American communication technology provider Polycom Inc. settled FCPA books and records and internal accounting controls provisions charges with the SEC Wednesday for using resellers and distributors in China to bribe government officials.
Polycom agreed to disgorge to the SEC about $10.7 million and pay prejudgment interest of $1.8 million, along with a penalty of $3.8 mllion. The company didn’t admit or deny the SEC’s findings.
The SEC resolved the case through an internal administrative order (pdf) without going to court.
The DOJ also released a “declination with disgorgement” with Polycom that was dated December 20. The declination (pdf) required Polycom to disgorge about $31 million overall to resolve “bribery committed by employees of the Company’s subsidiaries in China.” The DOJ said the China subsidiaries also knowingly and willfully caused false books and records at Polycom.
Under the declination, Polycom disgorged $10.8 million to the SEC, as well as $10.15 million to the U.S. Treasury Department and $10.15 million to the U.S. Postal Inspection Service Consumer Fraud Fund.
In return, the DOJ said it “declined prosecution consistent with the FCPA Corporate Enforcement Policy.”
The bribes took place from 2006 through at least July 2014, according to the SEC.
Polycom was acquired by Plantronics Inc. in July 2018 and is now a wholly-owned subsidiary of the California-based communications firm.
According to the SEC, Polycom’s VP in China and other senior managers provided significant discounts to distributors and resellers, knowing and intending that the distributors and resellers would use the discounts to make payments to Chinese government officials at agencies and state-owned enterprises.
The payments were recorded using a parallel deal-tracking and email system located in China, outside of Polycom’s company-approved systems.
Sales personnel were told by managers to use their personal email addresses instead of their Polycom addresses when discussing the sales opportunities.
During this period, the SEC said Polycom China “failed to devise and maintain a sufficient system of internal accounting controls and lacked an effective anti-corruption compliance program with regard to its Chinese sales operations.”
From 2012 to 2014, Polycom made about $10.7 million in profit from bribes to Chinese officials, the SEC said.
The SEC said it considered Polycom’s “self-disclosure, cooperation, and remedial efforts” in the settlement.
The company also hired outside counsel to conduct the investigation, fired eight individuals, disciplined eighteen others, and enhanced their third-party and due diligence procedures, the SEC said.
The DOJ said in the declination that Polycom fired eight individuals involved in the misconduct, disciplined 18 other employees, and ended the company’s relationship with one of its channel partners.
Polycom’s parent, Plantonics, disclosed in August 2018 that it was under investigation by both the DOJ and SEC for the Polycom compliance issues. Plantronics said it was seeking a “declination and/or non-prosecution agreement to resolve this matter.”
Plantronics CEO Joe Burton said in a statement Wednesday, “We are very pleased that the investigation into some of Polycom’s foreign operations has concluded.”
He said Plantronics “has been, and remains, committed to operating with ethical and financial integrity, and we look forward to the future with Polycom.”
Harry Cassin is the managing editor of the FCPA Blog.