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Harry Cassin
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Nortek FCPA spending climbs to $2.3 million for China investigation

Nortek Inc. said in its annual report Monday that FCPA spending in 2015 rose to $2.3 million for legal and other professional services connected to an investigation in China.

FCPA spending in 2014 was $800,000, the company said.

Providence, Rhode Island-based Nortek makes home and commercial air conditioning and security systems.

It was one of 28 companies on our latest Corporate Investigations List (here) that named China in connection with a pending FCPA investigation.

In Monday’s disclosure, Nortek said it “discovered certain questionable hospitality, gift and payment practices, and other expenses at our subsidiary, Linear Electronics (Shenzhen) Co. Ltd.” that raise FCPA concerns.

Nortek self disclosed the internal investigation to the DOJ and SEC in January 2015.

It said Monday it can’t predict whether those agencies will bring an enforcement action or what penalties they might impose.

The company reported about $2.5 billion in revenue last year.

It trades on Nasdaq under the symbol NTK.

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Here’s the FCPA disclosure from Nortek Inc.’s Form 10-K filed with the SEC on February 29, 2016:

As previously reported, as part of our routine internal audit activities, we discovered certain questionable hospitality, gift and payment practices, and other expenses at our subsidiary, Linear Electronics (Shenzhen) Co. Ltd. (“Linear China”), which are inconsistent with our policies and raise concerns under the U.S. Foreign Corrupt Practices Act and perhaps under other applicable anti-corruption laws. We conducted an internal investigation into these practices and payments with the assistance of outside counsel.

On January 7, 2015 and January 8, 2015, respectively, we voluntarily contacted the SEC and the DOJ to advise both agencies of our internal investigation. We are cooperating with the SEC and DOJ investigations into these matters. We take these matters very seriously and are committed to conducting business in compliance with all applicable laws.

Based on information known at this time, we currently believe that the amount of the questionable expenses and payments is not material with respect to our consolidated financial condition or results of operations for the periods presented. However, at this time, we are unable to predict, what, if any, action may be taken by the DOJ or SEC or any penalties or remedial measures these agencies may seek, but intend to cooperate with both agencies. Any determination that our operations or activities are not in compliance with existing laws or regulations could result in the imposition of fines, civil and criminal penalties, and equitable remedies, including disgorgement or injunctive relief. We cannot reasonably estimate the potential liability, if any, related to these matters resulting from any proceedings that may be commenced by the SEC, the DOJ or any other governmental authorities.

In the fiscal year ended December 31, 2015 and 2014, approximately $2.3 million and $0.8 million, respectively, was recorded for legal and other professional services incurred related to the internal investigation of this matter. We expect to incur additional costs relating to the investigation of this matter in 2016.


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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1 Comment

  1. Its seems that bribery plc is alive and kicking, why do companies engage expensive lawyers to conduct investigations? surely plenty of ex FBI around who are qualified investigators who could do a better job for much less?

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