witnesses in SSI Korea's favor;
d. The right to see, hear, confront, and cross-examine all witnesses called to testify against SSI Korea;
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8. 1 know that ifSSI Korea pleads "GUILTY" there will be no trial before either ajudge
or a jury, and that SSI Korea will not be able to appeal from the judge's denial of any pretrial
motions SSI Korea may have filed concerning matters or issues not related to the court's jurisdiction.
9. In this case SSI Korea is pleading "GUILTY" under Rule I 1(c)(I)(13). SSI Korea's
attorneys have explained the effect of SSI Korea's plea under Rule II(c)(I)(B) to be as follows:
Page 3 - PETITION TO ENTER PLEA OF GUILTY
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SSI Korea's pleas of guilty are under Rule 1 l(c)(1)(B); therefore, although the judge will consider the recommendations and agreements of both the prosecution and defense attorneys concerning sentencing, the judge is not obligated to follow those recommendations or agreements. If the judge imposes a sentence different from what SSI Korea expected to receive under the terms of its Plea Agreement with the prosecutor, SSI Korea does not have a right to withdraw its plea.
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I know the maximum sentence which can be imposed upon SSI Korea for the crimes
to which SSI Korea is pleading guilty is set forth in paragraph 4 of the plea agreement.
11. 1 know that thejudge, in addition to any other penalty, will order a mandatory special
assessment as provided by law in the amount of $400 for each count of conviction.
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13. SSI Korea's attorneys have discussed with me the Sentencing Factors set forth in
paragraph 6 of the plea agreement. I know that the Guidelines are advisory, not mandatory. I also
know the sentencing judge, in determining the particular sentence to be imposed, must consider
those factors set forth in Title 18, United States Code, Section 3553(a), including but not limited to:
the nature and circumstances of the offense, SSI Korea's own history and characteristics, the goals
of sentencing (punishment, deterrence, protection and rehabilitation) and the sentencing range
established by the advisory Guidelines. If SSI Korea's attorney or any other person has calculated
a guideline range for SSI Korea, I know that this is only a prediction and advisory and that it is the
judge who makes the final decision as to what the guideline range is and what sentence will be
imposed. I also know that a judge may not impose a sentence greater than the maximum sentence
referred to in paragraph (10) above.
Page 4- PETITION TO ENTER PLEA OF GUILTY
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Page 5 - PETITION TO ENTER PLEA OF GUILTY
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17. On any fine or restitution in an amount of $2,500 or more, I know that SSI Korea
will be required to pay interest unless that fine or restitution is paid within fifteen (15) days from
the date of the entry ofjudgment.
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20. SSI Korea's plea of "GUILTY" is based on a Plea Agreement that it has made
with the prosecutor. That Plea Agreement is attached hereto and incorporated herein. I have
read the Plea Agreement, and I understand the Plea Agreement.
21. The Plea Agreement contains the only agreement between the United States
government and SSI Korea. No officer or agent of any branch of government (federal, state or
local) or anyone else has promised or suggested that SSI Korea will receive leniency if it pleads
"GUILTY" except as stated in the paragraphs 5 and 7 of Plea Agreement. I understand that SSI
Korea cannot rely on any promise or suggestion made to SSI Korea by a government agent or
officer which is not stated in writing in the Plea Agreement, or which is not presented to the
judge in my presence in open court at the time of the entry of SSI Korea's plea of guilty.
Page 6- PETITION TO ENTER PLEA OF GUILTY
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22. SSI Korea's plea of "GUILTY" is not the result of force, threat, or intimidation.
23. I hereby request that the judge accept SSI Korea's plea of "GUILTY" to the
following counts: Guilty to the Information.
24. 1 know that the judge must be satisfied that a crime occurred and that SSI Korea
committed that crime before SSI Korea's plea of "GUILTY" can be accepted. With respect to
the charges to which SSI Korea is pleading guilty, SSI Korea agrees that the factual allegations in
the Information and in the separate Statement of Facts are true.
25. 1 offer SSI Korea's plea of "GUILTY" freely and voluntarily and of my own
accord and with a full understanding of the allegations set forth in the Information, and with a
full understanding of the statements set forth in this Petition and in the Certificate of SSI Korea's
attorney that is attached to this Petition.
SIGNED by me in the presence of SSI Korea's attorneys, after reading all of the
foregoing pages and paragraphs of this Petition on this day of October, 2006.
4,0~& Kenneth M. Novack Chairman and Authorized Agent of SSI Korea
Page 7- PETITION TO ENTER PLEA OF GUILTY
Case 3:06-cr-00398-KI Document 11 Filed 10/16/06 Page 8 of 65 Page ID#: 45
CERTIFICATE OF COUNSEL
The undersigned, as attorney for SSI Korea, hereby certifies:
1. 1 have fully explained to Kenneth M. Novack, Chairman and Authorized Agent of
SSI Korea, the allegations contained in the Information in this case, any lesser-included offenses,
and the possible defenses which may apply in this case.
2. 1 have personally examined the attached Petition To Enter Plea of Guilty And
Order Entering Plea, explained all its provisions to Mr. Novack, and discussed fully with Mr.
Novack all matters described and referred to in the Petition.
3. 1 have explained to Mr. Novack the maximum penalty and other consequences of
entering a plea of guilty described in the Petition and the attached plea agreement, and I have also
explained to Mr. Novack the applicable Federal Sentencing Guidelines.
4. I recommend that the Court accept SSI Korea's plea of "GUILTY."
SIGNED by me in the presence of Mr. Novack, and after full discussion with Mr. Novack
of the contents of the Petition To Enter Plea of Guilty, and any Plea Agreement, on this _____ day
of October, 2006.
C
Of Attoriieys for SSI Korea
'v(JL4Csqr.r, LL
Page 8- CERTIFICATE OF COUNSEL
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ORDER ENTERING PLEA
I find that SSI Korea's plea of GUILTY has been made freely and voluntarily and not out
of ignorance, fear, inadvertence, or coercion. I further find SSI Korea has admitted facts that
prove each of the necessary elements of the crimes to which SSI Korea has pled guilty.
HAS THEREFORE ORDERED that SSI Korea's plea of GUILTY be accepted and
entered as requested in this Petition and as recommended in the Certificate of SSI Korea's
attorney.
DATED this ZLL of October, 2006, in open court.
el
U.S. District Court
Page 9- ORDER ENTERING PLEA
Case 3:06-cr-00398-KI Document 11 Filed 10/16/06 Page 10 of 65 Page ID#: 47
U.S. Department of Justice
Criminal Division
Washington, D.C. 20530
October 10, 2006
Raymond Banoun, Esq. Cadwalader, Wickersham & Taft LLP 1201 F Street, N.W. Washington, D.C. 20004
Re: United States v. SSI INTERNATIONAL FAR EAST. LTD. Plea Agreement, CR 06-398
Dear Mr. Banoun:
1. Parties/Scope: This plea agreement is between the United
States Department of Justice, Criminal Division, Fraud Section
("the Department") and defendant, SSI INTERNATIONAL FAR EAST, LTD.
("SSI KOREA"), a wholly owned subsidiary of Schnitzer Steel
Industries, Inc. ("Schnitzer Steel") , and thus does not bind any
other federal, state, or local prosecuting, administrative, or
regulatory authority. This agreement does not apply to any other
charges other than those specifically mentioned herein.
2. Charges: Defendant SSI KOREA, an organization under 18 U.S.C.
§ 18, by its authorized agent, Kenneth M. Novack, Chairman, SSI
International Far East, Ltd., agrees to waive indictment and plead
guilty to an information charging one count each of Conspiracy (18
U.S.C. § 371), violating the Foreign Corrupt Practices Act ("FCPA")
(15 U.S.C. § 78dd-3), Wire Fraud (18 U.S.C. § 1343) , and aiding and
abetting the making of false entries in Schnitzer's books and
records (15 U.S.C. § 78m(b) (2) & (5) and 18 U.S.C. § 2)
3. Factual Basis: Defendant SSI KOREA is pleading guilty because
it is guilty of the charges contained in Counts One through Four of
Case 3:06-cr-00398-KI Document 11 Filed 10/16/06 Page 11 of 65 Page ID#: 48
the Information. Defendant SSI KOREA agrees and stipulates that
the factual allegations set forth in the Information are true and
correct and accurately reflect its criminal conduct. The parties
further stipulate and agree to the Statement of Facts attached
hereto and incorporated herein as Exhibit 1.
4. Penalties:
a. The statutory maximum sentence that the Court can impose
for a violation of Title 18, United States Code, Section 371 is a
fine of $500,000 or twice the gross gain or gross loss resulting
from the offense, whichever is greatest, 18 U.S.C. H 3571(c) (3)
and (d); five years' probation, 18 U.S.0 § 3561(c) (1); and a
mandatory special assessment of $400, 18 U.S.C. § 3013 (a) (2) (B).
b. The statutory maximum sentence that the Court can impose
for a violation of Title 15, United States Code, Section 78dd-3 is
a fine of $25,000,000 or twice the gross gain or gross loss
resulting from the offense, whichever is greatest, 15 U.S.C. §
78ff(a), 18 U.S.C. § 3571(d); five years' probation, 18 U.S.0 §
3561(c) (1); and a mandatory special assessment of $400, 18 U.S.C.
