A Dutch pharmaceutical company has agreed to pay more than $2.5 million to settle Securities and Exchange Commission charges stemming from improper payments to Iraq under the United Nations’s Oil for Food Program. The regulator charged that Akzo Nobel NV knew, or was reckless in not knowing, that illicit payments were either offered or paid in connection with a number of transactions involving subsidiary companies.

The SEC also asserted that Akzo failed to maintain an adequate system of internal controls to detect and prevent the payments. “Akzo Nobel’s accounting for these transactions failed to properly record the nature of the company’s payments,” it added.

Under the settlement, without admitting or denying the allegations in the commission’s complaint, the company agreed to disgorge about $1.65 million in profits, plus $584,150 in prejudgment interest, and to pay a civil penalty of $750,000. Akzo will also enter into a nonprosecution agreement with the Department of Justice. One of the company’s former subsidiaries will enter into a criminal disposition with the Dutch Public Prosecutor, pursuant to which it will pay a fine.

The SEC had filed books and records and internal-control charges against the company under the Foreign Corrupt Practices Act. The commission’s complaint alleged that from 2000 to 2003, two of Akzo Nobel’s subsidiaries made $279,491 in kickback payments in connection with their sale of humanitarian goods to Iraq under the Oil for Food Program. The kickbacks were characterized as “after-sales service fees,” but no bona fide services were performed, according to the SEC.

Under the program, the Iraqi government under Saddam Hussein was able to purchase humanitarian goods through a U.N. escrow account. The kickbacks paid in connection with Akzo Nobel’s subsidiaries’ sales to Iraq bypassed the escrow account and were paid by third parties to Iraqi-controlled accounts in Lebanon and Jordan, according to the SEC.