Manufacturer Fined for Bribery and Internal Control Violations Through Subsidiary

A global manufacturer settled SEC charges that the company's subsidiary violated the Foreign Corrupt Practices Act ("FCPA"). The SEC charged that the subsidiary engaged in improper conduct to win government contracts.

In the Order, the SEC found that the subsidiary paid bribes to foreign officials in Thailand, including to officials at the Royal Thai Air Force, Department of Highways and Department of Rural Roads. The SEC found that the bribes took the form of cash payments, sham consulting fees and entertainment, including trips to massage parlors and "factory visit" trips disguised as sightseeing tours. The SEC found that the manufacturer failed to integrate its subsidiary into its internal compliance framework following its acquisition, resulting in violations of the FCPA's books and records and internal accounting controls provisions.

Additionally, the SEC found that the subsidiary engaged in commercial bribery of a private company, "Customer A," offering similar cash payments and luxury trips to secure machine sales and service contracts. As a result of this misconduct, the SEC found that the manufacturer obtained approximately $4.3 million in illicit profits.

The SEC determined that the manufacturer violated SEA Sections 13(b)(2)(A) and 13(b)(2)(B) ("Periodical and other reports").

To settle the charges, the manufacturer agreed to (i) cease and desist from further violations and (ii) pay disgorgement of $4,343,401, prejudgment interest of $1,086,954 and a civil monetary penalty of $4,500,000, totaling $9,930,355. The SEC noted that the manufacturer took remedial steps, including terminating employees involved in the misconduct, enhancing its internal audit and compliance programs and revising its anti-bribery and corruption policies.