The SEC on Thursday used an administrative (intenal) order to resolve FCPA-related offenses by Watts Water Technologies, Inc. and a former employee, Leesen Chang.
Watts’ subsidiary in China, Watts Valve (Changsha) Co., Ltd. (CWV), made corrupt payments ‘to influence the design institutes to recommend CWV valve products to the state-owned customers and to create design specifications that favored CWV valve products.’
From 2006 to 2009, Chang, a U.S. citizen and the former vice president of sales for Watts’ subsidiary in China, approved commission payments that itemized payments to [government owned] design institutes. The SEC said Chang ‘knew or should have known that the payments were improperly recorded as commissions.’
Watts agreed to penalties of $3.7 million. It will disgorge $2,755,815, pay prejudgment interest of $820,791, and a $200,000 penalty. Chang will pay a $25,000 penalty.
The SEC said Watts ‘failed to implement a system of FCPA compliance and internal controls commensurate with the risks posed by CWV when it acquired the subsidiary.’
But when FCPA violations were discovered in 2009, the SEC said, Watts ‘voluntarily self-reported the improper payments, shared the results of its internal investigation and further cooperated with the Commission staff’s investigation. The company also promptly undertook numerous remedial measures.’
Watts Water Technologies, Inc. trades on the NYSE under the symbol WTS.
Download a copy of the order instituting cease and desist order against Watts Water Technologies, Inc. and Leesen Chang, Securities Exchange Act of 1934, Release No. 65555, Accounting and Auditing Enforcement Release No 3328 (both dated October 13, 2011), and Administrative Proceeding File No. 3-14585 here.
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