Editors

Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Shruti J. Shah
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
Contributing Editor

Eric Carlson
Contributing Editor

Bill Steinman
Contributing Editor

Wisconsin marketing firm pays $10 million to resolve FCPA offenses

Quad/Graphics Inc. agreed Thursday to pay the SEC nearly $10 million to settle violations of the Foreign Corrupt Practices Act for long-running bribery schemes and cover-ups in Peru and China.

The Sussex, Wisconsin print and digital marketing company disgorged $6.9 million and prejudgment interest of about $960,000, and agreed to pay a civil penalty of $2 million.

The SEC resolved the enforcement action through an internal administrative order (pdf) and didn’t go to court.

The company settled without admitting or denying the SEC’s findings.

Quad/Graphics violated the FCPA’s anti-bribery, books and records, and internal controls provisions, the SEC said.

The company also violated U.S. sanctions and export laws by concealing transactions with a state-controlled Cuban telecommunications company.

The DOJ declined to prosecute Quad/Graphics, according to a September 19 declination letter (pdf) published Friday. “We have reached this conclusion despite the bribery committed by employees of the Company’s subsidiaries in Peru and China,” the DOJ said.

In China, a subsidiary called Quad/Tech Shanghai Trading Company, Ltd. used sham sales agents to make and promise improper payments to employees of private and government customers to win business.

In Peru, Quad/Graphics’ subsidiary there “repeatedly paid or promised bribes to Peruvian government officials to win sales contracts and avoid penalties, and improperly attempted to influence the judicial outcome of a dispute with the Peruvian tax authority.”

Quad/Graphics Peru S.A. also created false records to conceal the illegal Cuba business.

From at least 2011 to 2016, Quad/Graphics failed “to implement a robust compliance program and maintain sufficient internal accounting controls,” the SEC said. The company also failed to give employees compliance training.

The China subsidiary didn’t do any due diligence on sham sales agents or require them to prove they performed any services before their invoices were paid.

The improper payments in China were falsely recorded in Quad’s books and records as “commissions.”

“Quad failed to provide adequate oversight and auditing of Quad/Tech China,” the SEC said.

In the scheme in Peru to bribe judges to win favorable outcomes in tax litigation, two U.S.-based senior executives approved an invoice from a Peru law firm for more than $400,000. Both executives knew about the bribery scheme and the likely role of the law firm as an intermediary, the SEC said.

Quad/Graphics became a public company in 2010 when it acquired Canadian printer World Color Press Inc. and its 16,000 employees.

The SEC said that despite becoming a publicly traded company with a large global workforce and operations in high risk areas, Quad’s compliance program was “almost non-existent” in 2010.

Quad/Graphics today has about 21,000 employees and operations in ten countries. It trades on the NYSE under the ticker “QUAD.”

The Peru subsidiary was formerly part of World Color Press. Its plant in Lima specializes in printing textbooks and school exam. It also prints directories, magazines, catalogs, and retail inserts, as well as telephone directories. 

The China subsidiary sold automated systems to print newspapers and other products.

The SEC said Thursday it considered Quad/Graphics’ self- disclosure, cooperation, and remedial efforts.

Quad’s remedial actions included firing employees involved in the improper conduct, giving the compliance department a bigger role and more resources, hiring a new International Trade Compliance Manager, and recruiting and training new compliance and internal audit staff with anti-corruption expertise.

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Richard L. Cassin is editor at large of the FCPA Blog.

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