Rockwell Automation Inc. today settled an administrative proceeding with the SEC for bribes it paid in China.
The company will pay $2.8 million for the settlement, including disgorgement and interest of $2.4 million and a civil penalty of $400,000.
Rockwell was named in a cease and desist order for violating the books and records and internal controls provisions of the Foreign Corrupt Practices Act (15 U.S.C. §§ 78m(b)(2)(A) and 78m(b)(2)(B)).
The violations occurred through a former subsidiary in China, Rockwell Automation Power Systems (Shanghai) Ltd. (“RAPS-China”), which the company sold in 2007.
Rockwell, headquartered in Milwaukee, Wisconsin, provides industrial automation products and services.
From 2003 to 2006, employees of RAPS-China paid $615,000 to state-owned enterprises that could influence contract awards. The SEC said RAPS-China’s marketing and sales director intended that the payments go directly to employees at the Chinese state-owned companies.
Employees of RAPS-China also paid $450,000 to fund sightseeing and other non-business trips for employees at state-owned companies. The SEC said destinations in the U.S. included New York City, Washington D.C., and Hawaii.
“Some trips appeared to have no direct business component,” according to the SEC, “other than the development of customer good will. For example, RAPS-China arranged for so-called design meetings in New York City despite the lack of any Rockwell facility there because ‘everyone likes New York.'”
The FCPA includes an affirmative defense that allows payment or reimbursement of expenses of foreign officials that are directly related to “the promotion, demonstration, or explanation of products or services.” 15 U.S.C. §§ 78dd-1(c)(2)(A) and 78dd-2(c)(2)(A). Rockwell’s payments, however, were not directly related to legitimate business purposes and were not recorded accurately in its books and records.
Rockwell made about $1.7 million in net profits from the bribery.
“It failed to accurately record the payments in its books and records,” the SEC charged, “and failed to implement or maintain a system of internal accounting controls sufficient to prevent and detect the payments.”
Rockwell Automation Inc. trades on the NYSE under the symbol ROK.
Download the SEC’s Administrative Release No. 64380, Accounting and Auditing Enforcement Release No. 3274, and Administrative Proceeding File No. 3-14364 in In Re Rockwell Automation Inc. (all dated May 3, 2011) here.