DOJ Declines Prosecution in Two FCPA Cases, SEC Executes NPAs

The DOJ declined prosecution in two self-reported potential FCPA actions while the SEC entered into non-prosecution agreements with each issuer. One matter involved Akamai Technologies, Inc. while the other centered on Nortek, Inc.

Akamal Technologies, Inc. provides cloud services for delivering, optimizing and securing online content and business applications. Its shares are listed on NASDAQ Global Select Market. Akamal (Beijing) Technologies, Co. Ltd. is a wholly-owned subsidiary of Akamai in Beijing.

Under China’s regulatory system Akamai-China is required to contract with a third party channel partner to deliver services to end customers. From at least 2013 through 2015 the Regional Sales Manager of the subsidiary schemed with the firm’s channel partner to bribe employees of three firms, two of which were state owned enterprises. To effectuate the scheme the channel partner paid money to the Regional Sales Manager who in turn used portions of the funds to provide expensive gifts to the employees of the firms. Overall about $155,500 was paid to employees of end customers, including about $38,500 in cash to government officials. During the same period gifts worth about $32,000 were given to officials in violation of firm policies. As evidenced by the payments to officials, the firm’s compliance procedures were inadequate.

Akamai self-reported the matter in late December 2014. The misconduct was discovered through a complaint from an employee of the subsidiary. The firm took immediate action to halt the conduct. The sales manager was put on administrative leave and later resigned. The firm also terminated its relationship with the channel partner and undertook a comprehensive review of its compliance programs, implementing remedial measures. Akamai also cooperated with the SEC’s investigation and, in connection with the non-prosecution agreement, paid disgorgement of $662,452 along with prejudgment interest. DOJ declined prosecution, consistent with its Pilot Program.

Nortek, Inc. manufactures and sells a variety of products for residential and commercial constructions and remodeling. Its shares are listed on NASDAQ Global Select Market. Linear Electronics (Shenzhen) Co. was its indirect, wholly owned subsidiary which manufactured products for Nortek from 2009 through 2014.

During the period Nortek owned the subsidiary it systematically made improper gifts to local Chinese officials. Those included cash, gift cards, meals, travel, accommodations and entertainment. In some instances the accounting department entered the illicit payments as entries in various accounts and supported them with false information and documentation. The subsidiary had inadequate internal controls.

After learning of the bribes Nortek took immediate action to end the practice. Those involved were terminated. Significant remedial steps were taken. The firm also cooperated with the SEC’s investigation. In connection with the non-prosecution the firm agreed to pay disgorgement of $291,403 along with prejudgment interest that was paid to secure preferential treatment. The DOJ declined prosecution consistent with its Pilot Program.

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