Document:

WWW.EXFILE.COM, INC. -- 14656 -- SCHNITZER STEEL INDUSTRIES, INC. -- EXHIBIT 10.1 TO FORM 8-K

    EXHIBIT
      10.1

    

    DEFERRED
      PROSECUTION AGREEMENT

    

    Defendant
      SCHNITZER STEEL INDUSTRIES, INC. (“Schnitzer Steel” or “the Company”), an Oregon
      corporation, by its undersigned attorneys, pursuant to authority granted by
      its
      Board of Directors, and the United States Department of Justice, Criminal
      Division, Fraud Section (“Department of Justice” or the “Department”), enter
      into this Deferred Prosecution Agreement (“Agreement”).

    

    
      	1.	
              SchnitzerSteel
                accepts and acknowledges that the Department of Justice will file
                a
                criminal Information in the United States District Court for the
                District
                of Oregon charging SSI International Far East, Ltd. (“SSI Korea”), a
                wholly-owned subsidiary of Schnitzer Steel, with Conspiracy to violate,
                and with substantive violations of, the anti-bribery provisions of
                the
                Foreign Corrupt Practices Act of 1977 (“FCPA”) and the Wire Fraud statute,
                and with aiding and abetting the making of false entries in the books
                and
                records of Schnitzer Steel, a publicly-held corporation, in violation
                of
                the books and records and internal controls provisions of the FCPA.
                Schnitzer Steel accepts and acknowledges that SSI Korea will enter
                a plea
                of guilty to all charges in the Information. Schnitzer Steel does
                not
                endorse, ratify or condone criminal conduct and, as set forth below,
                has
                taken steps to prevent such conduct from

            

    

     

    
      
        

      

    

    
    

    
    

    
      	 	
              occurring
                in the future.

            

    

     

    
      	2.	
              Schnitzer
                Steel accepts and acknowledges that it is responsible for the acts
                of its
                officers and employees, and those of its wholly owned subsidiary,
                SSI
                Korea, as set forth in the Statement of Facts annexed hereto as
                “Attachment A.” Should the Department, pursuant to Paragraphs 21 and 22 of
                this Agreement, initiate the prosecution that is deferred by this
                Agreement, Schnitzer Steel agrees that it will neither contest the
                admissibility of, nor contradict, in any such proceeding, the facts
                contained in the Statement of
                Facts.

            

    

     

    
      	3.	
              Schnitzer
                Steel expressly agrees that it shall not, through its present or
                future
                attorneys, Board of Directors, officers, or any other person authorized
                to
                speak for the Company, make any public statement, in litigation or
                otherwise, contradicting Schnitzer Steel’s acceptance of responsibility
                set forth above or the factual statements set forth in the Statement
                of
                Facts. Any such contradictory statement shall, subject to Schnitzer
                Steel’s cure rights below, constitute a breach of this Agreement as
                governed by Paragraph 21 of this Agreement, and Schnitzer Steel thereafter
                shall be subject to prosecution as set forth in Paragraphs 21 and
                22 of
                this Agreement. The decision whether any public statement by any
                such
                person 

            

    

     

    
      
        
        

      

      
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              contradicting
                a fact contained in the Statement of Facts will be imputed to Schnitzer
                Steel for the purpose of determining whether Schnitzer Steel has
                breached
                this Agreement shall be at the sole discretion of the Department.
                Should
                the Department determine that a public statement by any such person
                contradicts in whole or in part a statement contained in the Statement
                of
                Facts, the Department shall so notify Schnitzer Steel as provided
                in
                Paragraph 27, and the Company may avoid a breach of this Agreement
                by
                publicly repudiating such statement within two (2) business days
                after
                notification. Consistent with Schnitzer Steel’s obligations as set forth
                above, Schnitzer Steel shall be permitted to raise defenses and to
                assert
                affirmative claims in civil and regulatory proceedings relating to
                the
                matters set forth in the Statement of Facts. This Paragraph is not
                intended to apply to any statement made by any Schnitzer Steel employee
                in
                the course of any criminal, regulatory, or civil case initiated against
                such individual, unless such individual is speaking on behalf of
                Schnitzer
                Steel.

            

    

     

    
      	4.	
              In
                connection with this Agreement, Schnitzer Steel agrees to issue a
                press
                release, the text of which shall be acceptable to the
                Department.

            

    

     

    
      	5.	
              During
                the three-year (3) term of this Agreement, Schnitzer Steel agrees
                to
                cooperate fully with the Department, the

            

    

     

    
      
        
        

      

      
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              U.S.
                Securities and Exchange Commission (the “SEC”), and any other authority or
                agency designated by the Department investigating Schnitzer Steel
                and any
                of its present and former officers, employees, agents, consultants,
                contractors and subcontractors, in any and all matters relating to
                corrupt
                payments in connection with its operations. Schnitzer Steel agrees
                that
                its cooperation shall include, but is not limited to, the
                following:

            

    

     

    
      	a)  	
              Schnitzer
                Steel shall continue to cooperate fully with the Department, the
                SEC, and
                any other authority or agency designated by the Department, and shall
                truthfully disclose all information with respect to the activities
                of
                Schnitzer Steel, its officers, employees, agents, consultants, contractors
                and sub-contractors concerning all matters relating to corrupt payments
                in
                connection with its operations, related false books and records,
                and
                inadequate internal controls about which Schnitzer Steel has any
                knowledge
                or about which the Department shall inquire. This obligation of truthful
                disclosure includes an obligation upon Schnitzer Steel to provide
                to the
                Department and to the SEC, upon request, any document, record, or
                other
                tangible evidence relating to such corrupt payments, books and records,
                and internal controls about which the

            

    

     

    
      
        
        

      

      
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              Department
                shall inquire of Schnitzer Steel. This obligation of truthful disclosure
                includes an obligation to provide the Department with access to Schnitzer
                Steel’s facilities, documents, and employees. This obligation does not
                apply to any communications that are protected by the attorney-client
                privilege or work product doctrine. The parties agree, however, that
                the
                disclosure of information to Schnitzer Steel’s counsel concerning corrupt
                payments and related books and records shall not relieve Schnitzer
                Steel
                of its obligation to truthfully disclose such matters to the Department
                and the SEC.

            

    

     

    
      	b)  	
              Upon
                request of the Department, with respect to any issue relevant to
                its
                investigation of corrupt payments in connection with Schnitzer Steel’s
                operations, related books and records, and inadequate internal controls,
                Schnitzer Steel shall designate knowledgeable employees, agents,
                or
                attorneys to provide to the Department the information and materials
                described in Paragraph 5(a) above, on Schnitzer Steel’s behalf. It is
                further understood that Schnitzer Steel must at all times provide
                complete, truthful, and accurate
                information.

            

    

     

    
      	c)  	
              With
                respect to any issue relevant to the Department’s
                

            

    

     

    
      
        
        

      

      
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              investigation
                of corrupt payments in connection with Schnitzer Steel’s operations, the
                Company shall use its best efforts to make its employees available
                to
                provide information and testimony as requested by the Department,
                including sworn testimony before a federal grand jury or in federal
                trials, as well as interviews with federal law enforcement authorities.
                Cooperation under this Paragraph will include identification of witnesses
                who, to Schnitzer Steel’s knowledge, may have material information
                regarding the matters under
                investigation.

            

    

     

    
      	d)  	
              With
                respect to any issue relevant to the Department’s investigation of corrupt
                payments in connection with Schnitzer Steel’s operations, the Company
                shall use its best efforts to make available, for interviews or for
                testimony, such present or former Schnitzer Steel officers, directors,
                agents, consultants, and employees, and the officers, directors,
                employees, agents and consultants of contractors and sub-contractors,
                as
                may be requested by Department of Justice.

            

    

     

    
      	e)  	
              With
                respect to any information, testimony, document, record, or other
                tangible
                evidence provided to the Department pursuant to this Agreement, Schnitzer
                Steel 

            

    

     

    
      
        
        

      

      
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              consents
                to any and all disclosures to other Government agencies of such materials
                as the Department, in its sole discretion, shall deem
                appropriate.

            

    

     

    
      	6.	
              In
                return for
                Schnitzer Steel’s full and truthful cooperation, the Department agrees not
                to use any information provided by Schnitzer Steel pursuant to this
                Agreement against the Company or its subsidiaries in any criminal
                or civil
                case relating to the conduct described in the Statement of Facts,
                at
                Attachment A, except in a prosecution for perjury or obstruction
                of
                justice; in a prosecution for making a false statement after the
                date of
                this Agreement; in a prosecution or other proceeding relating to
                any crime
                of violence; or in a prosecution or other proceeding relating to
                a
                violation of any provision of Title 26 of the U.S. Code. In addition,
                the
                Department agrees, except as provided herein, that it will not bring
                any
                criminal or civil case against Schnitzer Steel relating to the conduct
                of
                Schnitzer Steel employees as described in the attached Statement
                of Facts.
                This Paragraph does not provide any protection against prosecution
                for
                corrupt payments, if any, made in the future by Schnitzer Steel,
                its
                subsidiaries, affiliates, officers, directors, employees, agents
                or
                consultants, whether or not disclosed by Schnitzer Steel pursuant
                to the
                terms of this Agreement, nor does it

            

    

     

    
      
        
        

      

      
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              apply
                to any such payments, made in the past, which are not described in
                the
                attached Statement of Facts. In addition, this Paragraph does not
                provide
                any protection against criminal prosecution for any violations committed
                by any present or former officer, employee, director, agent or consultant
                of Schnitzer Steel or any of its subsidiaries or affiliates.
                

            

    

     

    
      	
              7.

            	
              Schnitzer
                Steel represents that it has implemented a compliance and ethics
                program
                designed to detect and prevent violations of the FCPA, U.S. commercial
                bribery laws and all applicable foreign bribery laws throughout its
                operations, including those of its subsidiaries, affiliates, and
                joint
                ventures, and those of its contractors and subcontractors, with
                responsibilities that include interactions with foreign officials.
                Implementation of these policies and procedures shall not be construed
                in
                any future enforcement proceeding as providing immunity or amnesty
                for any
                crimes not disclosed to the Department as of the date of the execution
                of
                this Agreement for which Schnitzer Steel would otherwise be
                responsible.

