Global Manufacturer Settles SEC Charges for FCPA Books and Records Violations

A global manufacturer of health technology products operating in China settled SEC charges for violations of the books and records and internal accounting controls provisions of the Foreign Corrupt Practices Act.

In an Order, the SEC said that the manufacturer’s agents in China engaged in a variety of improper bidding practices that unjustly enriched the company by $41 million. The SEC cited examples of bribery (to a hospital director) which led to the manufacturer's distributor winning a procurement award from the hospital, and manipulation of bids to create the appearance of compliance with minimum bids requirements in accordance with Chinese rules. The SEC found that manufacturer (i) created a corruption risk by offering special pricing discount offers to distributers and (ii) had insufficient internal accounting controls to ensure that transactions were recorded accurately in the books and records. As a result of its actions, the SEC stated that the manufacturer violated Exchange Act Section 13(b)(2)(B) and (A) ("Periodical and other reports").

To settle the charges, the manufacturer agreed to (i) cease and desist from further regulatory violation, (ii) disgorge $41,126,170, plus $6,047,633 in interest, (iii) pay a civil monetary penalty of $15,000,000 and (iii) comply with the undertakings set forth in the Order. In determining to accept manufacturer’s settlement offer, the SEC said it considered the manufacturer's ongoing remedial efforts, which included an internal investigation and regularly sharing information with SEC staff.