Texas-based Lennox International Inc. said in a securities filing Monday that it self reported to the SEC and DOJ an alleged payment of $475 to a Russian customs broker or official.
The company said its audit committee launched an internal investigation with outside counsel and forensic accountants.
The disclosure is unusual because of the small size of the alleged improper payment.
But the disclosure could indicate that Lennox wants to take advantage of the DOJ Pilot Program.
The Pilot Program encourages self disclosure.
In declination letters issued under the Pilot Program, the DOJ has mentioned factors that include:
- timely and voluntary self-disclosure
- thorough and comprehensive global investigations of the violations, and
- full cooperation including providing all known relevant facts about the individuals involved in or responsible for the misconduct.
Lennox makes commercial and residential heating, air conditioning, and refrigeration systems. It had about $3.4 billion in revenue last year. Sales in Russia last year were just $5 million.
The company said the internal investigation hasn’t yet uncovered any other potentially improper payments.
But, Lennox said, “the investigation has raised questions regarding possible irregularities with respect to other Russian customs documents.”
The value of the Russia shipment linked to the alleged payment was about $68,500, Lennox said.
The company said it would cooperate with the SEC and DOJ and doesn’t expect any “material adverse effect on its business or financial condition.”
Lennox International Inc. trades on the NYSE under the symbol LII.
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Here’s the full FCPA disclosure from the Form 10-Q filed by Lennox International with the SEC on October 17, 2016:
In October 2016, the Company self-reported to the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) an alleged payment in the amount of 30,000 rubles (approximately US $475) to a Russian customs broker or official. The Company, under the oversight of its Audit Committee, has initiated an investigation into this matter with the assistance of external legal counsel and external forensic accountants. The alleged payment was purportedly made to release a shipment of goods being held by Russian customs officials due to inaccurate paperwork. The value of the shipment was approximately €62,000 (approximately US $68,500). The allegations are related to the Company’s subsidiary in Russia, which had 2015 annual sales of approximately US $5 million and approximately US $3 million in sales for the nine months ended September 30, 2016. To date, the investigation has not resulted in any evidence of other potentially improper payments; however, the investigation has raised questions regarding possible irregularities with respect to other Russian customs documents. The investigation is ongoing. The Company intends to fully cooperate with the SEC and the DOJ regarding this matter. The Company does not anticipate any material adverse effect on its business or financial condition as a result of this matter.
Richard L. Cassin is the publisher and editor of the FCPA Blog. He’ll be the keynote speaker at the FCPA Blog NYC Conference 2016.