            

    

    
      	
              8.

            	
              Schnitzer
                Steel agrees to the appointment of an independent compliance consultant
                (“Compliance Consultant”), within sixty (60) calendar days of the signing
                of this Agreement, to monitor the Company’s compliance program with
                respect to 

            

    

     

    
      
        
        

      

      
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              the
                FCPA, U.S. commercial bribery laws, and applicable foreign bribery
                laws
                for a period of three (3) years from the execution of this Agreement,
                subject to the provisions of Paragraph 11. The Compliance Consultant
                shall
                be the same person as appointed pursuant to any agreement between
                Schnitzer Steel and the SEC concerning the acts described in the
                Statement
                of Facts at Attachment A. The Compliance Consultant will review and
                evaluate the effectiveness of Schnitzer Steel’s internal controls,
                record-keeping, and financial reporting policies and procedures as
                they
                relate to Schnitzer Steel’s compliance with the books and records,
                internal accounting controls, and anti-bribery provisions of the
                FCPA,
                U.S. commercial bribery laws, and all applicable foreign bribery
                laws. This
                review and evaluation shall include an assessment of those policies
                and
                procedures as actually implemented.

            

    

     

    
      	
              9.

            	
              The
                Department shall provide to Schnitzer Steel, within thirty (30) days
                of
                the signing of this Agreement, the names of two (2) recommended Compliance
                Consultants. Thereafter, Schnitzer Steel shall select one person
                as its
                Compliance Consultant or, in the event the Company does not select
                a
                person within thirty (30) days, the Department shall have the sole
                right
                to select the Compliance Consultant. The compensation and expenses
                of the
                Compliance Consultant, and 

            

    

     

    
      
        
        

      

      
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              of
                any persons hired under his or her authority, shall be paid by Schnitzer
                Steel.

            

    

     

    
      	
              10.

            	
              Schnitzer
                Steel shall cooperate fully with the Compliance Consultant. The Compliance
                Consultant shall have the authority to take such reasonable steps,
                in the
                Compliance Consultant’s view, as may be necessary to be fully informed
                about the operations of Schnitzer Steel within the scope of his or
                her
                responsibilities under this Agreement. To that end, Schnitzer Steel
                shall
                provide the Compliance Consultant with access to all files, books,
                records, and personnel that fall within the scope of his or her
                responsibilities under this Agreement. It shall be a condition of
                the
                Compliance Consultant’s retention that the Compliance Consultant is
                independent of Schnitzer Steel and that no attorney-client relationship
                shall be formed between them. Except insofar as Schnitzer Steel retains
                the attorney-client privilege or work product doctrine described
                in
                Paragraph 5(a) of this Agreement, Schnitzer Steel shall not withhold
                from
                the Department, and shall require the Compliance Consultant to agree
                not
                to withhold from the Department, any documents or information on
                the basis
                of any privilege or work product
                claims.

            

    

    
      	
              11.

            	
              Schnitzer
                Steel agrees that the Compliance Consultant shall assess whether
                Schnitzer
                Steel’s policies and procedures are

            

    

     

    
      
        
        

      

      
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              reasonably
                designed to detect and prevent violations of the FCPA, all applicable
                U.S.
                commercial bribery laws, and all applicable foreign bribery laws,
                and,
                during the three-year consultancy, shall conduct an initial review
                and
                prepare an initial report, followed by two (2) follow-up reviews
                and
                follow-up reports as described below. With respect to each of the
                three
                (3) reviews, after initial consultations with Schnitzer Steel, the
                Department, and the SEC, the Compliance Consultant shall prepare
                a written
                work plan for each of the reviews, which shall be submitted in advance
                to
                Schnitzer Steel, the Department and the SEC for comment. In order
                to
                conduct an effective initial review and to fully understand any existing
                deficiencies in controls, policies and procedures related to the
                FCPA,
                U.S. commercial bribery laws, and all applicable foreign bribery
                laws, the
                Compliance Consultant’s initial work plan shall include such steps as are
                necessary to develop an understanding of the facts and circumstances
                surrounding the violations described in the attached Statement of
                Facts.
                Any disputes between Schnitzer Steel and the Compliance Consultant
                with
                respect to the work plan shall be decided by the Department in its
                sole
                discretion. 

            

    

     

    
      	
              12.

            	
              In
                connection with the initial review, the Compliance Consultant shall
                issue
                a written report within one hundred

            

    

     

    
      
        
        

      

      
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              twenty
                (120) calendar days after being retained, setting forth the Compliance
                Consultant’s assessment and making recommendations reasonably designed to
                improve Schnitzer Steel’s policies and procedures for ensuring compliance
                with the FCPA, U.S. commercial bribery laws, and all applicable foreign
                bribery laws. The Compliance Consultant shall provide the report
                to
                Schnitzer Steel’s Board of Directors and its Audit Committee and
                contemporaneously transmit copies to the following individuals, or
                their
                successors: 1) Mark F. Mendelsohn, Deputy Chief, Fraud Section, Criminal
                Division, U.S. Department of Justice, 10th
                and Constitution Ave., N.W. (Bond), Washington, D.C. 20530; and 2)
                Helane
                L. Morrison, District Administrator, U.S. Securities and Exchange
                Commission, 44 Montgomery Street, 26th
                Floor, San Francisco, CA 94127. The Compliance Consultant may extend
                the
                time period for issuance of the report with prior written approval
                of the
                Department and the SEC.

            

    

     

    
      	
              13.

            	
              Within
                one hundred twenty (120) calendar days after receiving the report,
                Schnitzer Steel shall adopt all recommendations in the report of
                the
                Compliance Consultant; provided, however, that within one hundred
                twenty
                (120) calendar days after receiving the report, Schnitzer Steel shall
                advise the Compliance Consultant, the Department and the SEC in writing
                of
                any recommendations that it considers

            

    

     

    
      
        
        

      

      
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              .

            	
              to
                be unduly burdensome, impractical, or costly. With respect to any
                recommendation that Schnitzer Steel considers unduly burdensome,
                impractical, or costly, Schnitzer Steel need not adopt that recommendation
                within that time but shall propose in writing an alternative policy,
                procedure or system designed to achieve the same objective or purpose.
                As
                to any recommendation on which Schnitzer Steel and the Compliance
                Consultant do not agree, such parties shall attempt in good faith
                to reach
                an agreement within sixty (60) calendar days after Schnitzer Steel
                serves
                the written advice. In the event Schnitzer Steel and the Compliance
                Consultant are unable to agree on an alternative proposal, Schnitzer
                Steel
                shall abide by the determinations of the Compliance Consultant. With
                respect to any recommendation that the Compliance Consultant determines
                cannot reasonably be implemented within one hundred twenty (120)
                calendar
                days after receiving the report, the Compliance Consultant may extend
                the
                time period for implementation with prior written approval of the
                Department.

            

    

     

    
      	
              14.

            	
              The
                Compliance Consultant shall undertake two follow-up reviews to further
                monitor and assess whether Schnitzer Steel’s policies and procedures are
                reasonably designed to detect and prevent violations of the FCPA,
                U.S.
                commercial bribery laws, and all applicable foreign bribery laws.
                

            

    

     

    
      
        
        

      

      
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              Within
                one hundred twenty (120) calendar days of initiating each follow-up
                review, the Compliance Consultant (i) shall complete the review,
                (ii)
                certify whether Schnitzer Steel’s anti-bribery compliance program,
                including its policies and procedures, is appropriately designed
                and
                implemented to ensure compliance with the FCPA, U.S. commercial bribery
                laws, and all applicable foreign bribery laws, and (iii) report on
                the
                Compliance Consultant’s findings in the same fashion as set forth in
                Paragraph 12 with respect to the initial review. The first follow-up
                review shall commence one year after appointment of the Compliance
                Consultant, and the second follow-up review shall commence at least
                one
                year after completion of the first review. The Compliance Consultant
                may
                extend the time period for these follow-up reviews with prior written
                approval of the Department and the SEC.

            

    

     

    
      	
              15.

            	
              In
                undertaking the assessment and reviews described in Paragraphs 8
                through
                14 of this Agreement, the Compliance Consultant shall formulate
                conclusions based on, among other things, (i) inspection of documents,
                including all the policies and procedures relating to Schnitzer Steel’s
                anti-bribery compliance program; (ii) onsite observation of Schnitzer
                Steel’s systems and procedures, including Schnitzer Steel’s internal
                controls, recordkeeping and 

            

    

     

    
      
        
        

      

      
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              internal
                audit procedures; (iii) meetings with and interviews of Schnitzer
                Steel’s
                employees, officers, directors and any other relevant persons; and
                (iv)
                analyses, studies and testing of Schnitzer Steel’s anti-bribery compliance
                program. In undertaking such assessment and reviews, the Compliance
                Consultant, at his or her own discretion, may rely, to a reasonable
                extent
                and after reasonable inquiry, on reports, studies, and analyses issued
                or
                undertaken by other consultants hired by Schnitzer Steel prior to
                the date
                of this Agreement.

            

    

     

    
      	
              16.