§ 3013 (a) (2) (B)
C. The statutory maximum sentence that the Court can impose
for a violation of Title 18, United States Code, Section 1343 is a
fine of $500,000 or twice the gross gain or gross loss resulting
from the offense, whichever is greatest, 18 U.S.C. H 3571(c) (3)
and (d); five years' probation, 18 U.S.0 § 3561(c) (1); and a
mandatory special assessment of $400, 18 U.S.C. § 3013 (a) (2) (B).
d. The statutory maximum sentence that the Court can impose
for a violation of Title 15, United States Code, Section
78m(b) (2)&(5) is a fine of $25,000,000 or twice the gross gain or
gross loss resulting from the offense, whichever is greatest, 15
U.S.C. H 78ff (a), 18 U.S.C. § 3571(d); five years' probation, 18
U.S.0 § 3561(c) (1) ; and a mandatory special assessment of $400, 18
Case 3:06-cr-00398-KI Document 11 Filed 10/16/06 Page 12 of 65 Page ID#: 49
U.S.C. § 3013 (a) (2) (B)
5. No Prosecution: In exchange for SSI KOREA's guilty plea and
the complete fulfillment of all its obligations under this
Agreement, the Department agrees not to file additional criminal
charges against SSI KOREA for any corrupt payments or accounting
thereof disclosed to the Department as of the date of this
Agreement, but specifically excluding any such conduct not
disclosed to the Department as of that date or any conduct
occurring after that date. This Agreement will not close or
preclude the investigation or prosecution of any natural persons,
including any officers, directors, employees, stockholders, agents
or consultants of SSI KOREA, its direct or indirect affiliates,
subsidiaries, or parent corporations who may have been involved in
any of the matters set forth in the Information or in any other
matters.
6. Sentencing Factors: The parties agree that pursuant to United
States v. Booker, 543 U.S. 220 (2005) , the Court must determine an
advisory sentencing guideline range pursuant to the United States
Sentencing Guidelines ("USSG") . The Court will then determine a
reasonable sentence within the statutory range after considering
the advisory sentencing guideline range and the factors listed in
18 U.S.C. § 3553(a). The parties' agreement herein to any
guideline sentencing factors constitutes proof of those factors
sufficient to satisfy the applicable burden of proof.
7. Stipulated Fine and Sentence: Assuming SSI KOREA accepts
responsibility as explained above, the parties will recommend the
imposition of a fine in the amount of $7,500,000 payable to the
Clerk of the Court for the United States District Court for the
District of Oregon. The parties further agree that this amount
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shall be paid as a lump sum within five (5) business days after the
imposition of sentencing in this matter. Defendant SSI KOREA
further agrees to pay the Clerk of the Court for the United States
District Court for the District of Oregon within (5) business days
of the time of sentencing the mandatory special assessment.
8. Basis for Stipulated Fine: The parties agree that an
appropriate disposition of the case is a fine of $7,500,000 for
defendant SSI KOREA based upon the following factors:
a. By entering and fulfilling the obligations under this
Agreement, defendant SSI KOREA demonstrates recognition and
affirmative acceptance of responsibility for its criminal conduct;
b. The plea underlying this Agreement is a result of the
voluntary disclosure of the relevant conduct at the direction of
the audit committee of Schnitzer Steel, the parent of SSI KOREA, to
the Department beginning in November 2004 and the disclosure of the
extensive investigation its attorneys subsequently conducted into
the Asian operations of Schnitzer Steel and SSI KOREA;
c. At the time of the initial disclosure, the conduct was
unknown to the Department; and
d. By entering into a deferred prosecution agreement with
the Department, Schnitzer Steel has, among other things, agreed to
implement a compliance and ethics program designed to detect and
prevent violations of the FCPA, U.S. commercial bribery laws and
all applicable foreign bribery laws throughout its operations,
including those of SSI KOREA and all of Schnitzer Steel's
subsidiaries and affiliates, and to appoint an independent
compliance consultant to monitor the company's compliance program.
9. Waiver of Presentence Report: The parties further agree, with
the permission of the Court, to waive the requirement for a
presentence report pursuant to Federal Rule of criminal Procedure
91
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32 (c) (1) (A), based on a finding by the Court that the record
contains information sufficient to enable the Court to meaningfully
exercise its sentencing power. However, the parties agree that in
the event the Court orders the preparation of a presentence report
prior to sentencing, such order will not affect the agreement set
forth herein.
10. Entry of Guilty Plea and Sentencing: The parties further
agree to ask the Court's permission to combine the entry of the
plea and sentencing into one hearing. However, the parties agree
that in the event the Court orders that the entry of the guilty
plea and sentencing hearing occur at separate hearings, such an
order will not affect the agreement set forth herein.
11. Waiver of Appeal/Post-Conviction Relief: SSI KOREA knowingly,
intelligently, and voluntarily waives defendant's right to appeal
the conviction in this case. SSI KOREA similarly knowingly,
intelligently, and voluntarily waives the right to appeal the
sentence imposed by the court px - r th..-e-enenoo doe-..t /
ntence aard..-h paie In addition, SSI
KOREA knowingly, intelligently, and voluntarily waives the right to
bring a collateral challenge pursuant to 28 U.S.C. § 2255, against
either the conviction, or the sentence imposed in this case, except
for a claim of ineffective assistance of counsel. SSI KOREA waives r
all defenses based on the statute of limitations and venue with
respect to any prosecution that is not time-barred on the date that
this agreement is signed in the event that (a) the conviction is
later vacated for any reason, (b) SSI KOREA violates this
agreement, or (c) the plea is later withdrawn. The government is
free to take any position on appeal or any other post judgment
matter.
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12. Court Not Bound: The Court is not bound by the
recommendations of the parties or of those made in any presentence
report. Because this Agreement is made under Rule 11(c) (1) (B) of
the Federal Rules of Criminal Procedure, SSI KOREA may not withdraw
any guilty plea or rescind this plea agreement if the Court does
not follow the agreements or recommendations herein.
13. Full Disclosure/Reservation of Rights: In the event the Court
directs the preparation of a presentence report, the Department
will fully inform the preparer of the presentence report and the
Court of the facts and law related to SSI KOREA's case. Except as
set forth in this Agreement, the parties reserve all other rights
to make sentencing recommendations and to respond to motions and
arguments by the opposition.
14. Breach of Plea Agreement: If SSI KOREA breaches the terms of
this Agreement, or commits any new criminal offenses between
signing this Agreement and sentencing, the Department is relieved
of its obligations under this Agreement, but SSI KOREA may not
withdraw any guilty plea.
13. Total Agreement: This letter states the full extent of the
agreement between the parties. There are no other promises or
agreements, express or implied. If SSI KOREA accepts this offer,
please sign and attach the original of this letter to the Petition
to Enter Plea.
Very truly yours,
me
Case 3:06-cr-00398-KI Document 11 Filed 10/16/06 Page 16 of 65 Page ID#: 53
FOR THE DEPARTMENT OF JUSTICE:
Steven A. Tyrrell Acting Chief, Fraud Section
By:
MARK F. MENDELSOHN Deputy Chief, Fraud Section
DEBORAH L. GRAMICCIONI Assistant Chief, Fraud Section
KATHLEEN MCGOVERN Trial Attorney, Fraud Section
Fraud Section, Criminal Division United States Department of Justice 10th & Constitution Avenue, NW Washing on,D.C. 20530
(202) 14-7023 FOR SCHNITZER:
/ Kenneth M. Novack Chairman SSI International Far East, Ltd. 3200 NW Yeon Avenue Portland, Oregon 97210
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STATEMENT OF FACTS
I. Schnitzer Steel's Status as an "Issuer" Under the Foreign Corrupt Practices Act
1. Schnitzer Steel Industries, Inc. ("Schnitzer
Steel") is a publicly traded corporation organized under the laws
of Oregon with its headquarters in Portland, Oregon, and offices
in Oregon, California and Washington. Schnitzer Steel operates
in three vertically integrated business segments: a metals
recycling business; an auto parts business; and a steel
manufacturing business. Schnitzer Steel maintains a class of
securities registered pursuant to Section 12(b) of the Securities
Exchange Act of 1934 (15 U.S.C. § 781) and was required to file
reports with the United States Securities and Exchange Commission
("SEC") under Section 13 of the Securities Exchange Act (15
U.S.C. § 78m) . Accordingly, Schnitzer Steel is an "issuer"
within the meaning of the Foreign Corrupt Practices Act, 15
U.S.C. § 78dd-1.
2. From 1995 to the present, Schnitzer Steel has
maintained a wholly-owned subsidiary in Seoul, Republic of Korea
("South Korea") . The subsidiary, SSI International Far East,
Ltd. ("SSI Korea"), facilitates the sale of ferrous recycled
("scrap") metal by Schnitzer Steel from the United States and
also acts as a broker for the sale of scrap metal by Japanese
suppliers to steel producers in the People's Republic of China
("China") and South Korea. SSI Korea maintains its principal
office in Seoul. It is managed by SSI International, Inc., a
wholly-owned subsidiary of Schnitzer Steel in Tacoma, Washington.
