The Securities and Exchange Commission Tuesday announced non-prosecution agreements (NPAs) with two unrelated companies for bribes foreign subsidiaries paid to Chinese officials.
Massachusetts-based internet services provider Akamai Technologies agreed to pay about $652,000 in disgorgement and about $19,400 in interest.
Rhode Island-based residential and commercial building products manufacturer Nortek Inc. agreed to pay about $291,000 in disgorgement and about $30,000 in interest.
Also on Tuesday, Akamai and Nortek released letters from the DOJ saying it wouldn’t bring enforcement actions against them. The declinations were the first the DOJ has issued under its FCPA Pilot Program.
The SEC non-prosecution agreements stipulated that “the companies are not charged with violations of the Foreign Corrupt Practices Act (FCPA) and do not pay additional monetary penalties,” the SEC said.
The DOJ announced the Pilot Program in early April. It’s intended to encourage companies to self report potential FCPA violations and cooperate in federal investigations.
Akamai and Nortek self-reported the misconduct in China promptly, the SEC said, and cooperated extensively with the ensuing SEC investigations.
Akamai’s foreign subsidiary arranged $40,000 in payments to induce government-owned entities to purchase more services than they actually needed. Employees at the foreign subsidiary violated the company’s written policies by providing improper gift cards, meals, and entertainment to officials at the state-owned entities to build business relationships.
Akamai self disclosed its internal investigation to the DOJ and SEC in February 2015 and made a public disclosure about it in a quarterly SEC filing a month later.
The SEC said Akamai had “possible violations of the books and records and internal accounting controls provisions of the Foreign Corrupt Practices Act from at least 2012 through 2015.”
Nortek’s subsidiary paid about $290,000 in bribes to Chinese officials in order to receive “preferential treatment, relaxed regulatory oversight, or reduced customs duties, taxes, and fees,” its NDA said. The bribes included cash payments, gift cards, meals, travel, accommodations, and entertainment expenses.
Nortek had possible violations of the books and records and internal accounting controls provisions of the FCPA from at least 2009 through 2014, the SEC said.
Nortek self disclosed its internal investigation to the DOJ and SEC in January 2015.
It said in March this year that FCPA-related spending for 2015 was $2.3 million for legal and other professional services connected to the investigation in China. FCPA spending in 2014 was $800,000.
Andrew Ceresney, chief of the SEC Enforcement Division, said Tuesday: “When companies self-report and lay all their cards on the table, non-prosecution agreements are an effective way to get the money back and save the government substantial time and resources while crediting extensive cooperation.”
The SEC said both companies:
- Reported the situation to the SEC on their own initiative in the early stages of internal investigations.
- Shared detailed findings of the internal investigations and provided timely updates to enforcement staff when new information was uncovered.
- Provided summaries of witness interviews and voluntarily made witnesses available for interviews, including those in China.
- Voluntarily translated documents from Chinese into English.
- Terminated employees responsible for the misconduct.
- Strengthened their anti-corruption policies and conducted extensive mandatory training with employees around the world with a focus on bolstering internal audit procedures and testing protocols.
The NPAs require the companies to cooperate with the SEC “regardless of the time period in which the cooperation is required.”
Both companies agreed to waive the FCPA’s five-year statute of limitations by entering into tolling agreements, “when requested to do so by the [SEC] during the period of cooperation.”
In a statement emailed to the FCPA Blog, Ropes & Gray partner Mimi Yang, who represented Akamai, said, “The steps Akamai took to promptly self report the misconduct and to cooperate with investigators enabled the company, the DOJ and SEC to resolve the matter quickly.”
“The fact that the SEC agreed to a rare FCPA non-prosecution agreement is indicative of how well all parties came together to reach a resolution,” Yang said.
The SEC first used an NPA to resolve FCPA offenses in April 2013 with Ralph Lauren Corporation. The company paid the SEC nearly $735,000 in disgorgement and interest. It resolved a DOJ enforcement action at the same time with an NPA and a criminal fine of $882,000.
The Akamai NPA is here and the Nortek NPA is here.
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.
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