Oct. 17, 2006 — Schnitzer Steel Industries, Inc. has finalized settlements with the United States Department of Justice and the U. S. Securities and Exchange Commission. The settlements resolve an investigation that was initiated when the company self reported its past practice of improper payments to purchasing managers of nearly all of the company's customers in Asia for export sales of recycled ferrous metals.

Under the settlement, the company's Korean subsidiary will pay a $7.5 million fine for Foreign Corrupt Practices Act anti-bribery and books and records provisions, conspiracy and wire fraud charges — charges for which the subsidiary pled guilty. The company also agreed to an order, issued by the Securities and Exchange Commission, to cease and desist from the past practices that were the subject of the investigation and to disgorge $7.7 million of profits and prejudgment interest. Schnitzer Steel and the government also agreed to a deferred prosecution agreement, under which the government will not prosecute the company if the company meets the conditions of the agreement for three years.

The settlement has been approved by the company's Board of Directors and Audit Committee. It concludes the independent investigation commenced in August, 2004 by the Board's Audit Committee and an outside law firm that was retained by the Audit Committee to assist in the previously announced investigation of these matters. The aggregate payments under the agreement — $15.2 million (including interest charges) — are consistent with the $15 million reserve that Schnitzer Steel had announced in its quarterly financial reports for the first and third quarters of fiscal 2006.

"These past payments in Asia were — and are — contrary to the policies and standards of Schnitzer Steel and its subsidiaries,” said Kenneth M. Novack, who has been Chairman of Schnitzer Steel's Board since May 19, 2005. “When our Board's Audit Committee learned of these payments, it launched a rigorous investigation. Then, with the unanimous support of the Board, the company promptly reported these payments to federal authorities and directed that further steps be taken to strengthen the company's culture of ethical and legal compliance so that this would not happen again. The company fully cooperated with federal authorities at each step of the investigation, and we are pleased to put this behind us.”

As a result of discovering the practices in Asia, Schnitzer Steel changed the company’s senior management, hiring John Carter as CEO in May, 2005. Carter, who helped the company resolve the investigation, brought in a new senior management team and led the company through a major transformation in its business.

Under the terms of the settlement, Schnitzer Steel has employed a compliance officer and designed and implemented a comprehensive compliance program, which will be overseen by the Audit Committee of the company's Board. Schnitzer Steel also will engage a compliance consultant to advise the compliance officer and the Board on the compliance program. The compliance program includes enhanced training of the company's employees and commercial representatives, expansion of existing programs such as the whistleblower hotline, and due diligence reviews of business practices, commercial relationships and partners.

Schnitzer Steel Industries is one of the largest manufacturers and exporters of recycled ferrous metals products in the United States with 28 operating facilities located in 11 states throughout the country, including six export facilities located on both the East and West Coasts and in Hawaii. The Company's vertically integrated operating platform also includes its auto parts and steel manufacturing businesses. The company's auto parts business sells used auto parts through its 35 Pick-N-Pull self service facilities and 18 GreenLeaf full service facilities located in 14 states and western Canada. With an annual production capacity of 700,000 tons, the company's steel manufacturing business — Cascade Steel Rolling Mills — produces finished steel products, including rebar, wire rod and other specialty products. The company commenced its 100th year of operations in 2006.