SSI Korea acts as Schnitzer Steel's agent in South Korea and
China, maintaining the business relationships with Schnitzer
Steel's customers in those countries. SS1 Korea also transmits
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requests to the United States for approval and wire transfer of
funds in connection with sales of scrap metal to Schnitzer
Steel's customers in South Korea and China, which payments
subsequently are processed and approved by employees and officers
of Schnitzer Steel in Portland, Oregon. Accordingly, SSI Korea
operates within the territorial jurisdiction of the United
States, within the meaning of the Foreign Corrupt Practices Act,
15 U.S.C. § 78dd-3.
3. Schnitzer Steel has developed longstanding
relationships with steel producers in South Korea and China that
have purchased Schnitzer Steel's scrap metal. Some of those
steel producers in China, such as Baosteel, are wholly or
partially owned by the government of China. Those government-
owned customers are foreign government "instrumentalities," and
their officers and employees are "foreign officials," within the
meaning of the Foreign Corrupt Practices Act, 15 U.S.C. § 78dd-
1(f) (1) (A).
II. Overview of Violations
4. From at least 1995, continuing to in or about at
least August 2004, Schnitzer Steel through its officers and
employees authorized and made corrupt payments, principally in
cash, to officers and employees ("managers") of private customers
in South Korea and private and government-owned customers in
China to induce them to purchase, and to secure an improper
advantage with respect to the purchase of, scrap metal from
Schnitzer Steel. In total, corrupt payments of approximately
$204,537 were paid to managers of government-owned customers in
China, and corrupt payments of approximately $1,683,672 were paid
to managers of private customers in China and South Korea. These
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corrupt payments took three basic forms: (1) commissions, (2)
refunds, and (3) gratuities.
III. Details of the Violations
A. Commissions
5. From at least 1999 to in or about August 2004,
Schnitzer Steel made corrupt payments in connection with nearly
every sale of scrap metal to customers in South Korea and China,
which payments were falsely reflected on Schnitzer Steel's books
and records as "commissions" (hereafter "commissions"). The
"commissions" were included in the purchase price of the scrap
metal. For scrap metal sold to customers in South Korea, the
"commission" was a standard $0.25 per ton. For scrap metal sold
to customers in China, the "commission" was a standard $0.15 per
ton. Schnitzer Steel wired the "commissions" at the request of
the head of its Asian scrap metal sales ("Officer A") to off-
books bank accounts in South Korea opened and maintained by the
manager of SSI Korea ("Employee All), specifically for receiving
these payments. Officer A was a resident of Tacoma, Washington,
and was an employee of SSI International, Inc. from in or about
1995 through 2005. From in or about March 2000 to in or about
May 2004, Officer A was a senior officer of SSI International,
Inc. and was responsible for Schnitzer Steel's Asian scrap metal
sales. Officer A's duties included, among other things,
negotiating sales of scrap metal with steel production companies
in Asia on behalf of Schnitzer Steel; handling invoices from SSI
Korea for payment in connection with sales to Schnitzer Steel's
customers in Asia; and forwarding to Schnitzer Steel's offices in
Portland, Oregon, for processing and authorization wire transfer
requests for payment to managers of Schnitzer Steel's scrap metal
3
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customers in China and South Korea. Employee A was a resident of
Seoul, South Korea, and was an employee of SSI Korea from in or
about 1995 through 2005. From in or about 1998 through 2005,
Employee A was the manager of SSI Korea and was responsible for
managing the business relationships locally with Schnitzer
Steel's scrap metal customers in Asia, managing SSI Korea's
Japanese brokered scrap metal sales, coordinating the delivery of
scrap metal to steel mills in South Korea and China and
forwarding to Officer A in Tacoma, Washington, invoices for
payment in connection with sales to Schnitzer Steel's customers
in South Korea and China and wire transfer requests for payment
to managers of Schnitzer Steel's scrap metal customers in those
countries.
6. Officer A and Employee A would use funds from the
secret accounts to make cash "commission" payments to the
managers of the customers, the funding of which is described
below. "Commissions" typically were paid directly to a
customer's manager in cash, either at a restaurant or at the
customer's office. Between September 1999 and August 2004, at
least 131 "commission" payments were made in South Korea and
China. Of those, at least 72 "commission" payments were made to
managers of their scrap metal customers in China. Those payments
totaled approximately $299,558.10, of which at least
approximately $104,297.03 was paid to managers of foreign
government "instrumentalities" within the meaning of the Foreign
Corrupt Practices Act, 15 U.S.C. § 78dd-l(f) (1) (A) (hereafter
"government instrumentalities") . At least 59 payments totaling
approximately $475,021.15 were made to managers of non-government
owned or controlled ("private") customers in South Korea.
7. SSI Korea also acted as a broker for Japanese
scrap metal companies that sold scrap metal in South Korea and
4
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China, receiving brokerage commissions for finding buyers for
scrap metal in South Korea and China. From at least September
1999 until at least September 2001, Japanese companies provided
SSI Korea with funds to make corrupt payments to managers of the
South Korean and Chinese steel mills similar to the corrupt
payments made by Schnitzer Steel for the scrap metal it sold.
Employee A generally delivered these corrupt payments to the
managers of the South Korean and Chinese steel mills. Employee A
and others delivered at least 135 cash "commission" payments by
Japanese scrap metal suppliers to managers of their customers in
South Korea and China. These payments totaled approximately
$156,059.50, of which at least $3,823.35 was paid to managers of
steel mills which were government instrumentalities. Records of
these "commission" payments were maintained by Schnitzer Steel in
the United States until September 2001. All records of
"commissions" related to the Japanese brokered sales paid after
September 2001 were maintained in South Korea by SSI Korea. In
or around August 2004, the records maintained by SSI Korea were
intentionally destroyed by an SSI Korea employee, as described
below.
B. Refunds
8. Schnitzer Steel made a second type of corrupt
payment in connection with sales of scrap metal to South Korean
and Chinese customers. Those payments typically were reflected
on Schnitzer Steel's books and records as a "refund to customer"
or "rebate to customer," although some were characterized
variously as "quality claims," "discounts," "credits," and
"freight savings" (hereafter "refunds") . In order to pay the
refunds, Schnitzer Steel participated in a scheme whereby the
customer's manager would cause the customer to overpay Schnitzer
5
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Steel for the scrap metal purchase, and would then personally
recover the overpayment from Schnitzer Steel. For sales in which
"refunds" were paid, "commissions" typically also were paid,
resulting in two or more corrupt payments to the customer's
manager.
9. The practice of paying "refunds" appears to have
started in mid-2001, due to the volatility in the price of scrap
metals, which sometimes resulted in a substantial difference in
the price of metal between the time of signing the contract and
shipment 60 to 90 days later. When the price in the market at
the time of shipment was substantially lower than the contract
price, a customer's manager often demanded to be paid a "refund."
The "refund" was negotiated at the time the customer entered into
a subsequent contract with Schnitzer Steel. The amount of the
"refund" was based on the tonnage of the next shipment to the
customer.
10. Unlike "commissions," which were a fixed per-ton
amount, "refunds" varied from $0.25 per ton up to $1.00 per ton.
The so-called "refund" was then incorporated in the price of the
subsequent scrap metal contract so that the customer, not
Schnitzer Steel, bore the cost of the "refund" which was
thereafter paid to the customer's manager. "Refunds" were paid
in the same way as "commission payments." Schnitzer Steel wired
the money for the "refunds" to secret bank accounts in South
Korea opened and maintained by Employee A specifically for the
purpose of receiving these payments. Officer A and Employee A
then used funds from the secret accounts to pay "refunds" to the
managers of the customers, the funding of which is described
below. "Refunds" typically were paid directly to the customer's
manager in cash, either at a restaurant or at the customer's
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office.
11. At least 80 "refund" payments were made between
May 2001 and August 2004, totaling approximately $889,372.68. Of those, at least 38 "refund" payments were made to customers'
managers in China, totaling approximately $280,046.47, of which approximately $57,218.18 was paid to managers of customers which
were government instrumentalities. At least 42 "refund" payments totaling approximately $609,326.21 were made to managers of
private customers in South Korea.
12. Three "refund" payments were made or facilitated
by Schnitzer Steel in regard to its brokerage of Japanese scrap
metal between May and September 2002. The total amount of those
payments was approximately $12,399.00, all of which were paid to
managers of private customers. Records related to those three
"refunds" were maintained by Schnitzer Steel in the United
States; all other records of "refund" payments related to the
Japanese brokered sales after September 2001 were maintained by
SSI Korea in South Korea. In or around August 2004, the records
maintained by SS1 Korea related to "refund" payments were
destroyed by an SSI Korea employee, as described below.
C. Funding of "Commission" and "Refund" Payments Through
Off-Book Bank Accounts in South Korea
13. In 1995, Schnitzer Steel acquired Manufacturing
Management Inc. ("MMI") and its South Korean subsidiary, MMI
International Far East, Ltd. ("MMI Korea"), which became SSI
Korea. Thereafter, Schnitzer Steel adopted MMI's practice of
making illegal "commission" payments to managers of customers in
cash or bank check from funds held in a series of bank accounts
7
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in South Korea that were not reflected on the books and records
of Schnitzer Steel or SSI Korea (the "off-book" bank accounts)
Starting around 2001, funds from those bank accounts were also
used to pay illegal "refunds."
