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Clear Channel Outdoor pays SEC $26.1 million to settle China FCPA violations

Texas-based media company Clear Channel Outdoor Holdings Inc. agreed to pay the SEC $26.1 million to resolve FCPA violations for bribing Chinese officials to buy outdoor advertising in China.

Clear Channel was charged by the SEC in an administrative order with violating the FCPA’s anti-bribery, recordkeeping, and internal accounting controls provisions.

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

Clear Channel agreed to pay a civil penalty of $6 million and about $20 million in disgorgement and pre-judgment interest.

From 2012 through 2017, Clear Media Limited, a then-majority-owned subsidiary of Clear Channel, bribed Chinese government officials to win contracts to sell advertising for display on public bus shelters and other outdoor displays, the SEC said.

Clear Media used fake intermediaries and invoices to generate cash for off-book “customer development” consultants, and improper payments were falsely characterized as legitimate entertainment, cleaning and maintenance, and “customer development” expenses in Clear Channel’s consolidated books and records.

Clear Media employees in China, between 2007 and 2017, engaged in a series of unrecorded and allegedly unauthorized transactions to misappropriate $10.2 million. Between 2011 and 2018, they used the undisclosed “off-book” bank accounts to receive at least $5.2 million in government subsidies not recorded as income, and from 2012 through 2017 caused Clear Media to pay $9.8 million in cash as “customer development” expenses to 19 secret consultants to sell public billboard and advertising space to about 70 government and private customers.

In one instance, Clear Media’s Hangzhou branch spent $12,800 on “customer entertainment” in December 2016 while seeking to renew a concession with a Hangzhou transit authority. In January 2017, Clear Media provided its Hangzhou branch with around $14,000 to entertain government officials “due to the need to renegotiate” the concession. Afterwards, Clear Media’s Hangzhou branch transferred approximately $20,350 to its cleaning and maintenance entity, classifying the payment as a “subsidy” or an “allowance.” Later that month, the concession was renewed, the SEC said.

According to the SEC, in 2017, given the risks surrounding Clear Media’s payments to cleaning and maintenance entities, Clear Channel’s internal auditors requested support related to the entities’ monthly expenditures, as well as for the payments made to entertain officials renegotiating the concession in Hangzhou. A Chinese Clear Media executive blocked Clear Channel’s internal auditors, Clear Media’s internal auditor, and another Clear Media executive from obtaining access to the records and investigators from interviewing employees.

“Despite repeated red flags raised by its internal auditors, Clear Channel failed to address the deficient internal accounting controls that allowed Clear Media to continue these improper payments for many years,” said Charles Cain, Chief of the SEC Enforcement Division’s FCPA Unit, in Thursday’s release.

Clear Channel was owned by iHeartMedia2 when the violations occurred and separated from iHeartMedia in 2019 as a standalone, publicly traded company.

Clear Channel first disclosed the investigation in an April 2018 SEC filing, according to data from FCPA Tracker.

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