Settlement and Allison Transmission and Lawsuits and Law and Manufacturing & Technology and International Business

Former Allison exec settles suit alleging bribery

January 21, 2011

A former China-based executive of Allison Transmission has agreed to settle a lawsuit that claimed the company won business by bribing foreign officials.

Stephen Lowe, a former managing director based in Shanghai, sued the Indianapolis company in November, saying he was fired in retaliation for raising concerns about executives’ interactions with Beijing City Bus officials. Allison is the world’s largest supplier of automatic transmissions for commercial vehicles, and its presence in China has grown since it won contracts to provide thousands of bus transmissions to Beijing leading up to the 2008 Olympics.

Lowe’s lawsuit, filed in Marion Superior Court, was dismissed on Jan. 12. An attorney at The Employment Law Group in Washington, D.C., which represented Lowe, could not be reached for comment. Allison spokeswoman Melissa Sauer said she couldn’t comment on the settlement agreement.

As IBJ reported last month, Lowe’s suit accused Allison of violating the U.S. Foreign Corrupt Practices Act, which prohibits employees of U.S. companies from bribing foreign government officials to win business. The company did not comment on the allegations then.

Even though Lowe dropped his case, Allison could be dealing with the legal exposure for years to come, said Mike Koehler, a Butler University business law professor and expert on Foreign Corrupt Practices Act cases.

“I’d be surprised if Allison or its private-equity owners have not been contacted by the Department of Justice,” Koehler said. Based on the Justice Department's handling of other cases, he said, the government probably will ask the company to conduct its own investigation and then hand over the results.

An internal review likely would encompass Allison's worldwide operations, Koehler added. “The DOJ will not agree to wrap this thing up until it is confident this was an isolated incident in China. These things take a while,” he said.

Sauer said she did not know whether the Justice Department had contacted Allison. She added that the company “continues to have a strong record of ethical business practices, and we always emphasize strong compliance with those practices to our employees across our global operations.”

Other Indiana companies are dealing with the Justice Department's aggressive pursuit of foreign corruption cases. The Securities and Exchange Commission and Justice Department started looking at Eli Lilly and Co. and other drugmakers' activities in Poland in 2003. Last February, Lilly reported that the government had expanded its inquiry to other countries, and that it was cooperating with requests for information.

Koehler said companies like Lilly and Warsaw-based Zimmer Holdings have been caught up in corrupt-practices investigations because the Justice Department views people who buy drugs or medical equipment for state-owned hospitals as "foreign officials." He noted that the 1977 law originated around military contractors' bribes to foreign heads of state. 

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