14. Between 1995 and 1998, the off-book bank accounts
were opened and maintained in the names of relatives of "Employee
B," a former MMI Korea employee who in 1995 became the manager of
SSI Korea. Employee B was a resident of Seoul, South Korea.
Between 1995 and 1998, Employee B was responsible for managing
the business relationships locally with Schnitzer Steel's scrap
metal customers in Asia, managing SSI Korea's Japanese brokered
scrap metal sales, coordinating the delivery of scrap metal to
the customers of Schnitzer Steel and the Japanese scrap metal
suppliers, and forwarding to Tacoma, Washington, invoices for
payment in connection with sales to Schnitzer Steel's customers
in South Korea and China and wire transfer requests for payment
to managers of Schnitzer Steel's scrap metal customers in those
countries.
15. Employee B resigned from SSI Korea in 1998.
Following his resignation, his former deputy, Employee A, became
the manager of SSI Korea. Around that time, Employee C, a former
employee of NMI based in Tacoma, Washington, who was Officer A's
supervisor and the manager of Schnitzer Steel's Asian scrap metal
sales until he retired in or around February 2000, traveled to
South Korea and instructed Employee A that he was to continue
making "commission" payments on behalf of Schnitzer Steel to
managers of its South Korean and Chinese customers. Employee C
further instructed Employee A that he should establish bank
accounts to be used to facilitate the "commission" payments.
Thereafter, Employee A opened bank accounts in South Korea in the
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names of his mother and wife. On August 21, 2001, Employee A
opened a bank account in the name of a fictitious corporate
entity, similar to that of SSI Korea, "SSI International Co.,
Ltd." Employee A maintained these off-book bank accounts on
behalf of SSI Korea from 1998 through sometime in 2004.
16. After a shipment of scrap metal was delivered from
Schnitzer Steel to the South Korean or Chinese customer, Employee
A sent to Officer A in Tacoma, Washington, an invoice for the
"commission" associated with that shipment.
17. After receiving an invoice from Employee A for a
"commission," Officer A authorized it and requested a wire
transfer be made to one of SSI Korea's off-book bank accounts.
The wire transfer request was forwarded from Officer A in Tacoma,
Washington, to Schnitzer Steel employees in Portland, who
approved and processed it. The request typically identified a
bank account number, but not the individual or entity in whose
name that bank account was maintained. The request typically
identified the payment as a "commission." Each "commission"
payment was authorized by one or more Schnitzer Steel executives.
Similarly, Officer A made a wire request for each "refund," which
was sent from Tacoma, Washington, to Portland, Oregon, for
approval and processing. "Officer B," who supervised Officer
A, authorized at least 40 "commissions" or "refunds" between
September 1999 and October 2003. Officer B was a resident of
Portland, Oregon, who was employed as a senior executive officer
of Schnitzer Steel, based in Portland, Oregon, from at least 1990 to 2005. Officer B's responsibilities included, among other
things, setting policy for the sale of scrap metal to Asian
customers, approving all such sales, authorizing wire transfer
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requests for payment to managers of customers of Schnitzer Steel,
and directly supervising the work of and approving the expenses
of Officer A.
18. The funds for the "commissions" and "refunds" were
transmitted by Schnitzer Steel in Portland to the off-book bank
accounts in South Korea by wire transfers that were reflected in
Schnitzer Steel's books and records as "commissions" and
"refunds." Between September 1999 and August 2004, at least 121
such wire transfers were made.'
19. Prior to August 21, 2001, the off-book bank
accounts in South Korea were maintained in the names of
individuals. The Japanese suppliers for which SSI Korea brokered
scrap metal sales refused to transfer funds to those accounts,
because the suppliers did not want to send funds to bank accounts
in the names of individuals. Instead, the Japanese suppliers
transferred funds for both SSI Korea's brokerage commission and
the corrupt payments to the managers of the customers to the bank
account of SSI Korea. Employee A, however, did not want to make
the payments from the SSI Korea bank account, because he did not
want to risk disclosure of the payments. Accordingly, Employee A
in South Korea and Officer A in Tacoma, Washington, agreed that
Schnitzer Steel in Portland would wire transfer funds to the off-
book bank accounts in South Korea. These wire transfers were
authorized by one or more Schnitzer Steel executives or officers.
20. Between September 1999 and September 2001, there
7 of the 121 wire transfers to off-book bank accounts paying "commissions" and "refunds" also included payments associated with the Japanese brokered scrap metal sales. See footnote 2 below.
10
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were 25 wire transfers from Schnitzer Steel to off-book bank
accounts in South Korea in connection with "commissions" related
to Japanese brokered scrap metal sales. 2 Officer B authorized 4
of those wire transfers. In addition, in 2002, there were 3 wire
transfers from Schnitzer Steel to the off-book bank account in
the name of the fictitious entity SSI International Co., Ltd. in
connection with "refunds" related to Japanese brokered scrap
metal sales.
21. After Employee A opened an off-book bank account
on August 21, 2001 in the fictitious name SSI International Co.,
Ltd., the Japanese scrap metal suppliers transferred funds to
cover their corrupt payments to managers of their customers
directly to that account. The records of all funds received from
the Japanese scrap metal suppliers after August 21, 2001, with the exception of the 3 "refund" payments noted above, were
maintained solely by SSI Korea. Those records were destroyed in
or about August 2004 by an SSI Korea employee, as described below.
D. Gratuities
22. In addition to the "commission" and "refund"
payments, Schnitzer Steel, from at least October 1999 to in or
about May 2003, made a third type of corrupt payment in
connection with certain sales of scrap metal to customers in
South Korea and China. The third type of payment was made
through checks written to Schnitzer Steel employees or to "cash,"
which were reflected on Schnitzer Steel's books and records as
2 of the 25 wire transfers made in connection with the Japanese brokered scrap metal sales also included payments for "commissions" and "refunds."
11
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"gratuities,", "other marine expenses," "commissions," "customer
relations," and "bonuses" (hereafter "gratuities").
23. Checks to fund the "gratuities" were written and
cashed by Schnitzer Steel employees in the United States at the
direction of Schnitzer Steel Officer A in Tacoma, Washington.
Some of these checks were written and cashed with the
authorization by one or more Schnitzer Steel executives or
officers. The cash was delivered in the United States to the
manager of the South Korean or Chinese customer at or about the
time that a cargo of scrap metal was loaded for shipment.
24. Between October 1999 and April 2003, at least 26
payments of "gratuities" were made in the United States to
managers of South Korean and Chinese customers. Of those, at
least 18 of the "gratuity" payments were made to managers of
Chinese customers. Those payments totaled $45,198.60, of which at least $39,198.60 was paid to managers of customers which were
government instrumentalities. At least 6 payments totaling $6,600 were made to managers of private South Korean customers.
Two additional payments of "gratuities" totaling $4,000 were made
to managers of customers, the identities of which cannot be
determined from Schnitzer Steel's books and records.
E. Other Cash Payments to Officers or Employees of Customers
25. In addition to the payments of "commissions,"
"refunds," and "gratuities," other cash payments were made by
Officer A and Employee A to managers of Schnitzer Steel's
customers. Some of the other cash payments ranged in amount from
$2,000 to over $6,000. Others, characterized in Schnitzer
Steel's books and records as "condolence money" and
12
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"congratulations money," typically ranged in amount from $45 to $500. The other cash payments made by Officer A were authorized
by Officer B.
26. Approximately 25 other cash payments to managers
of Schnitzer Steel's customers were made between September 1999
and December 2004, the total amount of which was $17,243.46, of which $4,500 was paid to managers of customers which were
government instrumentalities.
F. Gifts and Entertainment
27. Both Officer A and Employee A gave gifts to
managers of customers. Some of the gifts were given in
conjunction with the payments of "commissions" and "refunds,"
which Officer A and Employee A typically presented privately to
the manager in cash or "bank check" wrapped with a gift (e.g.,
pens, jewelry, perfume) . The value of those gifts was generally
less than $350. However, more substantial gifts, ranging in
value from $400 to $8,000, were also given. The value of the
gifts increased substantially in the fall of 2004 after the
practice of making corrupt payments to managers of Schnitzer
Steel's customers was uncovered and Officer B instructed that no
further "commissions" or "refunds" be paid to managers of
Schnitzer Steel's customers. For example, Officer A gave a
manager of a private customer a $2,400 Cartier watch in or about
September 2004, and Employee A gave a manager of a different
13
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private customer two gift certificates worth approximately
$10,000 in or about November 2004.
28. Between September 1999 and December 2004, gifts with a total value of $50,392.12 were given to managers of
customers by Officer A and Employee A. At least $3,564.65 of
those gifts were given to managers of customers which were
government instrumentalities.
29. Officer A and Employee A also entertained managers
of customers extensively. This entertainment was provided in
South Korea, China and the United States. The entertainment in
South Korea included free use of SSI Korea's golf club membership
and a condominium time-share which gave SSI Korea the right to
accommodations at five resort locations. The expenses attributed
to the entertainment of managers of customers between September
1999 and December 31, 2004 totaled $87,636.75.
