Des Plaines company to pay $30 million for bribery charge

They say money can't buy you love.

Maybe not. But it can get you out of a criminal charge, at least if you're a large, publicly traded corporation.

Des Plaines-based Lawson Products Monday agreed to pony up $30 million in restitution and penalties in order to have, in three years, a criminal charge of mail fraud against the company dropped.

"This charge will be outstanding for three years," explained assistant U.S. attorney Brandon Fox, a prosecutors who worked on the case in Chicago with colleagues Nancy Miller and Kruti Trivedi.

Essentially, the U.S. attorney's office alleges the company ran a thinly veiled bribery scheme with its "Winners Choice" program, where it "rewarded" the purchasing agents of governments and businesses for purchasing its products. The rewards ranged from $10 to $50 in gift certificates, which were then returned for checks in that amount.

While those small amounts aren't reportable as taxable income, amounts over $600 are, and the government alleged many purchasing agents reaped multiple checks totaling well over $600 in any given year.

Sales people were instructed to give higher "rewards" for products that they sold at higher than normal prices, the government contends. Additionally, the government contends sales agents were even instructed to sometimes calculate the amount of the rewards given as a percentage of the products purchased -- the hallmark of a kickback scheme.

Lawson, an international company specializing in supplying products and services to the repair and maintenance sector, enjoyed net sales of $125 million in the first quarter of 2008, according to its Web site.

The company was offered the deal in part because of its near-immediate cooperation with investigators after the company was raided by federal agents, said Fox.

"We are pleased to have reached this agreement with the U.S. attorney's office, which enables us all to move forward with our business plan," said Neil E. Jenkins, executive vice president and general counsel in a prepared statement. "Throughout this process, we have been committed to working with the government to uncover the truth, and we have promised our continued cooperation. We are confident we have taken the necessary actions and implemented the proper processes, oversight and programs so that such events are not repeated and we can continue to run our business with integrity."

A deferred prosecution agreement potentially spares innocent shareholders and company employees the no-win result of a company's bankruptcy and insolvency, a la Enron and Arthur Anderson.

In addition to announcing the deal with Lawson Monday, the government also charged the owner of Keogh Inc., Lawrence Keogh, 79, of Lake Forest. Keogh, Inc. administered the rewards program for Lawson and was located in Woodstock before moving to Lake Bluff.

"He's been cooperating with the government extensively," said attorney Tom Scorza, who noted Keogh has already testified at the trial of other suspects in the case.

"He's a longtime businessman with no prior (criminal) record - and he made one mistake and he's owned up to it," said Scorza.

Keogh, the government said, mailed out $9.7 million to those purchasing Lawson products without reporting such payments as income in IRS 1099 forms as required, costing the government more than $1 million in lost taxes.

Leroy Whittle, 65, of Alexandria, Va., was also charged with violating the law prohibiting giving gratuities to government officials. Prosecutors said Whittle gave a $300 gift card to an employee of the executive branch of government in Washington, D.C.

That's significant, said his attorney John Kern, because the gratuities charge is far less serious than a charge of bribery. Kern said the card was a gesture of business goodwill, albeit an illegal one.

Roger Cannon Jr., 38, of Palatine, a sales agent at Lawson subsidiary Drummond American Crop. in Vernon Hills, was charged with mail fraud. Prosecutors allege he gave rewards totaling thousands of dollars to employees of the City of Elgin, Elgin School District U-46, and the Village of Rosemont.

"His (Cannon's) offenses are entirely related to his former employment and he has long since left that position and looks forward to resolving this matter in a satisfactory manner," said attorney Mike Monico.

Under the agreement with the government, Lawson will reimburse victims of the scam. The government has defined victims as companies or governments that lost $10,000 or more under the rewards programs, or entities that either employed convicted employees or were targeted by convicted sales agents. The rest of the $30 million will go to the U.S. government. Lawson will deposit the $30 million in three, $10 million increments over the next two years. It will also continue new ethics policies and procedures put in place after it was raided.