            	
              The
                Compliance Consultant’s charge, as further described in Paragraphs 8
                through 15 above, is to review Schnitzer Steel’s controls, policies and
                procedures related to the compliance with the FCPA, U.S. commercial
                bribery laws and all other applicable foreign bribery laws. Should
                the
                Compliance Consultant, during the course of his or her engagement,
                discover that corrupt payments or corrupt transfers of property or
                interests may have been offered, promised, paid, or authorized by
                any
                Schnitzer Steel entity or person, or any entity or person working
                directly
                or indirectly for Schnitzer Steel, the Compliance Consultant shall
                promptly report such payments to Schnitzer Steel’s Corporate Compliance
                Officer and its Audit Committee for further investigation, unless
                the
                Compliance Consultant 

            

    

     

    
      
        
        

      

      
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              believes,
                in the exercise of his or her discretion, that such disclosure should
                be
                delayed. In such circumstances, the Compliance Consultant may refer
                the
                matter directly to the Department and the SEC. If the Compliance
                Consultant refers the matter only to Schnitzer Steel’s Corporate
                Compliance Officer or its Audit Committee, Schnitzer Steel shall
                promptly
                report the same to the Department and the SEC. If Schnitzer Steel
                fails to
                make such disclosure within ten (10) calendar days of the report
                of such
                payments to Schnitzer Steel’s Corporate Compliance Officer or its Audit
                Committee, the Compliance Consultant shall independently disclose
                his or
                her findings to the Department and the SEC, at the addresses listed
                above
                in Paragraph 12. If the Compliance Consultant reasonably concludes
                that
                disclosure to Schnitzer Steel’s Corporate Compliance Officer or its Audit
                Committee would be inappropriate, the Compliance Consultant may limit
                such
                disclosure to any one of the foregoing parties. If the Compliance
                Consultant reasonably concludes that disclosure to even one of the
                foregoing parties would be inappropriate, the Compliance Consultant
                may
                refer the matter directly to the Department or the SEC. In the event
                of
                such a direct referral, the Compliance Consultant shall make a similar
                disclosure to Schnitzer Steel’s Corporate Compliance Officer or its Audit
                

            

    

     

    
      
        
        

      

      
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              Committee
                as soon as the reason for the nondisclosure has abated, unless directed
                not to do so by the relevant authorities. Further, in the event that
                any
                Schnitzer Steel entity or person, or any entity or person working
                directly
                or indirectly for Schnitzer Steel, refuses to provide information
                necessary for the performance of the Compliance Consultant’s
                responsibilities, the Compliance Consultant shall disclose that fact
                to
                the Department and the SEC. Schnitzer Steel shall not take any action
                to
                retaliate against the Compliance Consultant for such disclosures.
                The
                Compliance Consultant is not precluded from reporting other criminal
                or
                regulatory violations discovered in the course of performing his
                or her
                duties, in the same manner as described
                above.

            

    

    
       

    

    
      	
              17.

            	
              The
                Agreement between Schnitzer Steel and the Compliance Consultant shall
                provide that for the three-year period of engagement and for a period
                of
                two (2) years from completion of the engagement, the Compliance Consultant
                shall not enter into any additional employment, consultant,
                attorney-client, auditing or other professional relationship with
                Schnitzer Steel, or any of its present or former affiliates, directors,
                officers, employees, or agents acting in their capacity as such.
                The
                agreement will also provide that the Compliance Consultant will require
                that any firm with which 

            

    

     

    
      
        
        

      

      
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              he
                or she is affiliated or of which he or she is a member, and any person
                engaged to assist the Compliance Consultant in performance of his
                or her
                duties under this Agreement shall not, without prior written consent
                of
                the Department and the SEC’s Division of Enforcement, enter into any
                employment, consultant, agency, attorney-client, auditing or other
                professional relationship with Schnitzer Steel, or any of its present
                or
                former affiliates, directors, officers, employees, or agents acting
                in
                their capacity as such for the period of the engagement and for a
                period
                of two (2) years after the engagement. To ensure the independence
                of the
                Compliance Consultant, Schnitzer Steel shall not have the authority
                to
                terminate the Compliance Consultant without the prior written approval
                of
                the Department and the SEC. 

            

    

     

    
      	
              18.

            	
              Schnitzer
                Steel further agrees that its subsidiary, SSI Korea, shall pay a
                monetary
                penalty of $7,500,000 to the U.S. Treasury within ten (10) days of
                the
                imposition of any fine upon SSI Korea by the District Court for the
                District of Oregon. Schnitzer Steel will offset against the $7,500,000
                monetary penalty required under this Agreement any fine imposed upon
                SSI
                Korea by the District Court for the District of Oregon. This amount
                is a
                final payment and shall not be refunded (a) if the Department does
                not
                institute a criminal prosecution against Schnitzer Steel
                

            

    

     

    
      
        
        

      

      
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              pursuant
                to Paragraph 21 below, or (b) should the Department later determine
                that
                Schnitzer Steel has breached this Agreement and brings a prosecution
                against it pursuant to Paragraph 22 below. Further, nothing in this
                Agreement shall be deemed an agreement by the Department that this
                amount
                is the maximum criminal fine that may be imposed in such prosecution,
                and
                the Department shall not be precluded from arguing that the Court
                should
                impose a higher fine. The Department agrees, however, to recommend
                to the
                Court that any amounts paid pursuant to this Agreement and in the
                criminal
                proceeding against SSI Korea should be offset against whatever fine
                the
                Court shall impose as part of its judgment in the event of a subsequent
                breach and prosecution. Schnitzer Steel agrees, on behalf of itself
                and
                its subsidiaries, including SSI Korea, that no tax deduction will
                be
                sought in connection with the $7,500,000 million monetary penalty
                required
                under this Agreement or any criminal fine imposed by a Court in connection
                with any criminal proceeding arising from the facts contained in
                the
                Statement of Facts.

            

    

     

    
      	
              19.

            	
              In
                consideration of the action of the Audit Committee of the Board of
                Directors of Schnitzer Steel in initiating an investigation conducted
                by
                outside legal counsel and the voluntary disclosure to the Department
                and
                the SEC; the cooperation of the Audit Committee and the Company with
                the
                investigations conducted by the Department and the SEC; the
                

            

    

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    
      	
               

            	
              willingness
                of the Board of Directors to replace senior officers of the Company,
                to
                increase the number of independent directors, and to adopt and implement
                effective compliance procedures; and the willingness of Schnitzer
                Steel to
                (a) acknowledge responsibility for its behavior, (b) cause its subsidiary,
                SSI Korea, to enter a plea of guilty to criminal charges, (c) continue
                its
                cooperation with the Department, the SEC, and other investigative
                and
                regulatory authorities and agencies, (d) adopt and maintain remedial
                measures and its commitment to independently review and audit such
                measures, and (e) consent to pay the criminal fine in connection
                with the
                plea of guilty of its subsidiary SSI Korea, the Department agrees
                that any
                prosecution of Schnitzer Steel be and hereby is deferred for a period
                of
                three (3) years from the date of this
                Agreement.

            

       

    

    
      	
              20.

            	
              The
                Department further agrees that if Schnitzer Steel is in full compliance
                with all of its obligations under this Agreement, including its obligation
                to adopt the recommendations of the Compliance Consultant in accordance
                with the terms of Paragraph 13, the Department will not institute
                a
                criminal prosecution against Schnitzer Steel pursuant to Paragraph
                1, and
                this Agreement shall expire 

            

    

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    
      	
               

            	
              except
                that the Department shall remain bound to its obligation in paragraph
                6
                not to bring any criminal or civil case against Schnitzer Steel relating
                to the conduct described in the Statement of
                Facts.

            

    

     

    
      	21.	
              If
                the Department determines, in its sole discretion, that Schnitzer
                Steel,
                at any time between the execution of this Agreement and completion
                of
                Schnitzer Steel’s cooperation as set forth in Paragraph 5, provided
                deliberately false, incomplete, or misleading information under this
                Agreement or has committed any federal crimes subsequent to the date
                of
                this Agreement or has otherwise violated any provision of this Agreement,
                Schnitzer Steel shall, in the Department’s sole discretion, thereafter be
                subject to prosecution for any federal criminal violation of which
                the
                Department has knowledge. Any such prosecutions may be premised on
                information provided by Schnitzer Steel. Moreover, Schnitzer Steel
                agrees
                that any such prosecutions that are not time-barred by the applicable
                statute of limitations on the date of this Agreement may be commenced
                against Schnitzer Steel in accordance with this Agreement, notwithstanding
                the expiration of the statute of limitations between the signing
                of this
                Agreement and the termination of this Agreement. By this Agreement,
                Schnitzer Steel expressly intends to and does waive any rights in
                this
                respect.  

            

    

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    
      	
              22.

            	
              It
                is further agreed that in the event that the Department, in its sole
                discretion, determines that Schnitzer Steel has violated any provision
                of
                this Agreement: (a) all statements made by or on behalf of Schnitzer
                Steel
                to the Department, and any testimony given by Schnitzer Steel before
                a
                grand jury or any tribunal, at any legislative hearings, or to the
                SEC,
                whether prior or subsequent to this Agreement, or any leads derived
                from
                such statements or testimony, shall be admissible in evidence in
                any and
                all criminal proceedings brought by the Department against Schnitzer
                Steel
                and (b) Schnitzer Steel shall not assert any claim under the United
                States
                Constitution, Rule 11(f) of the Federal Rules of Criminal Procedure,
                Rule
                410 of the Federal Rules of Evidence, or any other federal rule,
                that
                statements made by or on behalf of Schnitzer Steel prior to or subsequent
                to this Agreement, or any leads therefrom, should be suppressed.
                The
                decision whether conduct or statements of any individual will be
                imputed
                to Schnitzer Steel for the purpose of determining whether Schnitzer
                Steel
                has violated any provision of this Agreement shall be in the sole
                discretion of the Department.

            

    

     

    
      	
              23.

            	
              Schnitzer
                Steel acknowledges that the Department has made no representations,
                assurances, or promises concerning
                what

            

    

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

      

        
          	
                	
                  sentence
                    may be imposed by the Court should Schnitzer Steel breach this
                    Agreement
                    and this matter proceed to judgment. Schnitzer Steel further
                    acknowledges
                    that any such sentence is solely within the discretion of the
                    Court and
                    that nothing in this Agreement binds or restricts the Court in
                    the
                    exercise of such discretion.

                

        

      

       

    

    
      	
              24.

            	
              Schnitzer
                Steel agrees that in the event it sells or merges all or substantially
                all
                of its business operations as they exist as of the date of this Agreement,
                whether such sale is structured as a stock or asset sale, it shall
                include
                in any contract for sale or merger a provision binding the purchaser
                or
                any successor to the obligations described in this
                Agreement.

