SEC announces non-prosecution agreements in FCPA cases allegedly involving Chinese officials

The Securities and Exchange Commission (SEC) has agreed to nonprosecution agreements (NPAs) in two cases that both relate to alleged bribes paid to Chinese officials by foreign subsidiaries. One company, Nortek, will pay $291,403, plus $30,655 in interest, the SEC said. Some $290,000 in improper payments and gifts were made to Chinese officials by Nortek’s subsidiary “in order to receive preferential treatment, relaxed regulatory oversight, or reduced customs duties, taxes, and fees,” according to the SEC.

The SEC alleged that from at least 2009 until 2014, various company employees (including a managing director, accounting manager, and customs liaison officer) made or approved more than 400 improper payments and gifts to local government officials in China in order to receive preferential treatment, relaxed regulatory oversight, and/or reduced customs duties, taxes, and fees. These incentives were given to local officials from departments including customs, tax, fire, police, labor, health inspection, environmental protection, and telecommunications.

Both companies self-reported the misconduct promptly, and they cooperated extensively with the ensuing SEC investigations. The non-prosecution agreements stipulate that the companies are not charged with violations of the Foreign Corrupt Practices Act (FCPA) and do not pay additional monetary penalties.

“When companies self-report and lay all their cards on the table, non-prosecution agreements are an effective way to get the money back and save the government substantial time and resources while crediting extensive cooperation,” said Andrew Ceresney, Director of the SEC Enforcement Division.

Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit, added, “Akamai and Nortek each promptly tightened their internal controls after discovering the bribes and took swift remedial measures to eliminate the problems. They handled it the right way and got expeditious resolutions as a result.”

The incidents also show how China is an enforcement priority of the SEC. “Over the past five years, the greatest number of FCPA enforcement actions from any one country has been China. This makes US companies doing business in China a priority for the SEC and DOJ Fully 20% of all FCPA enforcement actions over the past 5 years originated in China.”

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Source: SEC Announces Two Non-Prosecution Agreements in FCPA Cases, SEC Press Release, Jun 7, 2016

SEC agrees to non-prosecution agreements in cases involving alleged bribes to Chinese officials, Inside Counsel, Jun 10, 2016

Nortek Settles FCPA Investigation Over Payments to Chinese Government Officials, Jun 13, 2016

Securities and Exchange Commission

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