A California-based gas detection company settled FCPA charges today with the DOJ and SEC for $2.9 million.
RAE Systems of San Jose agreed in a non-prosecution agreement to pay a criminal penalty of $1.7 million, and in an agreement with the SEC to pay $1,147,800 in disgorgement and $109,212 in prejudgment interest.
According to the DOJ, RAE Systems “accepted responsibility for violating the internal controls and books and records provisions of the FCPA arising from and related to improper benefits corruptly paid by employees” of two RAE joint ventures in China.
When RAE acquired a majority of one of the joint ventures, it knew about “improper commissions, kickbacks and ‘under table greasing to get deals’ by employees. And when buying a majority of the other JV, RAE Systems didn’t conduct any pre-acquisition corruption due diligence in spite of a number of red flags, the DOJ said.
“In both instances,” according to the DOJ, “RAE Systems learned of corrupt practices at [the joint ventures] and knowingly failed to implement effective systems of internal controls and failed to properly classify the improper payments in its books and records.”
The payments were made by Chinese employees of the joint ventures from 2004 through 2008, and amounted to about $400,000.
Most of the joint ventures’ customers were PRC government departments and bureaus, and large state-owned agencies and instrumentalities, including regional fire departments, emergency response departments and entities under the supervision of the provincial environmental agency, the DOJ said.
RAE Systems Inc. trades on the AMEX under the symbol RAE.
Download the DOJ’s December 10, 2010 non-prosecution agreement with RAE Systems Inc. here.
View the SEC’s Litigation Release No. 21770 in Securities and Exchange Commission v. RAE Systems Inc., Civil Action No. 1:10-cv-02093 (D.D.C., December 10, 2010) here.
Download the SEC’s civil complaint against RAE Systems Inc. here.
The non-pros agreement is noteworthy in that it seems to describe a plan to create a sham compliance program. I imagine that as DoJ begins to look more closely at FCPA compliance programs – as described in two prior postings (https://fcpablog.com/blog/2010/12/6/compliance-and-enforcement-by-the-book.html and https://fcpablog.com/blog/2010/11/23/credit-for-compliance-the-doj-gets-specific.html ) – we’ll see more of this sort of discussion in connection with issues of organizational fault. And, it is not inconceivable that one day prosecutors could look at questions of individual liability through the same lens.
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