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Cybersecurity company settles FCPA claims for $11.7 million

Securities SEC FCPA Settlement Financial Crimes


On August 29, a cybersecurity company agreed to pay over $11.7 million to settle SEC claims that certain subsidiaries operating in Russia and China violated the books and records and internal accounting controls provisions of the FCPA. The alleged misconduct included certain sales employees at the Russian subsidiary who misrepresented “the need for increased discounts to meet competition,” and—instead of passing the incremental discounts on to end-user customers—created “common funds” in off-book accounts that were diverted toward “excessive” travel and entertainment involving foreign officials, which the employees allegedly claimed served business purposes. According to the SEC, the company failed to (i) properly record the expenses; or (ii) implement or maintain an effective internal accounting system to prevent the violations from occurring. During approximately the same time period, sales employees at the Chinese subsidiary also paid for domestic trips and entertainment for foreign officials while allegedly understating the amount of entertainment involved and falsifying trip agendas to the company’s legal department to obtain approval.

In entering into the administrative order, the SEC considered the company’s cooperation and compliance efforts. Without admitting or denying wrongdoing, the company agreed to pay a $6.5 million civil money penalty and more than $5.2 million in disgorgement and interest.

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