Legal Proceedings, Guarantees, and Commitments
The Company is routinely involved in a number of actual or threatened legal actions, including those involving alleged personal injuries, employment law, product liability, intellectual property, environmental issues, alleged tax liability, and class actions. The Company also routinely receives inquiries from regulators and other government authorities relating to various aspects of our business. The outcomes of these matters are not within our complete control and may not be known for prolonged periods of time. In some actions, claimants seek damages, as well as other relief, including injunctive relief, that could require significant expenditures or result in lost revenues. In accordance with applicable accounting standards, the Company records a liability in its consolidated financial statements for material loss contingencies when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a material loss contingency is reasonably possible but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed in the notes to the consolidated financial statements. When determining the estimated loss or range of loss, significant judgment is required to estimate the amount and timing of a loss to be recorded. Estimates of probable losses resulting from litigation and governmental proceedings involving the Company are inherently difficult to predict, particularly when the matters are in early procedural stages, with incomplete facts or legal discovery; involve unsubstantiated or indeterminate claims for damages; potentially involve penalties, fines, disgorgement, or punitive damages; or could result in a change in business practice.
Beginning in August 2008, the Company engaged outside counsel and other advisers to conduct a comprehensive review, under the U.S. Foreign Corrupt Practices Act ("FCPA") and other U.S. and foreign laws, of certain transactions conducted by the Company and its affiliates and joint ventures. The Company voluntarily disclosed this matter to the U.S. Department of Justice ("DOJ"), the U.S. Securities and Exchange Commission ("SEC"), and certain foreign regulators in March 2009, and since then the Company has provided periodic updates to these agencies. On December 20, 2013, the Company reached a comprehensive settlement with the DOJ and the SEC to resolve these matters. Under the settlement, the Company entered into a non-prosecution agreement with the DOJ and a consent decree with the SEC and agreed with these agencies to monetary relief totaling approximately $54 million, the amount for which the Company established a reserve and included in its selling, general, and administrative expenses for the year ended December 31, 2013. The $54 million in monetary relief includes $36 million in disgorgement and prejudgment interest paid by the Company to the SEC, and a $18 million fine paid by Alfred C. Toepfer International Ukraine Ltd. (“ACTI Ukraine”), a majority owned subsidiary of the Company, to the DOJ. As part of the comprehensive settlement, ACTI Ukraine also entered a guilty plea to one count of conspiracy to violate the anti-bribery provisions of the FCPA in the U.S. District Court for the Central District of Illinois. Alfred C. Toepfer International G.m.b.H. has also agreed to pay a fine of $1 million to German authorities in connection with this matter which is included in the Company's selling, general, and administrative expenses for the year ended December 31, 2013.
The Company has entered into agreements, primarily debt guarantee agreements related to equity-method investees, which could obligate the Company to make future payments if the primary entity fails to perform its contractual obligations. The Company has not recorded a liability for payment of these contingent obligations, as the Company believes the fair value of these contingent obligations is immaterial. The Company has collateral for a portion of these contingent obligations. These contingent obligations totaled $37 million at December 31, 2013.