            

    

     

    
      	
              25.

            	
              It
                is understood that this Agreement is binding on Schnitzer Steel and
                the
                Department but specifically does not bind any other federal agencies,
                or
                any state or local law enforcement or regulatory agencies, although
                the
                Department will bring the cooperation of Schnitzer Steel and its
                compliance with its other obligations under this Agreement to the
                attention of such agencies and authorities if requested to do so
                by
                Schnitzer Steel and its attorneys. 

            

    

     

    
      	
              26.

            	
              This
                Agreement sets forth all the terms of the Deferred Prosecution Agreement
                between Schnitzer Steel and the Department. No modifications or additions
                to this Agreement 

            

    

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    
      	
               

            	
              shall
                be valid unless they are in writing and signed by the Department,
                Schnitzer Steel’s attorneys, and a duly authorized representative of
                Schnitzer Steel.

            

    

     

    
      	
              27.

            	
              Any
                notice to Schnitzer Steel under this Agreement shall be given by
                personal
                delivery, overnight delivery by a recognized delivery service or
                registered or certified mail, in each case addressed to Schnitzer
                Steel
                Industries, Inc., Attn: President and Chief Executive Officer, 3200
                NW
                Yeon Avenue, Portland OR 97210, with a copy by the same means to
                Schnitzer
                Steel Industries, Inc., Attn: General Counsel, 3200 NW Yeon Avenue,
                Portland OR 97210. Notice shall be effective upon actual receipt
                by
                Schnitzer Steel.

            

    

    

    

    FOR
      THE
      DEPARTMENT OF JUSTICE:

    

    

    /S/
      STEVEN
      A.
      TYRRELL

    Steven
      A.
      Tyrrell

    Acting
      Chief, Fraud Section

    

    

    By:
      /s/ Kathleen McGovern

    MARK
      F.
      MENDELSOHN

    Deputy
      Chief, Fraud Section

    

    DEBORAH
      L. GRAMICCIONI

    Assistant
      Chief, Fraud Section

    

    KATHLEEN
      MCGOVERN

    Trial
      Attorney, Fraud Section

    

    

    Fraud
      Section, Criminal Division

     

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    United
      States Department of Justice

    10th&
      Constitution Avenue, NW 
Washington, D.C. 20530 

    (202)
      514-7023

    

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    FOR
      SCHNITZER:

    /s/
      KENNETH M. NOVACK

    Kenneth
      M. Novack 

    Chairman

    Schnitzer
      Steel Industries, Inc.

    
      3200NW
        Yeon
        Avenue

    

    Portland,
      Oregon 97210

    

    

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    

    OFFICER’S
      CERTIFICATE

    

    I
      have
      read this Agreement and carefully reviewed every part of it with counsel for
      Schnitzer Steel Industries, Inc., (“Schnitzer Steel”). I understand the terms of
      this Agreement and voluntarily agree, on behalf of Schnitzer Steel, to each
      of
      its terms. Before signing this Agreement, I consulted with the attorney for
      Schnitzer Steel. The attorney fully advised me of Schnitzer Steel’s rights, of
      possible defenses, of the Sentencing Guidelines’ provisions, and of the
      consequences of entering into this Agreement.

     

    I
      have
      carefully reviewed every part of this Agreement with the Audit Committee of the
      Board of Directors of Schnitzer Steel, to which the Board has delegated the
      authority to approve and enter into this Agreement on behalf of Schnitzer Steel.
      I have fully advised the Audit Committee of Schnitzer Steel’s rights, of
      possible defenses, of the Sentencing Guidelines’ provisions, and of the
      consequences of entering into the Agreement.

     

    No
      promises or inducements have been made other than those contained in this
      Agreement. Furthermore, no one has threatened or forced me, or to my knowledge
      any person authorizing this Agreement on behalf of Schnitzer Steel, in any
      way
      to enter into this Agreement. I am also satisfied with the attorney’s
      representation in this matter. I certify that I am an officer of 

     

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    Schnitzer
      Steel and that I have been duly authorized by Schnitzer Steel to execute this
      Agreement on behalf of Schnitzer Steel.

    

    
      
         

      

    

    
      
        10/16/06

        Date                   Schnitzer
          Steel Industries, Inc. 

      

    

    

    By:
      /s/ Kenneth M. Novack

     

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    

     

    CERTIFICATE
      OF COUNSEL

    

    

    I
      am
      counsel for Schnitzer Steel Industries, Inc., (“Schnitzer Steel”) in the matter
      covered by this Agreement. In connection with such representation, I have
      examined relevant Schnitzer Steel documents and have discussed this Agreement
      with the authorized representative of Schnitzer Steel. Based on my review of
      the
      foregoing materials and discussions, I am of the opinion that: Schnitzer Steel’s
      representative has been duly authorized to enter into this Agreement on behalf
      of Schnitzer Steel. This Agreement has been duly and validly authorized,
      executed, and delivered on behalf of Schnitzer Steel and is a valid and binding
      obligation of Schnitzer. Further, I have carefully reviewed every part of this
      Agreement with the General Counsel of Schnitzer Steel. I have fully advised
      him
      of Schnitzer Steel’s rights, of possible defenses, of the Sentencing Guidelines’
provisions, and of the consequences of entering into this Agreement. To my
      knowledge, Schnitzer Steel’s decision to enter into this Agreement is an
      informed and voluntary one.

    

    10/16/06

    Date   

     

      
      /s/
      George
      Terwilliger                                             

    Counsel
      for SCHNITZER STEEL INDUSTRIES, INC.

    

    

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    

    CERTIFICATE
      OF CORPORATE RESOLUTIONS

    

    A
      copy of
      the executed Certificate of Corporate Resolutions is annexed hereto as
“Attachment B.” 

    

    

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

    
      Attachment
        B

      

      SCHNITZER
        STEEL INDUSTRIES, INC. LIMITED CERTIFICATE OF 

      CORPORATE
        RESOLUTIONS

      

      I,
        Richard C. Josephson, do hereby certify that I am the duly elected, qualified
        and acting Secretary of Schnitzer Steel Industries, Inc. (“Schnitzer”), an
        Oregon corporation, and that the following is a complete and accurate copy
        of
        the resolutions adopted by the Board of Directors of Schnitzer at a meeting
        held
        on July 26, 2006 at which a quorum was present and resolved as
        follows:

      

      WHEREAS,
        by resolutions adopted at its meeting on April 19, 2006, the Board approved
        in
        principle a settlement of the investigations by the U.S. Department of Justice
        (“DOJ”) and the United States Securities and Exchange Commission (“Commission”)
        into the Company’s past payment practices in the Far East and delegated to the
        Audit Committee of the Board authority to negotiate the definitive documentation
        of the settlement, subject to final approval of the Board; and

      

      WHEREAS,
        the Audit Committee, with the assistance of its counsel and input from
        management of the Company, has prepared and obtained DOJ approval of a revised
        code of conduct and compliance program document, which was a condition to
        approval by DOJ of the settlement; and 

      

      WHEREAS,
        the settlement contemplates (a) the Company executing a deferred prosecution
        agreement with the DOJ and an offer of settlement to the Commission pursuant
        to
        which the Commission would issue a cease and desist order directed to the
        Company (together, the “Settlement Documents”), (b) the Company paying fines and
        disgorgement to the DOJ and the Commission in the amount of approximately
        $15
        million (including prejudgment interest) and (c) SSI International Far East
        Ltd., a subsidiary of the Company, pleading guilty to certain crimes; now,
        therefore, be it 

      

      RESOLVED,
        that the Audit Committee, or a subcommittee thereof as designated by the
        Audit
        Committee, is authorized and empowered, with the assistance of its counsel
        and
        in consultation of management of the Company as it deems appropriate, to
        negotiate the final forms of the Settlement Documents; and it is
        further

      

      RESOLVED,
        that the Company is authorized to pay to the DOJ and the Commission penalties,
        disgorgement and prejudgment interest in the aggregate amount of $15,225,201;
        and it is further

      

      RESOLVED,
        that Kenneth M. Novack, Chairman of the Board, is authorized, for and on
        behalf
        of the Company, to execute and deliver the 

       

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      Settlement
        Documents and such other documents and to take such other and further actions
        as
        may be approved by the Audit Committee or subcommittee thereof, as applicable,
        to consummate the resolution of the investigation.

      

      I
        further
        certify that the aforesaid resolutions have not been amended or revoked in
        any
        respect and remains in full force and effect.

      

      IN
        WITNESS WHEREOF, I have executed this Certificate on September 25,
        2006.

      

      

      By:
        /s/
        Richard C. Josephson

      Richard
        C. Josephson, Secretary

      Schnitzer
        Steel Industries, Inc.

       

       

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

    

    
      STATEMENT
        OF FACTS

      

      
        	
                I.

              	
                Schnitzer
                  Steel’s Status as an “Issuer” Under the Foreign Corrupt Practices
                  Act

              

      

      

      1. Schnitzer
        Steel Industries, Inc. (“Schnitzer Steel”) is a publicly traded corporation
        organized under the laws of Oregon with its headquarters in Portland, Oregon,
        and offices in Oregon, California and Washington. Schnitzer Steel operates
        in
        three vertically integrated business segments: a metals recycling business;
        an
        auto parts business; and a steel manufacturing business. Schnitzer Steel
        maintains a class of securities registered pursuant to Section 12(b) of the
        Securities Exchange Act of 1934 (15 U.S.C. § 78l) and was required to file
        reports with the United States Securities and Exchange Commission (“SEC”) under
        Section 13 of the Securities Exchange Act (15 U.S.C. § 78m). Accordingly,
        Schnitzer Steel is an “issuer” within the meaning of the Foreign Corrupt
        Practices Act, 15 U.S.C. § 78dd-1.

