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Marketing and Printing Services Provider Settles FCPA Charges

joseph.moreno@cwt.com's picture
Commentary by Joseph Moreno

A Wisconsin-based marketing digital and print services provider settled SEC charges that it violated the anti-bribery and books and records provisions of the Foreign Corrupt Practices Act ("FCPA"), in connection with the conduct of various bribery schemes conducted by its subsidiaries in China and Peru.

According to the SEC Order, between 2011 and 2016, the company's overseas subsidiaries paid or promised to pay over $1 million in bribes to secure business.

In China, the company's local subsidiary allegedly paid or promised $182,000 in improper payment, to employees of private and government customers through sham sales agents to secure business.

In Peru, the company's subsidiary allegedly:

  • bribed or offered "commissions" to government officials to win sales contracts from the Peruvian National Institute of Statistics and Information and other government municipalities, and to avoid penalties on existing contracts with the Ministry of Education;

  • paid over $200,000 in bribes through a local counsel to judges to influence the outcome of a value-added tax (VAT) tax dispute with the Peruvian tax authority; and

  • violated U.S. sanctions and export control laws by engaging in commercial transactions with a state-controlled Cuban telecommunications company, and attempted to hide the evidence by falsifying the transactions in its books and records.

To settle the charges, the company agreed to pay approximately $7 million in disgorgement, $1 million prejudgment interest, and a $2 million civil penalty. The company also committed to a one-year reporting period, during which it would file a written report detailing its anti-bribery/anti-corruption remediation efforts and disclose the discovery of any new credible evidence of FCPA violations.

Separately, the DOJ, citing its FCPA Corporate Enforcement Policy, declined to criminally prosecute the company, while observing the company's "prompt, voluntary self-disclosure of the misconduct."

Commentary

A few FCPA greatest hits jump out upon a reading of this order. The company went public in 2010 with virtually no anti-bribery/anti-corruption compliance program, no anti-corruption policies, procedures or internal controls, and a chief compliance officer with no legal or compliance experience (the individual apparently had an IT background). In the intervening six years the company apparently did little to rectify the situation. The alleged schemes by subsidiaries in Asia and Latin America were unremarkable, with unsupervised subsidiaries, the use of sham third-party vendors, and an ignoring of red flags by corporate executives both locally and in the United States. The SEC also noted in its Order that, while employee FCPA training was rolled out in 2012, it was obviously not supported by upper management indicating a "tone at the top" problem. One interesting twist is the sanctions and export control violations committed by engaging in sales to Cuba, an excellent reminder that a comprehensive corporate compliance program should incorporate sanctions and export control alongside FCPA, cybersecurity, and other key disciplines.

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