30. Officer B authorized the expenses for gifts and
entertainment incurred by Officer A.
G. Books and Records Violations
31. Schnitzer Steel failed to properly account for the
various types of corrupt payments made and failed to accurately
describe the same in its books and records. Instead, Schnitzer
Steel improperly characterized the payments it made as legitimate
payments for "commissions," "sales commissions," "commissions to
the customer," "refunds," "rebates," "refunds to customer,"
"rebates to customer," "quality claims," "discounts," "credits,"
"freight savings," "cash," "gratuities," "other marine expenses,"
14
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"customer relations," "bonuses," "condolence money," and
"congratulations money," in its books and records.
IV. Knowledge of the Payment Practices by Schnitzer Steel Senior
Management
32. Certain members of the senior executive management
of Schnitzer Steel, including Officer B, were aware of and either
authorized or had knowledge of, within the meaning of the Foreign
Corrupt Practices Act, § 78dd-l(f) (2), the giving of corrupt cash
payments and gifts, and of providing entertainment to customers'
managers in South Korea and China, including managers of
government instrumentalities.
V. Revenue Realized by Schnitzer Steel on Scrap Metal Sales for
Which Corrupt Payments Were Made to Managers of Customers
33. Schnitzer Steel realized gross revenue of
approximately $602,139,470 and profits of approximately
$54,927,319 on scrap metal sold by Schnitzer Steel to South
Korean and Chinese customers between September 1999 and August 2004 with respect to which corrupt payments were paid. From
those scrap metal sales to government instrumentalities,
Schnitzer Steel realized gross revenue of approximately
$96,396,740 and profits of approximately $6,259,104.
34. Schnitzer Steel realized gross revenue of
approximately $1,513,097 and profits of approximately $420,512 on
scrap metal sales by Japanese suppliers to South Korean and
Chinese customers between September 1999 and August 2004 for
which SSI Korea received a brokerage commission, and for which it
may be inferred, based on the destruction of records by SSI
15
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Korea, that "commissions" or "refunds" were paid. From those
sales, Schnitzer Steel realized gross revenue of approximately
$58,610 and profits of approximately $19,991 on scrap metal sold
to government instrumentalities.
VI. Schnitzer Steel's Lack of Internal Controls
35. Prior to May 2004, and during the period of these
transactions, Schnitzer Steel provided no training or education
to any of its employees, agents or subsidiaries regarding the
requirements of the Foreign Corrupt Practices Act, or the
prohibitions on the payments of commercial bribes or "kickbacks."
Schnitzer Steel also failed to maintain any program or procedures
to monitor its employees, agents and subsidiaries for compliance
with the FCPA and commercial bribery laws.
VII. Schnitzer Steel's Investigation and Initial Response
36. In May 2004, when Schnitzer Steel introduced its
new compliance and ethics program, Schnitzer Steel's compliance
department uncovered the corrupt payments and Schnitzer Steel
began to investigate the potential violations of law. At that
time, Officer B prohibited any further corrupt payments, but
nonetheless authorized Officer A to make at least two additional
corrupt payments that Schnitzer Steel previously had promised
private customers. In late May or early June 2004, Officer B
also authorized Officer A to increase entertainment expenses in
lieu of cash payments to Schnitzer Steel's private and
government-owned scrap metal customers. In response, Officer A
and Employee A gave managers of Schnitzer Steel's scrap metal
customers additional gifts, including gift certificates worth
$10,000 and a Cartier watch worth $2,400, as described above.
iLl
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VIII. Destruction of Records by SSI Korea
37. After Schnitzer Steel began its internal
investigation in late May or early June 2004 but before it had
issued a directive to its employees to preserve documents related
to the scrap metal transactions, an SSI Korea employee destroyed
documents concerning the corrupt payments and off-book bank
accounts, at the direction of Employee A, as described below.
38. Around May 2004, the general practice of making
corrupt payments to managers of South Korean steel producers that
purchased scrap metal became a matter of public notice when South
Korean law enforcement authorities conducted raids at the offices
of a South Korean steel company and six suppliers of its imported
raw materials.
39. Although SSI Korea was not one of the companies
whose offices were searched, Employee A was summoned twice for
interviews by the South Korean public prosecutor investigating
the matter and was questioned regarding any corrupt payments made
to the South Korean steel company's managers. In the initial
interview, Employee A denied making any such payments. In his
second interview, however, Employee A admitted making the corrupt
payments, but claimed a much smaller amount than had actually
been paid.
40. Shortly after each interview, Employee A and
Officer A discussed the interview and its implications. Officer
A shared the content of those discussions with Officer B.
Employee A later suggested to Officer A that the records of
corrupt payments to and from the off-book bank accounts be
17
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destroyed, and Officer A did not disagree. In or about August
2004, Employee A directed a member of the SSI Korea staff to
destroy all records pertaining to the off-book bank accounts,
which the staff member did. Thereafter, Employee A informed
Officer A that the documents had been destroyed.
IX. Schnitzer Steel's Cooperation and Remedial Actions
41. Schnitzer Steel has fully cooperated with the
investigation, producing all documents and information requested,
including voluntary production of documents protected by the
attorney-client privilege and early production and identification
to the Department of Justice ("DOJ") of relevant documents.
Schnitzer Steel also agreed to make employees available for
interviews and encouraged employee cooperation by agreeing to pay
travel expenses and attorneys' fees.
42. Schnitzer Steel's Audit Committee and Board of
Directors have taken additional remedial actions, including
ordering an investigation, the results of which were provided to
DOJ and the SEC. Schnitzer Steel has also designed and is
implementing a remedial plan, which includes (i) the appointment
of a corporate compliance officer who reports to Schnitzer
Steel's Audit Committee, (ii) expanded roles for Schnitzer
Steel's Audit Committee to oversee compliance with the Foreign
Corrupt Practices Act and other applicable bribery laws, (iii)
new reporting lines directly to the Audit Committee and Board of
Directors, (iv) new ethics and due diligence policies, and (v)
enhanced programs for educating and training executives and
employees on ethical matters, including Foreign Corrupt Practices
Act /anti-bribery compliance training. These and other remedial
actions build on other corporate governance changes adopted by
IN
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Schnitzer Steel pursuant to the Sarbanes-Oxley Act of 2002.
19
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DEFERRED PROSECUTION AGREEMENT
Defendant SCHNITZER STEEL INDUSTRIES, INC. ("Schnitzer
Steel" or "the Company") , an Oregon corporation, by its
undersigned attorneys, pursuant to authority granted by its Board
of Directors, and the United States Department of Justice,
Criminal Division, Fraud Section ("Department of Justice" or the
"Department") , enter into this Deferred Prosecution Agreement
("Agreement")
1. Schnitzer Steel accepts and acknowledges that the Department
of Justice will file a criminal Information in the United
States District Court for the District of Oregon charging
SSI International Far East, Ltd. ("SSI Korea"), a wholly-
owned subsidiary of Schnitzer Steel, with Conspiracy to
violate, and with substantive violations of, the anti-
bribery provisions of the Foreign Corrupt Practices Act of
1977 ("FCPA") and the Wire Fraud statute, and with aiding
and abetting the making of false entries in the books and
records of Schnitzer Steel, a publicly-held corporation, in
violation of the books and records and internal controls
provisions of the FCPA. Schnitzer Steel accepts and
acknowledges that SSI Korea will enter a plea of guilty to
all charges in the Information. Schnitzer Steel does not
endorse, ratify or condone criminal conduct and, as set
forth below, has taken steps to prevent such conduct from
Case 3:06-cr-00398-KI Document 11 Filed 10/16/06 Page 37 of 65 Page ID#: 74
occurring in the future.
2. Schnitzer Steel accepts and acknowledges that it is
responsible for the acts of its officers and employees, and
those of its wholly owned subsidiary, SSI Korea, as set
forth in the Statement of Facts annexed hereto as
"Attachment A." Should the Department, pursuant to
Paragraphs 21 and 22 of this Agreement, initiate the
prosecution that is deferred by this Agreement, Schnitzer
Steel agrees that it will neither contest the admissibility
of, nor contradict, in any such proceeding, the facts
contained in the Statement of Facts.
3. Schnitzer Steel expressly agrees that it shall not, through
its present or future attorneys, Board of Directors,
officers, or any other person authorized to speak for the
Company, make any public statement, in litigation or
otherwise, contradicting Schnitzer Steel's acceptance of
responsibility set forth above or the factual statements set
forth in the Statement of Facts. Any such contradictory
statement shall, subject to Schnitzer Steel's cure rights
below, constitute a breach of this Agreement as governed by
Paragraph 21 of this Agreement, and Schnitzer Steel
thereafter shall be subject to prosecution as set forth in
Paragraphs 21 and 22 of this Agreement. The decision
whether any public statement by any such person
ON
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contradicting a fact contained in the Statement of Facts
will be imputed to Schnitzer Steel for the purpose of
determining whether Schnitzer Steel has breached this
Agreement shall be at the sole discretion of the Department.
