Tyco to Pay Over $26 Million to Settle Charges of FCPA Violations
Tyco International agreed to pay more than $26 million to settle charges of Foreign Corrupt Practices Violations. Subsidiaries of the Switzerland-based manufacturer perpetuated schemes that typically involved payments of fake “commissions” or the use of third-party agents to funnel money improperly to obtain lucrative contracts, the Securities and Exchange Commission alleged. $13.68 million of the total went to the Department of Justice as part of a non-prosecution agreement to settle criminal charges stemming from the alleged violations, which include misstated books and records, failure to maintain internal controls, and violations of FCPA anti-bribery provisions.
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The SEC alleged that Tyco subsidiaries operated 12 different illicit payment schemes around the world starting before 2006 and continuing until 2009. In Germany, agents of a Tyco subsidiary paid third parties to secure contracts or avoid penalties or fines in several countries, said the SEC. These payments were falsely recorded as “commissions” in Tyco’s books and records when they were in fact bribes to pay off government customers, the SEC alleged. Tyco’s benefit as a result of these illicit payments was more than $4.6 million.
Additionally, Tyco’s subsidiary in China signed a contract with the Chinese Ministry of Public Security for $770,000 but reportedly paid about $3,700 to the “site project team” of a state-owned corporation to be able to obtain the contract. This amount was improperly recorded as a commission, the SEC said. Tyco’s subsidiary in France recorded payments to individuals from 2005 to 2009 for “business introduction services.” However, according to the SEC, one of the individuals receiving payments was a security officer at a government-owned mining company in Mauritania, and many of the earlier payments were deposited in the official’s personal bank account in France. In Thailand, Tyco’s subsidiary had a contract to install a CCTV system in the Thai Parliament House in 2006, and paid more than $50,000 to a Thai entity that acted as a consultant. The invoice for the payment refers to “renovation work,” but Tyco is unable to ascertain what, if any, work was actually done, the SEC said.
The SEC alleged that another scheme occurred in Turkey, where Tyco’s subsidiary retained a New York City-based sales agent who made illicit payments involving the sale of microwave equipment in September 2006 to an entity controlled by the Turkish government. Employees at Tyco’s subsidiary were well aware that the agent was paying foreign government customers to obtain orders, the SEC said. One internal e-mail stated, “Hell, everyone knows you have to bribe somebody to do business in Turkey. Nevertheless, I’ll play it dumb if [the sales agent] should call.”
In arriving at the settlements, the SEC and DoJ considered Tyco’s voluntary disclosure, cooperation in the investigation, and remedial measures. According to DoJ, that remediation includes the implementation of an enhanced compliance program, the termination of employees responsible for the improper payments and falsification of books and records, the severing of contracts with the responsible third-party agents and the closing of subsidiaries due to compliance failures.
The SEC press release is available here, and the DoJ press release is available here.