Lawson Products Agrees to Settlement in Kickback Scheme

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August 11, 2008

Lawson Products Agrees to Settlement in Kickback Scheme

Lawson Products, Inc., Des Plaines, IL, has agreed to pay $30 million in forfeiture and restitution in the case of sales agents who according to the government systematically provided nearly $10 million in illegal incentives to government employees to buy more products at higher prices for their employers.

The agreement brings to a close the government's investigation of Lawson's former customer loyalty programs. The agreement stipulates that a criminal case of mail fraud against the company will be dismissed in three years as long as Lawson "abides by all terms and conditions," according to the U.S. Attorney's Office for the Northern District of Illinois.

"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, Lawson's general counsel. "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."

Also on Monday, separate criminal charges were filed against two former sales managers for Lawson and a third man who allegedly aided and abetted the incentive scheme, bringing to 19 the number of defendants who have been charged in the matter since early 2007.

All but one of the cases involved the recipients of bribes or kickbacks or commissioned sales agents for Lawson or its subsidiary, Drummond American Corp.

Twelve of the original 13 charged in April 2007 have been convicted.

According to court documents, between 1992 and December 2005, Lawson maintained programs through which its sales agents could offer rewards to customers. The programs had names like "Winners Choice," "Cavalcade of Awards," "LPI" and "Spike Special." According to court documents, Lawson sales agents often provided more incentives through the programs if the purchasers ordered more merchandise. Some Lawson agents received training "suggesting that they provide customers' employees with rewards totaling approximately four to five percent of the amount of the sale."

"Today's settlement marks a new beginning for Lawson," said Thomas J. Neri, president and CEO.

Lawson Products is a distributor of services, systems, and products to the industrial, commercial, and institutional maintenance, repair and operations (MRO) market. The company also manufactures, sells, and distributes production and specialized component parts, and provides services and systems to original equipment manufacturers (OEMs). Together, Lawson and its subsidiary Drummond have $400 million in annual sales.

Here's the full release from the U.S. Attorney's office.

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