Should the Department determine that a public statement by
any such person contradicts in whole or in part a statement
contained in the Statement of Facts, the Department shall so
notify Schnitzer Steel as provided in Paragraph 27, and the
Company may avoid a breach of this Agreement by publicly
repudiating such statement within two (2) business days
after notification. Consistent with Schnitzer Steel's
obligations as set forth above, Schnitzer Steel shall be
permitted to raise defenses and to assert affirmative claims
in civil and regulatory proceedings relating to the matters
set forth in the Statement of Facts. This Paragraph is not
intended to apply to any statement made by any Schnitzer
Steel employee in the course of any criminal, regulatory, or
civil case initiated against such individual, unless such
individual is speaking on behalf of Schnitzer Steel.
4. In connection with this Agreement, Schnitzer Steel agrees to
issue a press release, the text of which shall be acceptable
to the Department.
S. During the three-year (3) term of this Agreement, Schnitzer
Steel agrees to cooperate fully with the Department, the
3
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U.S. Securities and Exchange Commission (the "SEC") , and any
other authority or agency designated by the Department
investigating Schnitzer Steel and any of its present and
former officers, employees, agents, consultants, contractors
and subcontractors, in any and all matters relating to
corrupt payments in connection with its operations.
Schnitzer Steel agrees that its cooperation shall include,
but is not limited to, the following:
a) Schnitzer Steel shall continue to cooperate fully with
the Department, the SEC, and any other authority or
agency designated by the Department, and shall
truthfully disclose all information with respect to the
activities of Schnitzer Steel, its officers, employees,
agents, consultants, contractors and sub-contractors
concerning all matters relating to corrupt payments in
connection with its operations, related false books and
records, and inadequate internal controls about which
Schnitzer Steel has any knowledge or about which the
Department shall inquire. This obligation of truthful
disclosure includes an obligation upon Schnitzer Steel
to provide to the Department and to the SEC, upon
request, any document, record, or other tangible
evidence relating to such corrupt payments, books and
records, and internal controls about which the
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Department shall inquire of Schnitzer Steel. This
obligation of truthful disclosure includes an
obligation to provide the Department with access to
Schnitzer Steel's facilities, documents, and employees.
This obligation does not apply to any communications
that are protected by the attorney-client privilege or
work product doctrine. The parties agree, however,
that the disclosure of information to Schnitzer Steel's
counsel concerning corrupt payments and related books
and records shall not relieve Schnitzer Steel of its
obligation to truthfully disclose such matters to the
Department and the SEC.
b) Upon request of the Department, with respect to any
issue relevant to its investigation of corrupt payments
in connection with Schnitzer Steel's operations,
related books and records, and inadequate internal
controls, Schnitzer Steel shall designate knowledgeable
employees, agents, or attorneys to provide to the
Department the information and materials described in
Paragraph 5(a) above, on Schnitzer Steel's behalf. It
is further understood that Schnitzer Steel must at all
times provide complete, truthful, and accurate
information.
c) With respect to any issue relevant to the Department's
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investigation of corrupt payments in connection with
Schnitzer Steel's operations, the Company shall use its
best efforts to make its employees available to provide
information and testimony as requested by the
Department, including sworn testimony before a federal
grand jury or in federal trials, as well as interviews
with federal law enforcement authorities. Cooperation
under this Paragraph will include identification of
witnesses who, to Schnitzer Steel's knowledge, may have
material information regarding the matters under
investigation.
d) With respect to any issue relevant to the Department's
investigation of corrupt payments in connection with
Schnitzer Steel's operations, the Company shall use its
best efforts to make available, for interviews or for
testimony, such present or former Schnitzer Steel
officers, directors, agents, consultants, and
employees, and the officers, directors, employees,
agents and consultants of contractors and sub-
contractors, as may be requested by Department of
Justice.
e) With respect to any information, testimony, document,
record, or other tangible evidence provided to the
Department pursuant to this Agreement, Schnitzer Steel
M.
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consents to any and all disclosures to other Government
agencies of such materials as the Department, in its
sole discretion, shall deem appropriate.
6. In return for Schnitzer Steel's full and truthful
cooperation, the Department agrees not to use any
information provided by Schnitzer Steel pursuant to this
Agreement against the Company or its subsidiaries in any
criminal or civil case relating to the conduct described in
the Statement of Facts, at Attachment A, except in a
prosecution for perjury or obstruction of justice; in a
prosecution for making a false statement after the date of
this Agreement; in a prosecution or other proceeding
relating to any crime of violence; or in a prosecution or
other proceeding relating to a violation of any provision of
Title 26 of the U.S. Code. In addition, the Department
agrees, except as provided herein, that it will not bring
any criminal or civil case against Schnitzer Steel relating
to the conduct of Schnitzer Steel employees as described in
the attached Statement of Facts. This Paragraph does not
provide any protection against prosecution for corrupt
payments, if any, made in the future by Schnitzer Steel, its
subsidiaries, affiliates, officers, directors, employees,
agents or consultants, whether or not disclosed by Schnitzer
Steel pursuant to the terms of this Agreement, nor does it
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apply to any such payments, made in the past, which are not
described in the attached Statement of Facts. In addition,
this Paragraph does not provide any protection against
criminal prosecution for any violations committed by any
present or former officer, employee, director, agent or
consultant of Schnitzer Steel or any of its subsidiaries or
affiliates.
7. Schnitzer Steel represents that it has implemented a
compliance and ethics program designed to detect and prevent
violations of the FCPA, U.S. commercial bribery laws and all
applicable foreign bribery laws throughout its operations,
including those of its subsidiaries, affiliates, and joint
ventures, and those of its contractors and subcontractors,
with responsibilities that include interactions with foreign
officials. Implementation of these policies and procedures
shall not be construed in any future enforcement proceeding
as providing immunity or amnesty for any crimes not
disclosed to the Department as of the date of the execution
of this Agreement for which Schnitzer Steel would otherwise
be responsible.
8. Schnitzer Steel agrees to the appointment of an independent
compliance consultant ("Compliance Consultant") , within
sixty (60) calendar days of the signing of this Agreement,
to monitor the Company's compliance program with respect to
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the FCPA, U.S. commercial bribery laws, and applicable
foreign bribery laws for a period of three (3) years from
the execution of this Agreement, subject to the provisions
of Paragraph 11. The Compliance Consultant shall be the
same person as appointed pursuant to any agreement between
Schnitzer Steel and the SEC concerning the acts described in
the Statement of Facts at Attachment A. The Compliance
Consultant will review and evaluate the effectiveness of
Schnitzer Steel's internal controls, record-keeping, and
financial reporting policies and procedures as they relate
to Schnitzer Steel's compliance with the books and records,
internal accounting controls, and anti-bribery provisions of
the FCPA, U.S. commercial bribery laws, and all applicable
foreign bribery laws. This review and evaluation shall
include an assessment of those policies and procedures as
actually implemented.
9. The Department shall provide to Schnitzer Steel, within
thirty (30) days of the signing of this Agreement, the names
of two (2) recommended Compliance Consultants. Thereafter,
Schnitzer Steel shall select one person as its Compliance
Consultant or, in the event the Company does not select a
person within thirty (30) days, the Department shall have
the sole right to select the Compliance Consultant. The
compensation and expenses of the Compliance Consultant, and
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of any persons hired under his or her authority, shall be
paid by Schnitzer Steel.
10. Schnitzer Steel shall cooperate fully with the Compliance
Consultant. The Compliance Consultant shall have the
authority to take such reasonable steps, in the Compliance
Consultant's view, as may be necessary to be fully informed
about the operations of Schnitzer Steel within the scope of
his or her responsibilities under this Agreement. To that
end, Schnitzer Steel shall provide the Compliance Consultant
with access to all files, books, records, and personnel that
fall within the scope of his or her responsibilities under
this Agreement. It shall be a condition of the Compliance
Consultant's retention that the Compliance Consultant is
independent of Schnitzer Steel and that no attorney-client
relationship shall be formed between them. Except insofar
as Schnitzer Steel retains the attorney-client privilege or
work product doctrine described in Paragraph 5(a) of this
Agreement, Schnitzer Steel shall not withhold from the
Department, and shall require the Compliance Consultant to
agree not to withhold from the Department, any documents or
information on the basis of any privilege or work product
claims.
11. Schnitzer Steel agrees that the Compliance Consultant shall
assess whether Schnitzer Steel's policies and procedures are
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reasonably designed to detect and prevent violations of the
FCPA, all applicable U.S. commercial bribery laws, and all
applicable foreign bribery laws, and, during the three-year
consultancy, shall conduct an initial review and prepare an
initial report, followed by two (2) follow-up reviews and
follow-up reports as described below. With respect to each
of the three (3) reviews, after initial consultations with
Schnitzer Steel, the Department, and the SEC, the Compliance
Consultant shall prepare a written work plan for each of the
reviews, which shall be submitted in advance to Schnitzer
Steel, the Department and the SEC for comment. In order to
conduct an effective initial review and to fully understand
any existing deficiencies in controls, policies and
procedures related to the FCPA, U.S. commercial bribery
laws, and all applicable foreign bribery laws, the
Compliance Consultant's initial work plan shall include such
steps as are necessary to develop an understanding of the
facts and circumstances surrounding the violations described
in the attached Statement of Facts. Any disputes between
Schnitzer Steel and the Compliance Consultant with respect
to the work plan shall be decided by the Department in its
sole discretion.
