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SEC Reaches Non-Prosecution Agreements for Bribes of Chinese Officials; DOJ Declines to Pursue FCPA Enforcement Actions
On June 7, the SEC announced it had entered into non-prosecution agreements with two unrelated companies in connection with bribes paid to Chinese officials by foreign subsidiaries. First, Akamai Technologies, a Massachusetts-based internet services provider, agreed to pay $652,000 in disgorgement and $19,433 in interest. According to its agreement, Akamai's foreign subsidiary had paid bribes to induce Chinese government-owned entities to purchase more services than they needed. Second, Nortek Inc., a Rhode Island-based residential and commercial building products manufacturer, agreed to pay $291,000 in disgorgement and $30,000 in interest. According to that agreement, Nortek's subsidiary made improper payments and gifts to Chinese officials in exchange for preferential treatment, relaxed regulatory oversight, and reduced customs duties, taxes, and fees. The agreements each stipulate that the companies are not charged with violations of the FCPA and will not pay any additional monetary penalties. In support of the agreements, the SEC noted that both companies promptly self-reported the conduct and cooperated extensively with the ensuing investigations. Kara Brockmeyer, Chief of the SEC Enforcement Division's FCPA Unit, praised the companies for "promptly tighten[ing] their internal controls after discovering the bribes and [taking] swift remedial measures to eliminate the problems." Also on June 7, Akamai and Nortek each released letters from the DOJ declining to pursue enforcement actions against the companies. The letters are the first public declinations issued by the DOJ under its FCPA Pilot Program announced in April 2016. The one-year Pilot Program is designed to encourage companies to voluntarily self-report potential FCPA-related misconduct and cooperate with federal investigations. DOJ declined to pursue enforcement actions based on several factors, including that the companies identified the misconduct themselves, promptly self-disclosed the misconduct, thoroughly investigated the misconduct, enhanced their compliance programs and internal accounting controls, terminated the employees responsible for the misconduct, disgorged any ill-gotten gains, fully cooperated with the federal investigations, and agreed to cooperate with any future investigations.
On June 16, the DOJ announced that a U.S. defense contractor, IAP Worldwide Services, Inc., will pay $7.1 million to resolve allegations that the company made over $1.7 million in illegal payments to Kuwati officials through a third party. The company entered into a non-prosecution agreement that requires the company to implement an enhanced compliance program and internal controls designed to prevent and detect FCPA violations, and to report annually for three years to DOJ regarding its compliance program. A former Vice President of IAP, James Rama, also pleaded guilty to one count of conspiracy to violate the anti-bribery provisions of the FCPA. The DOJ emphasized the companys cooperation with the governments investigation as relevant to the decision to enter into a non-prosecution agreement instead of a more harsh resolution. This statement appears to implement the policy announced in recent DOJ speeches, which have touted the benefits of cooperation to companies including the possibility of non-prosecution agreements. It is worth noting that an individual executive still was required to plead guilty, regardless of the companys resolution.
On July 18, 2012, aircraft maintenance, repair and overhaul ("MRO") provider, Nordam Group, Inc., resolved an FCPA matter with the US DOJ related to conduct in China. The non-prosecution agreement calls for a $2 million penalty, and makes this the second aviation services FCPA matter this year, joining Lufthansa Technik AG's MRO subsidiary, BizJet International Sales and Support, Inc.
- Non-Prosecution Agreement
- NPA Attachment A - Statement of Facts
- NPA Attachment B - Compliance Undertakings
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