InfoBytes Blog
SEC announces $6.3 million FCPA settlement with largest South Korean telecommunications company
On February 17, the SEC announced that South Korea’s largest telecommunications company agreed to pay $6.3 million to settle the SEC’s claims that the company violated the books and records and internal accounting controls provisions of the FCPA. According to the SEC, the company “lacked sufficient internal accounting controls over expenses, including executive bonuses and purchases of gift cards, which enabled managers and executives to generate slush funds.” This allegedly allowed company employees to provide improper benefits and payments to government officials in Korea and Vietnam and to seek business from government customers.
With respect to the company’s conduct in Korea, the SEC alleged that from “at least 2009 through 2017, high-level [company executives] maintained slush funds, comprised of both off-the-books accounts and physical stashes of cash, in order to provide items of value to government officials, among others.” These slush funds were then allegedly used for gifts and entertainment, as well as illegal political contributions to Korean government officials who had the ability to influence company business. The SEC also stated that between 2015 and 2016, the company allegedly made more than $1.6 million in payments to three organizations at the request of high-level government officials. All these payments were recorded as either charitable donations or sponsorships, and the company took no measures to determine whether the payments were legitimate donations, the SEC said.
Concerning the company’s conduct in Vietnam, the SEC alleged that between 2014 and 2018, company employees “internally discussed providing money to third parties connected to government officials in Vietnam in order to obtain contracts for two projects.” The company allegedly arranged with a construction company to pay roughly $95,000 to a high-level official in 2014 in order to obtain a contract, and then later allegedly falsely booked a $200,000 payment to the construction company as “[s]upport/consulting for performance of the business (completed).” During this time, the SEC claimed the company “lacked sufficient internal accounting controls regarding third parties and no relevant compliance policies regarding due diligence,” and allegedly “took no meaningful steps in response to allegations of improper payments in connection with the contracts.”
Without admitting or denying wrongdoing, the company consented to a cease and desist order, and agreed to pay approximately $3.5 million in civil penalties and $2.8 million in disgorgement and prejudgment interest. The company and 14 executives were indicted by South Korean authorities in November 2021 for criminal violations related to political contributions.