12. In connection with the initial review, the Compliance
Consultant shall issue a written report within one hundred
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twenty (120) calendar days after being retained, setting
forth the Compliance Consultant's assessment and making
recommendations reasonably designed to improve Schnitzer
Steel's policies and procedures for ensuring compliance with
the FCPA, U.S. commercial bribery laws, and all applicable
foreign bribery laws. The Compliance Consultant shall
provide the report to Schnitzer Steel's Board of Directors
and its Audit Committee and contemporaneously transmit
copies to the following individuals, or their successors: 1)
Mark F. Mendelsohn, Deputy Chief, Fraud Section, Criminal
Division, U.S. Department of Justice, 10th and Constitution
Ave., N.W. (Bond), Washington, D.C. 20530; and 2) Helane L.
Morrison, District Administrator, U.S. Securities and
Exchange Commission, 44 Montgomery Street, 26th Floor, San
Francisco, CA 94127. The Compliance Consultant may extend
the time period for issuance of the report with prior
written approval of the Department and the SEC.
13
Within one hundred twenty (120) calendar days after
receiving the report, Schnitzer Steel shall adopt all
recommendations in the report of the Compliance Consultant;
provided, however, that within one hundred twenty (120)
calendar days after receiving the report, Schnitzer Steel
shall advise the Compliance Consultant, the Department and
the SEC in writing of any recommendations that it considers
12
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to be unduly burdensome, impractical, or costly. With
respect to any recommendation that Schnitzer Steel considers
unduly burdensome, impractical, or costly, Schnitzer Steel
need not adopt that recommendation within that time but
shall propose in writing an alternative policy, procedure or
system designed to achieve the same objective or purpose.
As to any recommendation on which Schnitzer Steel and the
Compliance Consultant do not agree, such parties shall
attempt in good faith to reach an agreement within sixty
(60) calendar days after Schnitzer Steel serves the written
advice. In the event Schnitzer Steel and the Compliance
Consultant are unable to agree on an alternative proposal,
Schnitzer Steel shall abide by the determinations of the
Compliance Consultant. With respect to any recommendation
that the Compliance Consultant determines cannot reasonably
be implemented within one hundred twenty (120) calendar days
after receiving the report, the Compliance Consultant may
extend the time period for implementation with prior written
approval of the Department.
14. The Compliance Consultant shall undertake two follow-up
reviews to further monitor and assess whether Schnitzer
Steel's policies and procedures are reasonably designed to
detect and prevent violations of the FCPA, U.S. commercial
bribery laws, and all applicable foreign bribery laws.
13
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Within one hundred twenty (120) calendar days of initiating
each follow-up review, the Compliance Consultant (i) shall
complete the review, (ii) certify whether Schnitzer Steel's
anti-bribery compliance program, including its policies and
procedures, is appropriately designed and implemented to
ensure compliance with the FCPA, U.S. commercial bribery
laws, and all applicable foreign bribery laws, and (iii)
report on the Compliance Consultant's findings in the same
fashion as set forth in Paragraph 12 with respect to the
initial review. The first follow-up review shall commence
one year after appointment of the Compliance Consultant, and
the second follow-up review shall commence at least one year
after completion of the first review. The Compliance
Consultant may extend the time period for these follow-up
reviews with prior written approval of the Department and
the SEC.
15. In undertaking the assessment and reviews described in
Paragraphs 8 through 14 of this Agreement, the Compliance
Consultant shall formulate conclusions based on, among other
things, (i) inspection of documents, including all the
policies and procedures relating to Schnitzer Steel's anti-
bribery compliance program; (ii) onsite observation of
Schnitzer Steel's systems and procedures, including
Schnitzer Steel's internal controls, recordkeeping and
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internal audit procedures; (iii) meetings with and
interviews of Schnitzer Steel's employees, officers,
directors and any other relevant persons; and (iv) analyses,
studies and testing of Schnitzer Steel's anti-bribery
compliance program. In undertaking such assessment and
reviews, the Compliance Consultant, at his or her own
discretion, may rely, to a reasonable extent and after
reasonable inquiry, on reports, studies, and analyses issued
or undertaken by other consultants hired by Schnitzer Steel
prior to the date of this Agreement.
16. The Compliance Consultant's charge, as further described in
Paragraphs 8 through 15 above, is to review Schnitzer
Steel's controls, policies and procedures related to the
compliance with the FCPA, U.S. commercial bribery laws and
all other applicable foreign bribery laws. Should the
Compliance Consultant, during the course of his or her
engagement, discover that corrupt payments or corrupt
transfers of property or interests may have been offered,
promised, paid, or authorized by any Schnitzer Steel entity
or person, or any entity or person working directly or
indirectly for Schnitzer Steel, the Compliance Consultant
shall promptly report such payments to Schnitzer Steel's
Corporate Compliance Officer and its Audit Committee for
further investigation, unless the Compliance Consultant
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believes, in the exercise of his or her discretion, that
such disclosure should be delayed. In such circumstances,
the Compliance Consultant may refer the matter directly to
the Department and the SEC. If the Compliance Consultant
refers the matter only to Schnitzer Steel's Corporate
Compliance Officer or its Audit Committee, Schnitzer Steel
shall promptly report the same to the Department and the
SEC. If Schnitzer Steel fails to make such disclosure
within ten (10) calendar days of the report of such payments
to Schnitzer Steel's Corporate Compliance Officer or its
Audit Committee, the Compliance Consultant shall
independently disclose his or her findings to the Department
and the SEC, at the addresses listed above in Paragraph 12.
If the Compliance Consultant reasonably concludes that
disclosure to Schnitzer Steel's Corporate Compliance Officer
or its Audit Committee would be inappropriate, the
Compliance Consultant may limit such disclosure to any one
of the foregoing parties. If the Compliance Consultant
reasonably concludes that disclosure to even one of the
foregoing parties would be inappropriate, the Compliance
Consultant may refer the matter directly to the Department
or the SEC. In the event of such a direct referral, the
Compliance Consultant shall make a similar disclosure to
Schnitzer Steel's Corporate Compliance Officer or its Audit
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Committee as soon as the reason for the nondisclosure has
abated, unless directed not to do so by the relevant
authorities. Further, in the event that any Schnitzer Steel
entity or person, or any entity or person working directly
or indirectly for Schnitzer Steel, refuses to provide
information necessary for the performance of the Compliance
Consultant's responsibilities, the Compliance Consultant
shall disclose that fact to the Department and the SEC.
Schnitzer Steel shall not take any action to retaliate
against the Compliance Consultant for such disclosures. The
Compliance Consultant is not precluded from reporting other
criminal or regulatory violations discovered in the course
of performing his or her duties, in the same manner as
described above.
17. The Agreement between Schnitzer Steel and the Compliance
Consultant shall provide that for the three-year period of
engagement and for a period of two (2) years from completion
of the engagement, the Compliance Consultant shall not enter
into any additional employment, consultant, attorney-client,
auditing or other professional relationship with Schnitzer
Steel, or any of its present or former affiliates,
directors, officers, employees, or agents acting in their
capacity as such. The agreement will also provide that the
Compliance Consultant will require that any firm with which
17
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he or she is affiliated or of which he or she is a member,
and any person engaged to assist the Compliance Consultant
in performance of his or her duties under this Agreement
shall not, without prior written consent of the Department
and the SEC's Division of Enforcement, enter into any
employment, consultant, agency, attorney-client, auditing or
other professional relationship with Schnitzer Steel, or any
of its present or former affiliates, directors, officers,
employees, or agents acting in their capacity as such for
the period of the engagement and for a period of two (2)
years after the engagement. To ensure the independence of
the Compliance Consultant, Schnitzer Steel shall not have
the authority to terminate the Compliance Consultant without
the prior written approval of the Department and the SEC.
18. Schnitzer Steel further agrees that its subsidiary, SSI
Korea, shall pay a monetary penalty of $7,500,000 to the
U.S. Treasury within ten (10) days of the imposition of any
fine upon SSI Korea by the District Court for the District
of Oregon. Schnitzer Steel will offset against the
$7,500,000 monetary penalty required under this Agreement
any fine imposed upon SSI Korea by the District Court for
the District of Oregon. This amount is a final payment and
shall not be refunded (a) if the Department does not
institute a criminal prosecution against Schnitzer Steel
Case 3:06-cr-00398-KI Document 11 Filed 10/16/06 Page 54 of 65 Page ID#: 91
pursuant to Paragraph 21 below, or (b) should the Department
later determine that Schnitzer Steel has breached this
Agreement and brings a prosecution against it pursuant to
Paragraph 22 below. Further, nothing in this Agreement
shall be deemed an agreement by the Department that this
amount is the maximum criminal fine that may be imposed in
such prosecution, and the Department shall not be precluded
from arguing that the Court should impose a higher fine.
