On December 29, a Kentucky-based manufacturer and distributor of cable and wire, entered into a non-prosecution agreement with the DOJ regarding improper payments to government officials in Angola, Bangladesh, China, Indonesia, and Thailand. The company agreed to pay the DOJ a $20.5 million criminal penalty. The company simultaneously resolved an investigation by the SEC over the same conduct, and agreed to disgorge approximately $55.3 million, along with a $6.5 million penalty regarding accounting violations at its Brazilian subsidiary.
According to the DOJ, beginning in 2002, the company’s employees became aware that the company’s foreign subsidiaries were using third party agents and distributors to make corrupt payments to foreign officials in various countries to secure business. In 2011, employees from the company’s subsidiary expressed concerns to regional and parent-level executives that commission payments were being used for improper purposes but the company failed to investigate the payments or implement a system of internal controls to detect and prevent the abuse. In total, the subsidiaries paid approximately $13 million to third party agents and distributors from 2002 to 2013, a portion of which was used to make unlawful payments to foreign government officials. According to the DOJ, the payments and resulting contracts netted the company more than $51 million in profits on sales to state-owned enterprises around the world. The SEC separately found that due to weak internal controls, the company failed to detect improper inventory accounting at its Brazilian subsidiary, causing the company to materially misstate its financial statements from 2008 to the second quarter of 2012.
Simultaneous with its resolution with the company, SEC also resolved charges against the company’s then-senior vice president and the individual responsible for sales in Angola. The former senior vice president agreed to pay the SEC a $20,000 penalty without admitting or denying that he knowingly circumvented internal accounting controls and caused FCPA violations when he approved over $340,000 in payments to an agent in Angola. The SEC separately noted that while the company’s former CEO and CFO had now returned millions of dollars in compensation they had received during the period of the violations, the SEC had found no personal misconduct by either former officer.
The company’s $20.5 million criminal penalty represented a 50 percent reduction off the bottom of the U.S. Sentencing Guidelines fine range based on the DOJ’s conclusion that the company “voluntarily and timely disclosed the conduct at issue, fully cooperated in the investigation and fully remediated. The benefits the company received from the DOJ are similar to those companies can receive for participating in the Fraud Section’s FCPA Pilot Program for the self-reporting of FCPA violations. Prior coverage of the Fraud Section’s FCPA Pilot Program can be found here.