      2. From
        1995
        to the present, Schnitzer Steel has maintained a wholly-owned subsidiary
        in
        Seoul, Republic of Korea (“South Korea”). The subsidiary, SSI International Far
        East, Ltd. (“SSI Korea”), facilitates the sale of ferrous recycled (“scrap”)
        metal by Schnitzer Steel from the United States and also acts as a broker
        for
        the sale of scrap metal by Japanese suppliers to steel producers in the People’s
        Republic of China (“China”) and South Korea. SSI Korea maintains its principal
        office in Seoul. It is managed by SSI International, Inc., a wholly-owned
        subsidiary of Schnitzer Steel in Tacoma, Washington. SSI Korea acts as Schnitzer
        Steel’s agent in South Korea and China, maintaining the business relationships
        with Schnitzer Steel’s customers in those countries. SSI Korea also
        transmits

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      requests
        to the United States for approval and wire transfer of funds in connection
        with
        sales of scrap metal to Schnitzer Steel’s customers in South Korea and China,
        which payments subsequently are processed and approved by employees and officers
        of Schnitzer Steel in Portland, Oregon. Accordingly, SSI Korea operates within
        the territorial jurisdiction of the United States, within the meaning of
        the
        Foreign Corrupt Practices Act, 15 U.S.C. § 78dd-3. 

       

      3. Schnitzer
        Steel has developed longstanding relationships with steel producers in South
        Korea and China that have purchased Schnitzer Steel’s scrap metal. Some of those
        steel producers in China, such as Baosteel, are wholly or partially owned
        by the
        government of China. Those government-owned customers are foreign government
        “instrumentalities,” and their officers and employees are “foreign officials,”
within the meaning of the Foreign Corrupt Practices Act, 15 U.S.C. §
78dd-1(f)(1)(A). 

       

      
        	II.	
                Overview
                  of Violations

              

      

       

      4. From
        at
        least 1995, continuing to in or about at least August 2004, Schnitzer Steel
        through its officers and employees authorized and made corrupt payments,
        principally in cash, to officers and employees (“managers”) of private customers
        in South Korea and private and government-owned customers in China to induce
        them to purchase, and to secure an improper advantage with respect to the
        purchase of, scrap metal from Schnitzer Steel. In total, corrupt payments
        of
        approximately $204,537 were paid to managers of government-owned customers
        in
        China, and corrupt payments of approximately $1,683,672 were paid to managers
        of
        private customers in China and South Korea. These 

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      corrupt
        payments took three basic forms: (1) commissions, (2) refunds, and (3)
        gratuities. 

      

      
        	III.	
                Details
                  of the Violations

              

      

      A.           
        Commissions

      

      5. From
        at
        least 1999 to in or about August 2004, Schnitzer Steel made corrupt payments
        in
        connection with nearly every sale of scrap metal to customers in South Korea
        and
        China, which payments were falsely reflected on Schnitzer Steel’s books and
        records as “commissions” (hereafter “commissions”). The “commissions” were
        included in the purchase price of the scrap metal. For scrap metal sold to
        customers in South Korea, the “commission” was a standard $0.25 per ton. For
        scrap metal sold to customers in China, the “commission” was a standard $0.15
        per ton. Schnitzer Steel wired the “commissions” at the request of the head of
        its Asian scrap metal sales (“Officer A”) to off-books bank accounts in South
        Korea opened and maintained by the manager of SSI Korea (“Employee A”),
        specifically for receiving these payments. Officer A was a resident of Tacoma,
        Washington, and was an employee of SSI International, Inc. from in or about
        1995
        through 2005. From in or about March 2000 to in or about May 2004, Officer
        A was
        a senior officer of SSI International, Inc. and was responsible for Schnitzer
        Steel’s Asian scrap metal sales. Officer A’s duties included, among other
        things, negotiating sales of scrap metal with steel production companies
        in Asia
        on behalf of Schnitzer Steel; handling invoices from SSI Korea for payment
        in
        connection with sales to Schnitzer Steel’s customers in Asia; and forwarding to
        Schnitzer Steel’s offices in Portland, Oregon, for processing and authorization
        wire transfer requests for payment to managers of Schnitzer Steel’s scrap metal

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      customers
        in China and South Korea. Employee A was a resident of Seoul, South Korea,
        and
        was an employee of SSI Korea from in or about 1995 through 2005. From in
        or
        about 1998 through 2005, Employee A was the manager of SSI Korea and was
        responsible for managing the business relationships locally with Schnitzer
        Steel’s scrap metal customers in Asia, managing SSI Korea’s Japanese brokered
        scrap metal sales, coordinating the delivery of scrap metal to steel mills
        in
        South Korea and China and forwarding to Officer A in Tacoma, Washington,
        invoices for payment in connection with sales to Schnitzer Steel’s customers in
        South Korea and China and wire transfer requests for payment to managers
        of
        Schnitzer Steel’s scrap metal customers in those countries. 

       

      6. Officer
        A
        and Employee A would use funds from the secret accounts to make cash
“commission” payments to the managers of the customers, the funding of which is
        described below. “Commissions” typically were paid directly to a customer’s
        manager in cash, either at a restaurant or at the customer’s office. Between
        September 1999 and August 2004, at least 131 “commission” payments were made in
        South Korea and China. Of those, at least 72 “commission” payments were made to
        managers of their scrap metal customers in China. Those payments totaled
        approximately $299,558.10, of which at least approximately $104,297.03 was
        paid
        to managers of foreign government “instrumentalities” within the meaning of the
        Foreign Corrupt Practices Act, 15 U.S.C. § 78dd-1(f)(1)(A) (hereafter
“government instrumentalities”). At least 59 payments totaling approximately
        $475,021.15 were made to managers of non-government owned or controlled
        (“private”) customers in South Korea. 

       

      7. SSI
        Korea
        also acted as a broker for Japanese scrap metal companies that sold scrap
        metal
        in South Korea and

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      China,
        receiving brokerage commissions for finding buyers for scrap metal in South
        Korea and China. From at least September 1999 until at least September 2001,
        Japanese companies provided SSI Korea with funds to make corrupt payments
        to
        managers of the South Korean and Chinese steel mills similar to the corrupt
        payments made by Schnitzer Steel for the scrap metal it sold. Employee A
        generally delivered these corrupt payments to the managers of the South Korean
        and Chinese steel mills. Employee A and others delivered at least 135 cash
        “commission” payments by Japanese scrap metal suppliers to managers of their
        customers in South Korea and China. These payments totaled approximately
        $156,059.50, of which at least $3,823.35 was paid to managers of steel mills
        which were government instrumentalities. Records of these “commission” payments
        were maintained by Schnitzer Steel in the United States until September 2001.
        All records of “commissions” related to the Japanese brokered sales paid after
        September 2001 were maintained in South Korea by SSI Korea. In or around
        August
        2004, the records maintained by SSI Korea were intentionally destroyed by
        an SSI
        Korea employee, as described below.

      

      B.           
        Refunds

       

      8. Schnitzer
        Steel made a second type of corrupt payment in connection with sales of scrap
        metal to South Korean and Chinese customers. Those payments typically were
        reflected on Schnitzer Steel’s books and records as a “refund to customer” or
“rebate to customer,” although some were characterized variously as “quality
        claims,” “discounts,” “credits,” and “freight savings” (hereafter “refunds”). In
        order to pay the refunds, Schnitzer Steel participated in a scheme whereby
        the
        customer’s manager would cause the customer to overpay Schnitzer

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      Steel
        for
        the scrap metal purchase, and would then personally recover the overpayment
        from
        Schnitzer Steel. For sales in which “refunds” were paid, “commissions” typically
        also were paid, resulting in two or more corrupt payments to the customer’s
        manager. 

       

      9. The
        practice of paying “refunds” appears to have started in mid-2001, due to the
        volatility in the price of scrap metals, which sometimes resulted in a
        substantial difference in the price of metal between the time of signing
        the
        contract and shipment 60 to 90 days later. When the price in the market at
        the
        time of shipment was substantially lower than the contract price, a customer’s
        manager often demanded to be paid a “refund.” The “refund” was negotiated at the
        time the customer entered into a subsequent contract with Schnitzer Steel.
        The
        amount of the “refund” was based on the tonnage of the next shipment to the
        customer. 

       

      10. Unlike
        “commissions,” which were a fixed per-ton amount, “refunds” varied from $0.25
        per ton up to $1.00 per ton. The so-called “refund” was then incorporated in the
        price of the subsequent scrap metal contract so that the customer, not Schnitzer
        Steel, bore the cost of the “refund” which was thereafter paid to the customer’s
        manager. “Refunds” were paid in the same way as “commission payments.” Schnitzer
        Steel wired the money for the “refunds” to secret bank accounts in South Korea
        opened and maintained by Employee A specifically for the purpose of receiving
        these payments. Officer A and Employee A then used funds from the secret
        accounts to pay “refunds” to the managers of the customers, the funding of which
        is described below. “Refunds” typically were paid directly to the customer’s
        manager in cash, either at a restaurant or at the customer’s office.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      11. At
        least
        80 “refund” payments were made between May 2001 and August 2004, totaling
        approximately $889,372.68. Of those, at least 38 “refund” payments were made to
        customers’ managers in China, totaling approximately $280,046.47, of which
        approximately $57,218.18 was paid to managers of customers which were government
        instrumentalities. At least 42 “refund” payments totaling approximately
        $609,326.21 were made to managers of private customers in South
        Korea.

       

      12. Three
        “refund” payments were made or facilitated by Schnitzer Steel in regard to its
        brokerage of Japanese scrap metal between May and September 2002. The total
        amount of those payments was approximately $12,399.00, all of which were
        paid to
        managers of private customers. Records related to those three “refunds” were
        maintained by Schnitzer Steel in the United States; all other records of
        “refund” payments related to the Japanese brokered sales after September 2001
        were maintained by SSI Korea in South Korea. In or around August 2004, the
        records maintained by SSI Korea related to “refund” payments were destroyed by
        an SSI Korea employee, as described below. 

