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SEC, DOJ Decline Prosecution After Companies Self-Report Bribery of Chinese Officials

Thursday, June 09, 2016
Sandler, Travis & Rosenberg Trade Report

The Securities and Exchange Commission announced June 7 non-prosecution agreements with two unrelated companies that will forfeit gains connected to bribes paid to Chinese officials by foreign subsidiaries. The NPAs stipulate that the companies are not charged with violations of the Foreign Corrupt Practices Act and do not pay additional monetary penalties. In addition, consistent with its ongoing pilot program encouraging self-disclosure of FCPA violations, the Department of Justice has closed its inquiries into both matters without filing charges.

One company will pay $652,452 in disgorgement plus $19,433 in interest after employees at its foreign subsidiary violated its written policies by providing improper gift cards, meals and entertainment to officials at state-owned entities to build business relationships and induce them to purchase more services than they actually needed. The second company will pay $291,403 in disgorgement plus $30,655 in interest after its subsidiary made approximately $290,000 in improper cash payments and gifts, including gift cards, meals, travel, accommodations and entertainment, to Chinese officials to receive preferential treatment, relaxed regulatory oversight, or reduced customs duties, taxes and fees. 

An SEC press release states that both companies handled these situations “the right way and got expeditious resolutions as a result.” Specific actions the SEC deemed favorable include the following.

- self-reporting in the early stages of internal investigations

- sharing detailed findings of those investigations and providing timely updates when new information was uncovered

- providing summaries of witness interviews and voluntarily making witnesses available for interviews, including those in China

- voluntarily translating documents from Chinese into English

- terminating employees responsible for the misconduct

- strengthening anti-corruption policies and conducting extensive mandatory training with employees around the world with a focus on bolstering internal audit procedures and testing protocols

Similarly, the DOJ said it was closing its criminal inquiries into these matters based on a number of factors, including the companies’ prompt voluntary self-disclosures, thorough investigations, “fulsome” cooperation, full remediation, steps to enhance their compliance programs, and NPAs with the SEC.

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