Smith & Wesson said the DOJ has ended its FCPA investigation of the company and won’t bring criminal charges, and that a civil settlement with the SEC is close.
The DOJ launched the investigation after the 2010 indictment of its VP for sales at the start of the bungled Africa sting prosecution. Smith & Wesson wasn’t charged but it received a grand jury subpoena for its records.
Amaro Goncalves, the sales vice president, was one of 22 individuals exonerated in 2012 when the DOJ dismissed the charges and ended the prosecution. He’s no longer with Smith and Wesson.
In a securities filing Thursday, the Springfield, Massachusetts-based company said, “Following extensive investigation and evaluation, the DOJ declined to pursue any FCPA charges against us and closed its investigation.”
“The DOJ has noted our ‘thorough cooperation,'” the filing said.
Smith & Wesson said an SEC civil investigation launched in 2010 into potential FCPA offenses is “close to a resolution.”
The company has accrued about $2 million in fiscal 2014 for the estimated costs of the SEC investigation.
In the filing, Smith & Wesson said the DOJ investigation caused it “to make substantial changes in our foreign sales personnel and foreign representatives, modify our processes, and cease sales in certain foreign countries.”
The changes have had “a material adverse effect” on foreign sales, the company said.
Smith & Wesson Holding Corp. trades on Nasdaq under the symbol SWHC.
Smith & Wesson’s full FCPA disclosure in its Form 10-K filed with the SEC on June 19, 2014 said:
On January 19, 2010, the DOJ unsealed indictments of 22 individuals from the law enforcement and military equipment industries, one of whom was our former Vice President-Sales, International & U.S. Law Enforcement. We were not charged in the indictment. We also were served with a Grand Jury subpoena for the production of documents. Since that time, the DOJ has been conducting an investigation to determine whether we have violated the FCPA and we have continued to cooperate fully with the DOJ in this matter. On February 21, 2012, the DOJ filed a motion to dismiss with prejudice the indictments of the remaining defendants who are pending trial, including our former Vice President-Sales, International & U.S. Law Enforcement. On February 24, 2012, the district court granted the motion to dismiss.
Following extensive investigation and evaluation, the DOJ declined to pursue any FCPA charges against us and closed its investigation. The DOJ has noted our “thorough cooperation” in correspondence to the company.
We are under investigation by the SEC for potential violation of federal securities laws. In May 2010, we received a letter from the staff of the SEC giving notice that the SEC was conducting a non-public, fact-finding inquiry to determine whether there have been any violations of the federal securities laws. It appears this civil inquiry was triggered in part by the DOJ investigation into potential FCPA violations. We have always taken, and continue to take seriously, our obligation as an industry leader to foster a responsible and ethical culture, which includes adherence to laws and industry regulations in the United States and abroad.
We are cooperating fully with the SEC in this matter and have undertaken a comprehensive review of company policies and procedures. We are in the final stages of discussions with the SEC staff that have brought us close to a resolution. Any future agreement is subject to final review and approval by the SEC Commissioners. Based upon the status of current discussions, we have estimated and accrued an expense of approximately $2.0 million in fiscal 2014.
. . . The investigation by the [DOJ for potential FCPA] violations as described [above] caused us to make substantial changes in our foreign sales personnel and foreign representatives, modify our processes, and cease sales in certain foreign countries.
These actions have had and can be expected to continue to have a material adverse effect on the level of our foreign sales.
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.