3M Company agreed Friday to pay the SEC $6.5 million in penalties and disgorgement to resolve FCPA offenses related to a subsidiary in China.
In an internal administrative order, the SEC charged St. Paul, Minnesota-based 3M with violating the FCPA’s books and records and internal controls provisions.
Without admitting or denying the SEC’s findings, 3M agreed to pay $4.5 million in prejudgment interest and disgorgement and a civil penalty of $2 million.
According to the SEC, employees of a 3M subsidiary based in China arranged for employees of state-owned health care facilities to attend overseas conferences, educational events, and health care facility visits. In reality, the arrangements were often a pretext to provide the Chinese government officials with overseas travel, including planned luxury tourist activity that overlapped with the education events.
From at least 2014 to 2017, 3M China provided overseas travel that included guided tours, shopping visits, day trips to nearby sights, and other leisure activities. The tourism activities were scheduled at the same time as the events the officials were supposedly attending, and at times the Chinese officials missed whole days of the events or simply never attended at all, the SEC said.
Additionally, the events were in English and certain trips included Chinese government officials who neither understood English nor had adequate translation services.
The SEC said Friday that 3M’s Chinese subsidiary paid nearly $1 million to fund at least 24 trips for Chinese government officials that included tourism.
A 2016 eight-day trip to Chicago included five Chinese government officials, two of whom were accompanied by their spouses. One official and his spouse left Chicago in the evening after a planned educational event started and returned after the event had ended, so they could participate in planned tourism activities. Three other Chinese officials participated in full days of tourism nearly every day of the scheduled educational event.
The officials were not seen at the educational event activities and did not attend a dinner that 3M had organized for them, the SEC said.
According to the SEC, employees at 3M China submitted legitimate itineraries to the company’s compliance team, and colluded with Chinese travel agents to make alternate itineraries consisting of “tourism activities at or near the location of the overseas educational events.”
Employees asked the officials participating on the trips to keep the alternate agendas hidden.
3M first disclosed the investigation in a July 26, 2019 SEC filing, according to FCPA Tracker.
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