SEC Files Settled FCPA Action Centered On Improper Travel
A “world tour” was at the center of FCPA violations by two employees of FLIR Systems, Inc., In the Matter of Stephen Timms, Adm. Proc. File No. 3-16281 (Nov. 17, 2014). Travel was also the focus of the Commission’s latest FCPA case, In the Matter of Bruker Corporation, Adm. Proc. File No. 3-16314 (December 15, 2014).
Bruker Corporation, based in Billerica, Massachusetts, manufactures and markets analytical tools and life science and materials research systems. The firm manages its China operations through the Shanghai and Beijing representative offices of the Asia-based subsidiaries of four divisions.
From 2005 through 2008 the Bruker China offices paid about $119,710 to fund 17 trips for Chinese government officials. For the most part the trips were not related to any legitimate business. The trips were recorded as business expenses. The firm had about $1,131,740 in profits from contracts obtained from the state owned enterprises whose officials participated in the rips. Examples of the trips include:
- In 2006, as part of a sales contract with a state owned enterprise, the China offices paid for training expenses for a Chinese government official who executed the sales contracts for the SOEs. The so-called training expenses included payment for sightseeing, tour tickets, shopping and other leisure activities in Frankfurt and Paris.
- In 2007 the China offices paid for three Chinese government officials to visit Sweden for a conference. The payments also covered several days of sightseeing in Sweden, Finland and Norway.
- In 2009 the China offices paid for two Chinese government officials to travel to New York where the firm does not have any offices and Los Angeles where the firm does have facilities but the expenses included sightseeing activities. During the year the China offices also paid for three Chinese government officials to visit destinations in Europe for sightseeing.
- In 2010 the China offices paid for three Chinese officials to visit Frankfurt, Heidlberg, Stutgart, Munich, Salzburg, Liz, Graz and Vienna.
- In 2011 those offices paid for officials from seven state owned enterprises to go on sightseeing visits to destinations which included Austria, France, Switzerland, Italy and the Czech Republic.
From 2008 through 2011 the China offices also paid $111,228 to Chinese government officials through 12 Collaboration Agreements. The agreements were executed with a Chinese official who, in certain instances, was paid directly. Generally those agreements provided that the state owned enterprise was to provide research on Bruker products or use them in their demonstration labs. In fact no work was provided. The firm had profits of about $583,112 from contracts obtained from the state owned enterprises.
Throughout the period the firm had inadequate internal controls and FCPA compliance procedures, according to the Order. The firm failed to monitor and supervise its senior executives, did not have an independent compliance staff or an internal audit function that had authority to intervene into management decisions and take appropriate action. When the company distributed its training presentations, code of conduct and FCPA policy it failed to translate the documents into the local language.
Bruker discovered the improper payments in 2011. The firm promptly initiated an investigation, self-reported to the SEC and the DOJ and initiated a broad review of the China operations. Bruker also initiated remedial actions which included terminating senior staff at each China office, revising its compliance program and updating and enhancing its financial accounting controls. Throughout the process the firm provided what the Commission called “extensive, through and real-time cooperation.”
The Order alleges violations of Exchange Act Sections 13(b)(2)(A) and 13(b)(2)(B).
To resolve the matter the company consented to the entry of a cease and desist order base on the Sections cited in the Order. In addition, the firm will pay disgorgement of $1,714,852, prejudgment interest and a civil penalty of $375,000.