      

      
        	 	
                C.

              	
                Funding
                  of “Commission” and “Refund” Payments Through Off-Book Bank Accounts in
                  South Korea

              

      

       

      13. In
        1995,
        Schnitzer Steel acquired Manufacturing Management Inc. (“MMI”) and its South
        Korean subsidiary, MMI International Far East, Ltd. (“MMI Korea”), which became
        SSI Korea. Thereafter, Schnitzer Steel adopted MMI’s practice of making illegal
“commission” payments to managers of customers in cash or bank check from funds
        held in a series of bank accounts

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      in
        South
        Korea that were not reflected on the books and records of Schnitzer Steel
        or SSI
        Korea (the “off-book” bank accounts). Starting around 2001, funds from those
        bank accounts were also used to pay illegal “refunds.”

       

      14. Between
        1995 and 1998, the off-book bank accounts were opened and maintained in the
        names of relatives of “Employee B,” a former MMI Korea employee who in 1995
        became the manager of SSI Korea. Employee B was a resident of Seoul, South
        Korea. Between 1995 and 1998, Employee B was responsible for managing the
        business relationships locally with Schnitzer Steel’s scrap metal customers in
        Asia, managing SSI Korea’s Japanese brokered scrap metal sales, coordinating the
        delivery of scrap metal to the customers of Schnitzer Steel and the Japanese
        scrap metal suppliers, and forwarding to Tacoma, Washington, invoices for
        payment in connection with sales to Schnitzer Steel’s customers in South Korea
        and China and wire transfer requests for payment to managers of Schnitzer
        Steel’s scrap metal customers in those countries. 

       

      15. Employee
        B resigned from SSI Korea in 1998. Following his resignation, his former
        deputy,
        Employee A, became the manager of SSI Korea. Around that time, Employee C,
        a
        former employee of MMI based in Tacoma, Washington, who was Officer A’s
        supervisor and the manager of Schnitzer Steel’s Asian scrap metal sales until he
        retired in or around February 2000, traveled to South Korea and instructed
        Employee A that he was to continue making “commission” payments on behalf of
        Schnitzer Steel to managers of its South Korean and Chinese customers. Employee
        C further instructed Employee A that he should establish bank accounts to
        be
        used to facilitate the “commission” payments. Thereafter, Employee A opened bank
        accounts in South Korea in the

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      names
        of
        his mother and wife. On August 21, 2001, Employee A opened a bank account
        in the
        name of a fictitious corporate entity, similar to that of SSI Korea, “SSI
        International Co., Ltd.” Employee A maintained these off-book bank accounts on
        behalf of SSI Korea from 1998 through sometime in 2004.

       

      16. After
        a
        shipment of scrap metal was delivered from Schnitzer Steel to the South Korean
        or Chinese customer, Employee A sent to Officer A in Tacoma, Washington,
        an
        invoice for the “commission” associated with that shipment. 

       

      17. After
        receiving an invoice from Employee A for a “commission,” Officer A authorized it
        and requested a wire transfer be made to one of SSI Korea’s off-book bank
        accounts. The wire transfer request was forwarded from Officer A in Tacoma,
        Washington, to Schnitzer Steel employees in Portland, who approved and processed
        it. The request typically identified a bank account number, but not the
        individual or entity in whose name that bank account was maintained. The
        request
        typically identified the payment as a “commission.” Each “commission” payment
        was authorized by one or more Schnitzer Steel executives. Similarly, Officer
        A
        made a wire request for each “refund,” which was sent from Tacoma, Washington,
        to Portland, Oregon, for approval and processing. “Officer B,” who supervised
        Officer A, authorized at least 40 “commissions” or “refunds” between
        September 1999 and October 2003. Officer B was a resident of Portland, Oregon,
        who was employed as a senior executive officer of Schnitzer Steel, based
        in
        Portland, Oregon, from at least 1990 to 2005. Officer B’s responsibilities
        included, among other things, setting policy for the sale of scrap metal
        to
        Asian customers, approving all such sales, authorizing wire
        transfer

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      requests
        for payment to managers of customers of Schnitzer Steel, and directly
        supervising the work of and approving the expenses of Officer A.

       

      18. The
        funds
        for the “commissions” and “refunds” were transmitted by Schnitzer Steel in
        Portland to the off-book bank accounts in South Korea by wire transfers that
        were reflected in Schnitzer Steel’s books and records as “commissions” and
“refunds.” Between September 1999 and August 2004, at least 121 such wire
        transfers were made.1 

       

      19. Prior
        to
        August 21, 2001, the off-book bank accounts in South Korea were maintained
        in
        the names of individuals. The Japanese suppliers for which SSI Korea brokered
        scrap metal sales refused to transfer funds to those accounts, because the
        suppliers did not want to send funds to bank accounts in the names of
        individuals. Instead, the Japanese suppliers transferred funds for both SSI
        Korea’s brokerage commission and the corrupt payments to the managers of the
        customers to the bank account of SSI Korea. Employee A, however, did not
        want to
        make the payments from the SSI Korea bank account, because he did not want
        to
        risk disclosure of the payments. Accordingly, Employee A in South Korea and
        Officer A in Tacoma, Washington, agreed that Schnitzer Steel in Portland
        would
        wire transfer funds to the off-book bank accounts in South Korea. These wire
        transfers were authorized by one or more Schnitzer Steel executives or officers.
        

       

      20. Between
        September 1999 and September 2001, there 

       

      ____________________

      1  
        7 of the 121 wire transfers to off-book bank accounts paying “commissions” and
“refunds” also included payments associated with the Japanese brokered scrap
        metal sales. See footnote 2 below.

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      were
        25
        wire transfers from Schnitzer Steel to off-book bank accounts in South Korea
        in
        connection with “commissions” related to Japanese brokered scrap metal
        sales.2 
        Officer
        B authorized 4 of those wire transfers. In addition, in 2002, there were
        3 wire
        transfers from Schnitzer Steel to the off-book bank account in the name of
        the
        fictitious entity SSI International Co., Ltd. in connection with “refunds”
related to Japanese brokered scrap metal sales.  

       

      21. After
        Employee A opened an off-book bank account on August 21, 2001 in the fictitious
        name SSI International Co., Ltd., the Japanese scrap metal suppliers transferred
        funds to cover their corrupt payments to managers of their customers directly
        to
        that account. The records of all funds received from the Japanese scrap metal
        suppliers after August 21, 2001, with the exception of the 3 “refund” payments
        noted above, were maintained solely by SSI Korea. Those records were destroyed
        in or about August 2004 by an SSI Korea employee, as described
        below.

      

      D.           
        Gratuities

       

      22. In
        addition to the “commission” and “refund” payments, Schnitzer Steel, from at
        least October 1999 to in or about May 2003, made a third type of corrupt
        payment
        in connection with certain sales of scrap metal to customers in South Korea
        and
        China. The third type of payment was made through checks written to Schnitzer
        Steel employees or to “cash,” which were reflected on Schnitzer Steel’s books
        and records as 

      ____________

      
        2  
          7 of the 25 wire transfers made in connection with the Japanese brokered
          scrap
          metal sales also included payments for “commissions” and “refunds.”

      

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      “gratuities,’”
        “other marine expenses,” “commissions,” “customer relations,” and “bonuses”
(hereafter “gratuities”).

       

      23. Checks
        to
        fund the “gratuities” were written and cashed by Schnitzer Steel employees in
        the United States at the direction of Schnitzer Steel Officer A in Tacoma,
        Washington. Some of these checks were written and cashed with the authorization
        by one or more Schnitzer Steel executives or officers. The cash was delivered
        in
        the United States to the manager of the South Korean or Chinese customer
        at or
        about the time that a cargo of scrap metal was loaded for shipment.

       

      24. Between
        October 1999 and April 2003, at least 26 payments of “gratuities” were made in
        the United States to managers of South Korean and Chinese customers. Of those,
        at least 18 of the “gratuity” payments were made to managers of Chinese
        customers. Those payments totaled $45,198.60, of which at least $39,198.60
        was
        paid to managers of customers which were government instrumentalities. At
        least
        6 payments totaling $6,600 were made to managers of private South Korean
        customers. Two additional payments of “gratuities” totaling $4,000 were made to
        managers of customers, the identities of which cannot be determined from
        Schnitzer Steel’s books and records. 

      

      
        	 	
                E.

              	
                Other
                  Cash Payments to Officers or Employees of
                  Customers

              

      

      

      25. In
        addition to the payments of “commissions,” “refunds,” and “gratuities,” other
        cash payments were made by Officer A and Employee A to managers of Schnitzer
        Steel’s customers. Some of the other cash payments ranged in amount from $2,000
        to over $6,000. Others, characterized in Schnitzer Steel’s books and records as
“condolence money” and 

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      “congratulations
        money,” typically ranged in amount from $45 to $500. The other cash payments
        made by Officer A were authorized by Officer B. 

       

      26. Approximately
        25 other cash payments to managers of Schnitzer Steel’s customers were made
        between September 1999 and December 2004, the total amount of which was
        $17,243.46, of which $4,500 was paid to managers of customers which were
        government instrumentalities.

       

      
        	
              	F.	
                Gifts
                  and Entertainment

              

      

       

      27. Both
        Officer A and Employee A gave gifts to managers of customers. Some of the
        gifts
        were given in conjunction with the payments of “commissions” and “refunds,”
which Officer A and Employee A typically presented privately to the manager
        in
        cash or “bank check” wrapped with a gift (e.g., pens, jewelry, perfume). The
        value of those gifts was generally less than $350. However, more substantial
        gifts, ranging in value from $400 to $8,000, were also given. The value of
        the
        gifts increased substantially in the fall of 2004 after the practice of making
        corrupt payments to managers of Schnitzer Steel’s customers was uncovered and
        Officer B instructed that no further “commissions” or “refunds” be paid to
        managers of Schnitzer Steel’s customers. For example, Officer A gave a manager
        of a private customer a $2,400 Cartier watch in or about September 2004,
        and
        Employee A gave a manager of a different 

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

        private customer two gift certificates worth approximately
          $10,000 in or about November 2004. 

