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Foreign Corrupt Practices Act & Anti-Corruption

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  • Massachusetts-Based Technology Company PTC and Two Chinese Subsidiaries Pay $28 Million to Settle Civil and Criminal FCPA Charges; SEC Uses First DPA With Individual

    On February 16, the SEC and DOJ announced a settlement with a Massachusetts-based technology company, PTC Inc., for violations of the FCPA.  PTC and two Chinese subsidiaries agreed to pay $28 million to settle the parallel civil and criminal actions, with PTC paying approximately $13.5 million in disgorgement and prejudgment interest to settle the SEC’s charges, and its two Chinese subsidiaries paying approximately $14.54 million in penalties in a Non-Prosecution Agreement with the DOJ. PTC admitted that its subsidiaries in Shanghai and Hong Kong provided non-business related travel and other improper payments to Chinese government officials to win business.  Specifically, from 2006 to 2011, the two subsidiaries provided nearly $1.5 million to Chinese officials in improper travel, gifts, and entertainment.  The Chinese officials were employed by state-owned entities that were PTC customers.  The travel and entertainment expenses included overseas trips to visit PTC facilities, including corporate headquarters in Massachusetts, but the majority of the time on the trips was spent on recreational excursions unrelated to the purported business purpose.  For example, PTC paid for Chinese officials to visit New York, Las Vegas, San Diego, Los Angeles, and Honolulu, as well as guided tours, golfing, and other leisure activities during those trips.  Employees of PTC’s subsidiaries also provided gifts to the Chinese officials, including cell phones, iPods, gift cards, wine, and clothing.  The payments were recorded in the company’s books and records as legitimate commissions or business expenses. As part of the investigation, the SEC also entered into its first Deferred Prosecution Agreement (DPA) with an individual in an FCPA case.  The SEC announced that it would wait three years to bring any FCPA charges against a former employee of one of the subsidiaries, Yu Kai Yuan, because of the cooperation he provided during the SEC’s investigation.

    China DAP PTC Inc.

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  • Former Direct Access Partners Executives Sentenced to Two Years in Prison

    Two former executives of now-defunct Direct Access Partners LLC (DAP) were each sentenced to two years in prison for their roles in a bribery scheme involving Venezuela’s state-owned economic development bank, Banco de Desarrollo Económico y Social de Venezuela (Bandes).  On December 8, Tomas Clarke, the former Miami-based senior vice president of DAP, was sentenced to two years in prison and ordered to forfeit nearly $5.8 million for his role.  On December 4, Ernesto Lujan, the former managing partner at DAP’s Miami office, was sentenced to two years in prison and ordered to forfeit $18.5 million. The pair pleaded guilty in August 2013 in the U.S. District Court for the Southern District of New York to conspiracy to violate the FCPA, the Travel Act, and to commit money laundering, as well as substantive counts of these offenses. As described in a prior FCPA Scorecard post, DAP, a New York based broker-dealer, earned more than $60 million in commissions from trades placed by Bandes over a five year period.  To obtain that business, DAP paid millions of dollars in bribes to a Bandes official, Maria De Los Angeles Gonzalez De Hernandez (Gonzalez), often routing them through third parties and offshore bank accounts in Switzerland and elsewhere.  Clarke and Lujan are two of five former DAP executives to plead guilty in connection with this case.  In March, two other former executives, including DAP’s former CEO, were each sentenced to four years in prison.  One other former executive, who pleaded guilty in August 2013, has yet to be sentenced.  Gonzalez, who pleaded guilty in November 2013 in the U.S. District Court for the Southern District of New York to conspiracy to violate the Travel Act and to commit money laundering, as well as substantive counts of these offenses, also is awaiting sentencing.

    DAP SDNY

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  • Former Direct Access Partners Executives Sentenced to Four Years in Prison for FCPA Violations

    On March 27, Benito Chinea, the former CEO of now-defunct Direct Access Partners LLC (DAP), and another DAP employee were each sentenced to four years in prison, fined $40,000, and ordered to forfeit a total of more than $6 million for their role in a bribery scheme involving Venezuela’s state-owned economic development bank, Banco de Desarrollo Económico y Social de Venezuela (Bandes).  DAP, a New York based broker-dealer, earned more than $60 million in commissions from trades placed by Bandes over a five year period.  To obtain that business, DAP paid millions of dollars in bribes to a Bandes official, Maria De Los Angeles Gonzalez De Hernandez (Gonzalez), often routing them through third parties and offshore bank accounts in Switzerland and elsewhere.  The pair previously pleaded guilty last December in the U.S. District Court for the Southern District of New York to conspiracy to violate the FCPA and the Travel Act.  Several other DAP employees also pleaded guilty to similar charges in 2013, and Gonzalez herself pleaded guilty to conspiracy to violate the Travel Act and to commit money laundering.  The SEC also brought an enforcement action against Chinea and several other DAP employees; that action was stayed pending resolution of the criminal matters.

    Venezuela Direct Access Partners LLC DAP

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