The Department agrees, however, to recommend to the Court
that any amounts paid pursuant to this Agreement and in the
criminal proceeding against SSI Korea should be offset
against whatever fine the Court shall impose as part of its
judgment in the event of a subsequent breach and
prosecution. Schnitzer Steel agrees, on behalf of itself
and its subsidiaries, including SSI Korea, that no tax
deduction will be sought in connection with the $7,500,000
million monetary penalty required under this Agreement or
any criminal fine imposed by a Court in connection with any
criminal proceeding arising from the facts contained in the
Statement of Facts.
19. In consideration of the action of the Audit Committee of the
Board of Directors of Schnitzer Steel in initiating an
investigation conducted by outside legal counsel and the
voluntary disclosure to the Department and the SEC; the
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cooperation of the Audit Committee and the Company with the
investigations conducted by the Department and the SEC; the
willingness of the Board of Directors to replace senior
officers of the Company, to increase the number of
independent directors, and to adopt and implement effective
compliance procedures; and the willingness of Schnitzer
Steel to (a) acknowledge responsibility for its behavior,
(b) cause its subsidiary, SSI Korea, to enter a plea of
guilty to criminal charges, (c) continue its cooperation
with the Department, the SEC, and other investigative and
regulatory authorities and agencies, (d) adopt and maintain
remedial measures and its commitment to independently review
and audit such measures, and (e) consent to pay the criminal
fine in connection with the plea of guilty of its subsidiary
SSI Korea, the Department agrees that any prosecution of
Schnitzer Steel be and hereby is deferred for a period of
three (3) years from the date of this Agreement.
20. The Department further agrees that if Schnitzer Steel is in
full compliance with all of its obligations under this
Agreement, including its obligation to adopt the
recommendations of the Compliance Consultant in accordance
with the terms of Paragraph 13, the Department will not
institute a criminal prosecution against Schnitzer Steel
pursuant to Paragraph 1, and this Agreement shall expire
20
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except that the Department shall remain bound to its
obligation in paragraph 6 not to bring any criminal or civil
case against Schnitzer Steel relating to the conduct
described in the Statement of Facts.
21. If the Department determines, in its sole discretion, that
Schnitzer Steel, at any time between the execution of this
Agreement and completion of Schnitzer Steel's cooperation as
set forth in Paragraph 5, provided deliberately false,
incomplete, or misleading information under this Agreement
or has committed any federal crimes subsequent to the date
of this Agreement or has otherwise violated any provision of
this Agreement, Schnitzer Steel shall, in the Department's
sole discretion, thereafter be subject to prosecution for
any federal criminal violation of which the Department has
knowledge. Any such prosecutions may be premised on
information provided by Schnitzer Steel. Moreover,
Schnitzer Steel agrees that any such prosecutions that are
not time-barred by the applicable statute of limitations on
the date of this Agreement may be commenced against
Schnitzer Steel in accordance with this Agreement,
notwithstanding the expiration of the statute of limitations
between the signing of this Agreement and the termination of
this Agreement. By this Agreement, Schnitzer Steel
expressly intends to and does waive any rights in this
21
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respect.
22. It is further agreed that in the event that the Department,
in its sole discretion, determines that Schnitzer Steel has
violated any provision of this Agreement: (a) all statements
made by or on behalf of Schnitzer Steel to the Department,
and any testimony given by Schnitzer Steel before a grand
jury or any tribunal, at any legislative hearings, or to the
SEC, whether prior or subsequent to this Agreement, or any
leads derived from such statements or testimony, shall be
admissible in evidence in any and all criminal proceedings
brought by the Department against Schnitzer Steel and (b)
Schnitzer Steel shall not assert any claim under the United
States Constitution, Rule 11(f) of the Federal Rules of
Criminal Procedure, Rule 410 of the Federal Rules of
Evidence, or any other federal rule, that statements made by
or on behalf of Schnitzer Steel prior to or subsequent to
this Agreement, or any leads therefrom, should be
suppressed. The decision whether conduct or statements of
any individual will be imputed to Schnitzer Steel for the
purpose of determining whether Schnitzer Steel has violated
any provision of this Agreement shall be in the sole
discretion of the Department.
23. Schnitzer Steel acknowledges that the Department has made no
representations, assurances, or promises concerning what
22
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sentence may be imposed by the Court should Schnitzer Steel
breach this Agreement and this matter proceed to judgment.
Schnitzer Steel further acknowledges that any such sentence
is solely within the discretion of the Court and that
nothing in this Agreement binds or restricts the Court in
the exercise of such discretion.
24. Schnitzer Steel agrees that in the event it sells or merges
all or substantially all of its business operations as they
exist as of the date of this Agreement, whether such sale is
structured as a stock or asset sale, it shall include in any
contract for sale or merger a provision binding the
purchaser or any successor to the obligations described in
this Agreement.
25. It is understood that this Agreement is binding on Schnitzer
Steel and the Department but specifically does not bind any
other federal agencies, or any state or local law
enforcement or regulatory agencies, although the Department
will bring the cooperation of Schnitzer Steel and its
compliance with its other obligations under this Agreement
to the attention of such agencies and authorities if
requested to do so by Schnitzer Steel and its attorneys.
26. This Agreement sets forth all the terms of the Deferred
Prosecution Agreement between Schnitzer Steel and the
Department. No modifications or additions to this Agreement
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shall be valid unless they are in writing and signed by the
Department, Schnitzer Steel's attorneys, and a duly
authorized representative of Schnitzer Steel.
27. Any notice to Schnitzer Steel under this Agreement shall be
given by personal delivery, overnight delivery by a
recognized delivery service or registered or certified mail,
in each case addressed to Schnitzer Steel Industries, Inc.,
Attn: President and Chief Executive Officer, 3200 NW Yeon
Avenue, Portland OR 97210, with a copy by the same means to
Schnitzer Steel Industries, Inc., Attn: General Counsel,
3200 NW Yeon Avenue, Portland OR 97210. Notice shall be
effective upon actual receipt by Schnitzer Steel.
FOR THE DEPARTMENT OF JUSTICE:
Steven A. Tyrrell Acting Chief, Fraud Section
By:
%/L- MARK F. MENDELSOHN Deputy Chief, Fraud Section
DEBORAH L. GRAMICCIONI Assistant Chief, Fraud Section
KATHLEEN MCGOVERN Trial Attorney, Fraud Section
Fraud Section, Criminal Division United States Department of Justice
24
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loth & Constitution Avenue, NW Washington, D.C. 20530 (202) 514-7023
25
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FOR SCHNITZER:
Kenneth M. Novack Chairman Schnitzer Steel Industries, Inc. 3200 NW Yeon Avenue Portland, Oregon 97210
Case 3:06-cr-00398-KI Document 11 Filed 10/16/06 Page 62 of 65 Page ID#: 99
OFFICER'S CERTIFICATE
I have read this Agreement and carefully reviewed every part
of it with counsel for Schnitzer Steel Industries, Inc.,
("Schnitzer Steel") . I understand the terms of this Agreement
and voluntarily agree, on behalf of Schnitzer Steel, to each of
its terms. Before signing this Agreement, I consulted with the
attorney for Schnitzer Steel. The attorney fully advised me of
Schnitzer Steel's rights, of possible defenses, of the Sentencing
Guidelines' provisions, and of the consequences of entering into
this Agreement.
I have carefully reviewed every part of this Agreement with
the Audit Committee of the Board of Directors of Schnitzer Steel,
to which the Board has delegated the authority to approve and
enter into this Agreement on behalf of Schnitzer Steel. I have
fully advised the Audit Committee of Schnitzer Steel's rights, of
possible defenses, of the Sentencing Guidelines' provisions, and
of the consequences of entering into the Agreement.
No promises or inducements have been made other than those
contained in this Agreement. Furthermore, no one has threatened
or forced me, or to my knowledge any person authorizing this
Agreement on behalf of Schnitzer Steel, in any way to enter into
this Agreement. I am also satisfied with the attorney's
representation in this matter. I certify that I am an officer of
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Schnitzer Steel and that I have been duly authorized by Schnitzer
Steel to execute this Agreement on behalf of Schnitzer Steel.
Date Sc hni t z Inc.
By:
Case 3:06-cr-00398-KI Document 11 Filed 10/16/06 Page 64 of 65 Page ID#: 101
CERTIFICATE OF COUNSEL
I am counsel for Schnitzer Steel Industries, Inc., ("Schnitzer
Steel") in the matter covered by this Agreement. In connection
with such representation, I have examined relevant Schnitzer Steel
documents and have discussed this Agreement with the authorized
representative of Schnitzer Steel. Based on my review of the
foregoing materials and discussions, I am of the opinion that:
Schnitzer Steel's representative has been duly authorized to enter
into this Agreement on behalf of Schnitzer Steel. This Agreement
has been duly and validly authorized, executed, and delivered on
behalf of Schnitzer Steel and is a valid and binding obligation of
Schnitzer. Further, I have carefully reviewed every part of this
Agreement with the General Counsel of Schnitzer Steel. I have
fully advised him of Schnitzer Steel's rights, of possible
defenses, of the Sentencing Guidelines' provisions, and of the
consequences of entering into this Agreement. To my knowledge,
Schnitzer Steel's decision to enter into this Agreement is an
informed and voluntary one.
-
Date
Counsel fo SHNIR'STEEL INDUSTRIES, INC.
i4C€, LLP
29