         

      

      28. Between
        September 1999 and December 2004, gifts with a total value of $50,392.12
        were
        given to managers of customers by Officer A and Employee A. At least $3,564.65
        of those gifts were given to managers of customers which were government
        instrumentalities.

       

      29. Officer
        A
        and Employee A also entertained managers of customers extensively. This
        entertainment was provided in South Korea, China and the United States. The
        entertainment in South Korea included free use of SSI Korea’s golf club
        membership and a condominium time-share which gave SSI Korea the right to
        accommodations at five resort locations. The expenses attributed to the
        entertainment of managers of customers between September 1999 and December
        31,
        2004 totaled $87,636.75.

       

      30. Officer
        B
        authorized the expenses for gifts and entertainment incurred by Officer
        A.

      

      
        	 	
                G.

              	
                Books
                  and Records Violations

              

      

      

      31. Schnitzer
        Steel failed to properly account for the various types of corrupt payments
        made
        and failed to accurately describe the same in its books and records. Instead,
        Schnitzer Steel improperly characterized the payments it made as legitimate
        payments for “commissions,” “sales commissions,” “commissions to the customer,”
“refunds,” “rebates,” “refunds to customer,” “rebates to customer,” “quality
        claims,” “discounts,” “credits,” “freight savings,” “cash,” “gratuities,” “other
        marine expenses,” 

      

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

        “customer relations,” “bonuses,” “condolence money,” and
“congratulations money,” in its books and records.

         

      

      
        	
                IV.

              	
                Knowledge
                  of the Payment Practices by Schnitzer Steel Senior
                  Management

              

      

       

      32. Certain
        members of the senior executive management of Schnitzer Steel, including
        Officer
        B, were aware of and either authorized or had knowledge of, within the meaning
        of the Foreign Corrupt Practices Act, § 78dd-1(f)(2), the giving of corrupt cash
        payments and gifts, and of providing entertainment to customers’ managers in
        South Korea and China, including managers of government
        instrumentalities.

      

      
        	V.	
                Revenue
                  Realized by Schnitzer Steel on Scrap Metal Sales for Which Corrupt
                  Payments Were Made to Managers of
                  Customers

              

      

       

      33. Schnitzer
        Steel realized gross revenue of approximately $602,139,470 and profits of
        approximately $54,927,319 on scrap metal sold by Schnitzer Steel to South
        Korean
        and Chinese customers between September 1999 and August 2004 with respect
        to
        which corrupt payments were paid. From those scrap metal sales to government
        instrumentalities, Schnitzer Steel realized gross revenue of approximately
        $96,396,740 and profits of approximately $6,259,104. 

       

      34. Schnitzer
        Steel realized gross revenue of approximately $1,513,097 and profits of
        approximately $420,512 on scrap metal sales by Japanese suppliers to South
        Korean and Chinese customers between September 1999 and August 2004 for which
        SSI Korea received a brokerage commission, and for which it may be inferred,
        based on the destruction of records by SSI

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

      Korea,
        that “commissions” or “refunds” were paid. From those sales, Schnitzer Steel
        realized gross revenue of approximately $58,610 and profits of approximately
        $19,991 on scrap metal sold to government instrumentalities.

      

      
        	
                VI.

              	
                Schnitzer
                  Steel’s Lack of Internal
                  Controls

              

      

       

      35. Prior
        to
        May 2004, and during the period of these transactions, Schnitzer Steel provided
        no training or education to any of its employees, agents or subsidiaries
        regarding the requirements of the Foreign Corrupt Practices Act, or the
        prohibitions on the payments of commercial bribes or “kickbacks.” Schnitzer
        Steel also failed to maintain any program or procedures to monitor its
        employees, agents and subsidiaries for compliance with the FCPA and commercial
        bribery laws.

      

      
        	VII.	
                Schnitzer
                  Steel’s Investigation and Initial
                  Response

              

      

       

      36. In
        May
        2004, when Schnitzer Steel introduced its new compliance and ethics program,
        Schnitzer Steel’s compliance department uncovered the corrupt payments and
        Schnitzer Steel began to investigate the potential violations of law. At
        that
        time, Officer B prohibited any further corrupt payments, but nonetheless
        authorized Officer A to make at least two additional corrupt payments that
        Schnitzer Steel previously had promised private customers. In late May or
        early
        June 2004, Officer B also authorized Officer A to increase entertainment
        expenses in lieu of cash payments to Schnitzer Steel’s private and
        government-owned scrap metal customers. In response, Officer A and Employee
        A
        gave managers of Schnitzer Steel’s scrap metal customers additional gifts,
        including gift certificates worth $10,000 and a Cartier watch worth $2,400,
        as
        described above. 

      

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

      
        	VIII.	
                Destruction
                  of Records by SSI Korea

              

      

       

      37. After
        Schnitzer Steel began its internal investigation in late May or early June
        2004
        but before it had issued a directive to its employees to preserve documents
        related to the scrap metal transactions, an SSI Korea employee destroyed
        documents concerning the corrupt payments and off-book bank accounts, at
        the
        direction of Employee A, as described below. 

       

      38. Around
        May 2004, the general practice of making corrupt payments to managers of
        South
        Korean steel producers that purchased scrap metal became a matter of public
        notice when South Korean law enforcement authorities conducted raids at the
        offices of a South Korean steel company and six suppliers of its imported
        raw
        materials.

       

      39. Although
        SSI Korea was not one of the companies whose offices were searched, Employee
        A
        was summoned twice for interviews by the South Korean public prosecutor
        investigating the matter and was questioned regarding any corrupt payments
        made
        to the South Korean steel company’s managers. In the initial interview, Employee
        A denied making any such payments. In his second interview, however, Employee
        A
        admitted making the corrupt payments, but claimed a much smaller amount than
        had
        actually been paid. 

       

      40. Shortly
        after each interview, Employee A and Officer A discussed the interview and
        its
        implications. Officer A shared the content of those discussions with Officer
        B.
        Employee A later suggested to Officer A that the records of corrupt payments
        to
        and from the off-book bank accounts be 

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

      destroyed,
        and Officer A did not disagree. In or about August 2004, Employee A directed
        a
        member of the SSI Korea staff to destroy all records pertaining to the off-book
        bank accounts, which the staff member did. Thereafter, Employee A informed
        Officer A that the documents had been destroyed. 

      

      
        	IX.	
                Schnitzer
                  Steel’s Cooperation and Remedial
                  Actions

              

      

      

      41. Schnitzer
        Steel has fully cooperated with the investigation, producing all documents
        and
        information requested, including voluntary production of documents protected
        by
        the attorney-client privilege and early production and identification to
        the
        Department of Justice (“DOJ”) of relevant documents. Schnitzer Steel also agreed
        to make employees available for interviews and encouraged employee cooperation
        by agreeing to pay travel expenses and attorneys’ fees.

       

      42. Schnitzer
        Steel’s Audit Committee and Board of Directors have taken additional remedial
        actions, including ordering an investigation, the results of which were provided
        to DOJ and the SEC. Schnitzer Steel has also designed and is implementing
        a
        remedial plan, which includes (i) the appointment of a corporate compliance
        officer who reports to Schnitzer Steel’s Audit Committee, (ii) expanded roles
        for Schnitzer Steel’s Audit Committee to oversee compliance with the Foreign
        Corrupt Practices Act and other applicable bribery laws, (iii) new reporting
        lines directly to the Audit Committee and Board of Directors, (iv) new ethics
        and due diligence policies, and (v) enhanced programs for educating and training
        executives and employees on ethical matters, including Foreign Corrupt Practices
        Act /anti-bribery compliance training. These and other remedial actions build
        on
        other corporate governance changes adopted by 

      
         

         

        
          
            
            

          

          
            18

            
              

            

          

          Schnitzer Steel pursuant to the Sarbanes-Oxley
            Act of
            2002. 

           

           

           

           

           

           

           

           

           

           

           

           

           

           

           

           

           

           

           

           

           

           

           

           

          
            
              
              

            

            
              19WWW.EXFILE.COM, INC. -- 14656 -- SCHNITZER STEEL INDUSTRIES, INC. -- EXHIBIT 10.2 TO FORM 8-K

    EXHIBIT
      10.2

    
      	 	 
		
              U.S.
                Department of Justice

              

              Criminal
                Division

            
	 	 
	 	
              Washington,
                D.C. 20530

            
	 	 
	 	 
	 	 
	 	 
	 	 
	 	 

    

    October
      10, 2006

    

    

    

    Raymond
      Banoun, Esq.       

    Cadwalader,
      Wickersham & Taft LLP

    1201
      F
      Street, N.W.

    Washington,
      D.C. 20004

     

    Re:
       United
      States v. SSI INTERNATIONAL FAR EAST. LTD. 

    Plea
      Agreement, CR 06-398 

    

    Dear
      Mr.
      Banoun:

    

    1. 
Parties/Scope:
      This
      plea agreement is between the United States Department of Justice, Criminal
      Division, Fraud Section (“the
      Department”)
      and
      defendant, SSI INTERNATIONAL FAR EAST, LTD. (“SSI
      KOREA”),
      a
      wholly owned subsidiary of Schnitzer Steel Industries, Inc. (“Schnitzer
      Steel”),
      and
      thus does not bind any other federal, state, or local prosecuting,
      administrative, or regulatory authority. This agreement does not apply to any
      other charges other than those specifically mentioned herein.

    

    2. 
Charges:
      Defendant SSI KOREA, an organization under 18 U.S.C. _
      18, by
      its authorized agent, Kenneth M. Novack, Chairman, SSI International Far East,
      Ltd., agrees to waive indictment and plead guilty to an information charging
      one
      count each of Conspiracy (18 U.S.C. _
      371),
      violating the Foreign Corrupt Practices Act (“FCPA”)
      (15
      U.S.C. § 78dd-3),
      Wire Fraud (18 U.S.C. _
      1343),
      and aiding and abetting the making of false entries in Schnitzer’s
      books
      and records (15 U.S.C. §
      78m(b)(2) & (5) and 18 U.S.C. _
      2).

