The SEC Tuesday said it used its first deferred prosecution agreement with an individual in an FCPA case.
FCPA civil charges will be deferred for three years against Yu Kai Yuan, a former employee at PTC’s China subsidiaries, “as a result of significant cooperation he has provided during the SEC’s investigation.”
On Tuesday, PTC Inc. and two China units settled FCPA enforcement actions by paying $28 million. The China units paid a $14.5 million criminal penalty to the DOJ, and PTC paid $11.8 million in disgorgement and nearly $1.8 million in prejudgment interest to the SEC.
The companies admitted violating the FCPA by paying for recreational travel for several China officials. They hid the cost of the trips by overcharging for PTC China’s software sales to the state-owned entities whose employees went on the trips.
“PTC-China’s books and records were consolidated into PTC’s books and records, thereby causing PTC’s books and records to be inaccurate,” the SEC said.
Yuan, 47, a Chinese citizen, lives in Shanghai. From 1996 until 2011, he worked as a sales executive at Parametric Technology (Hong Kong) Ltd. and Parametric Technology (Shanghai) Software Co., Ltd.
The SEC alleged that Yu caused PTC to violate the books and records and internal control provisions of the FCPA.
Yu didn’t admit or deny the SEC’s allegations. But he offered to accept full responsibility for his conduct and to not contest or contradict the SEC’s factual statements, the agency said.
The SEC signed the DPA in December after Yu signed it in November. The SEC didn’t announce the DPA until the PTC enforcement action was finished and made public Tuesday. The term of Yu’s DPA runs from February 16, 2016 to February 15, 2019.
The SEC said,
DPAs facilitate and reward cooperation in SEC investigations by foregoing an enforcement action against an individual who agrees to cooperate fully and truthfully throughout the period of deferred prosecution.
The SEC used its first deferred prosecution agreement with an individual in November 2013. The respondent was former hedge fund administrator Scott Herckis. He helped end a fraud involving a hedge fund manager who was stealing investor assets.
The agency first resolved an FCPA case using a pre-trial agreement in April 2013. Ralph Lauren Corporation paid $1.6 million in combined penalties to the DOJ and SEC in exchange for two non-prosecution agreements. The company admitted its Argentina subsidiary paid bribes to government and customs officials.
The DOJ often uses deferred prosecution agreements in criminal cases to encourage individuals and companies to share information and help in subsequent investigations. In return, the DOJ refrains from prosecuting the defendants for their own violations if they don’t commit further offenses.
A copy of the SEC’s deferred prosecution agreement with Yu Kai Yuan is here (pdf).
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.