     

    3.              
      Factual
      Basis:
      Defendant
      SSI KOREA is pleading guilty because it is guilty of the charges contained
      in
      Counts One through Four of 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    the
      Information. Defendant SSI KOREA agrees and stipulates that the factual
      allegations set forth in the Information are true and correct and accurately
      reflect its criminal conduct. The parties further stipulate and agree to the
      Statement of Facts attached hereto and incorporated herein as
      Exhibit 1.

     

    4. 
Penalties:

    a. 
      The statutory maximum sentence that the Court can impose for a violation of
      Title 18, United States Code, Section 371 is a fine of $500,000 or twice the
      gross gain or gross loss resulting from the offense, whichever is greatest,
      18
      U.S.C. §§ 3571(c)(3) and (d); five years’ probation, 18 U.S.C § 3561(c)(1); and
      a mandatory special assessment of $400, 18 U.S.C.
§ 3013(a)(2)(B).

    b. 
      The statutory maximum sentence that the Court can impose for a violation of
      Title 15, United States Code, Section 78dd-3 is a fine of $25,000,000 or twice
      the gross gain or gross loss resulting from the offense, whichever is greatest,
      15 U.S.C. §§ 78ff(a), 18 U.S.C. § 3571(d); five years’ probation, 18 U.S.C §
3561(c)(1); and a mandatory special assessment of $400, 18 U.S.C.
§ 3013(a)(2)(B).

    c. 
      The statutory maximum sentence that the Court can impose for a violation of
      Title 18, United States Code, Section 1343 is a fine of $500,000 or twice the
      gross gain or gross loss resulting from the offense, whichever is greatest,
      18
      U.S.C. §§ 3571(c)(3) and (d); five years’ probation, 18 U.S.C § 3561(c)(1); and
      a mandatory special assessment of $400, 18 U.S.C.
§ 3013(a)(2)(B).

    d.
      The
      statutory maximum sentence that the Court can impose for a violation of Title
      15, United States Code, Section 78m(b)(2)&(5) is a fine of $25,000,000 or
      twice the gross gain or gross loss resulting from the offense, whichever is
      greatest, 15 U.S.C. §§ 78ff(a), 18 U.S.C. § 3571(d); five years’ probation, 18
      U.S.C § 3561(c)(1); and a mandatory special assessment of $400, 18 U.S.C.
§ 3013(a)(2)(B).

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    5. 
No
      Prosecution:
      In
      exchange for SSI KOREA’s guilty plea and the complete fulfillment of all its
      obligations under this Agreement, the Department agrees not to file additional
      criminal charges against SSI KOREA for any corrupt payments or accounting
      thereof disclosed to the Department as of the date of this Agreement, but
      specifically excluding any such conduct not disclosed to the Department as
      of
      that date or any conduct occurring after that date. This Agreement will not
      close or preclude the investigation or prosecution of any natural persons,
      including any officers, directors, employees, stockholders, agents or
      consultants of SSI KOREA, its direct or indirect affiliates, subsidiaries,
      or
      parent corporations who may have been involved in any of the matters set forth
      in the Information or in any other matters.

     

    6. 
Sentencing
      Factors:
      The parties agree that pursuant to United
      States v. Booker,
      543
      U.S. 220 (2005), the Court must determine an advisory sentencing guideline
      range
      pursuant to the United States Sentencing Guidelines (“USSG”).
      The
      Court will then determine a reasonable sentence within the statutory range
      after
      considering the advisory sentencing guideline range and the factors listed
      in 18
      U.S.C. §
      3553(a).
      The parties’
      agreement herein to any guideline sentencing factors constitutes proof of those
      factors sufficient to satisfy the applicable burden of proof.

     

    7. 
Stipulated
      Fine and Sentence:
      Assuming SSI KOREA accepts responsibility as explained above, the parties will
      recommend the imposition of a fine in the amount of $7,500,000 payable to the
      Clerk of the Court for the United States District Court for the District of
      Oregon. The parties further agree that this amount

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    shall
      be
      paid as a lump sum within five (5) business days after the imposition of
      sentencing in this matter. Defendant SSI KOREA further agrees to pay the Clerk
      of the Court for the United States District Court for the District of Oregon
      within (5) business days of the time of sentencing the mandatory special
      assessment. 

    

    8.              
      Basis
      for Stipulated Fine:
      The parties agree that an appropriate disposition of the case is a fine of
      $7,500,000 for defendant SSI KOREA based upon the following
      factors:

      
      a. By entering and fulfilling the obligations under this Agreement, defendant
      SSI KOREA demonstrates recognition and affirmative acceptance of responsibility
      for its criminal conduct; 

      
      b. The
      plea
      underlying this Agreement is a result of the voluntary disclosure of the
      relevant conduct at the direction of the audit committee of Schnitzer Steel,
      the
      parent of SSI KOREA, to the Department beginning in November 2004 and the
      disclosure of the extensive investigation its attorneys subsequently conducted
      into the Asian operations of Schnitzer Steel and SSI KOREA;

       c.
      At the time of the initial disclosure, the conduct was unknown to the
      Department; and

      
      d. By entering into a deferred prosecution agreement with the Department,
      Schnitzer Steel has, among other things, agreed to implement a compliance and
      ethics program designed to detect and prevent violations of the FCPA, U.S.
      commercial bribery laws and all applicable foreign bribery laws throughout
      its
      operations, including those of SSI KOREA and all of Schnitzer Steel’s
      subsidiaries and affiliates, and to appoint an independent compliance consultant
      to monitor the company’s compliance program.  

     

    9.               
      Waiver
      of Presentence Report:
      The parties further agree, with the permission of the Court, to waive the
      requirement for a presentence report pursuant to Federal Rule of Criminal
      Procedure 

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    32(c)(1)(A),
      based on a finding by the Court that the record contains information sufficient
      to enable the Court to meaningfully exercise its sentencing power. However,
      the
      parties agree that in the event the Court orders the preparation of a
      presentence report prior to sentencing, such order will not affect the agreement
      set forth herein.

     

    10.             
      Entry
      of Guilty Plea and Sentencing:
      The parties further agree to ask the Court’s
      permission to combine the entry of the plea and sentencing into one hearing.
      However, the parties agree that in the event the Court orders that the entry
      of
      the guilty plea and sentencing hearing occur at separate hearings, such an
      order
      will not affect the agreement set forth herein.

    

    11.             
      Waiver
      of Appeal/Post-Conviction Relief: 
      SSI KOREA knowingly, intelligently, and voluntarily waives defendant’s
      right
      to appeal the conviction in this case. SSI KOREA similarly knowingly,
      intelligently, and voluntarily waives the right to appeal the sentence imposed
      by the court, provided the sentence does not exceed the sentence agreed by
      the
      parties herein. In addition, SSI KOREA knowingly, intelligently, and voluntarily
      waives the right to bring a collateral challenge pursuant to 28 U.S.C.
§
      2255,
      against either the conviction, or the sentence imposed in this case, except
      for
      a claim of ineffective assistance of counsel. SSI KOREA waives all defenses
      based on the statute of limitations and venue with respect to any prosecution
      that is not time-barred on the date that this agreement is signed in the event
      that (a) the conviction is later vacated for any reason, (b) SSI KOREA violates
      this agreement, or (c) the plea is later withdrawn. The government is free
      to
      take any position on appeal or any other post judgment matter.

    

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    12. 
Court
      Not Bound:
      The Court is not bound by the recommendations of the parties or of those made
      in
      any presentence report. Because this Agreement is made under Rule 11(c)(1)(B)
      of
      the Federal Rules of Criminal Procedure, SSI KOREA may not withdraw any guilty
      plea or rescind this plea agreement if the Court does not follow the agreements
      or recommendations herein.

    

    13. 
Full
      Disclosure/Reservation of Rights:
      In the event the Court directs the preparation of a presentence report, the
      Department will fully inform the preparer of the presentence report and the
      Court of the facts and law related to SSI KOREA’s
      case.
      Except as set forth in this Agreement, the parties reserve all other rights
      to
      make sentencing recommendations and to respond to motions and arguments by
      the
      opposition.

    

    14. 
Breach
      of Plea Agreement:
      If SSI KOREA breaches the terms of this Agreement, or commits any new criminal
      offenses between signing this Agreement and sentencing, the Department is
      relieved of its obligations under this Agreement, but SSI KOREA may not withdraw
      any guilty plea.

    

    13. 
Total
      Agreement:
      This letter states the full extent of the agreement between the parties. There
      are no other promises or agreements, express or implied. If SSI KOREA accepts
      this offer, please sign and attach the original of this letter to the Petition
      to Enter Plea.

    

    

    Very
      truly yours,

    

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    FOR
      THE
      DEPARTMENT OF JUSTICE:

    

    

    /s/
      Steven A.
      Tyrrell                   

    Steven
      A.
      Tyrrell

    Acting
      Chief, Fraud Section

    

    

    By:

     

    /s/
      Kathleen
      McGovern             

    MARK
      F.
      MENDELSOHN

    Deputy
      Chief, Fraud Section

    

    DEBORAH
      L. GRAMICCIONI

    Assistant
      Chief, Fraud Section

    

    KATHLEEN
      MCGOVERN

    Trial
      Attorney, Fraud Section

    

    

    Fraud
      Section, Criminal Division

    United
      States Department of Justice

    10th&
      Constitution Avenue, NW 

    Washington,
      D.C. 20530 

    (202)
      514-7023

     

    FOR
      SCHNITZER:

    /s/
      Kenneth M.
      Novack            

    Kenneth
      M. Novack 

    Chairman

    SSI
      International Far East, Ltd. 

    3200
      NW
      Yeon Avenue

    Portland,
      Oregon 97210

    

    

    

    
      
        
        

      

      
        7

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