In an SEC filing this week, global real estate services firm CB Richard Ellis (CBRE) disclosed possible FCPA violations in China.
It said payments by employees for entertainment and gifts to Chinese government officials were discovered during an internal investigation. The company didn't say how much may have been improperly paid, but characterized the amount as "minor." The payments may also have violated local law, it said.
The antibribery provisions prohibit the giving or offering to give anything of value to a foreign official to obtain or retain business. See, e.g., 15 U.S.C. §78dd-1(a) [Section 30A of the Securities & Exchange Act of 1934]. So even "minor" payments or gifts can be the basis for a violation. And failing to accurately account for small payments or gifts, especially those that may violate the FCPA and local law, can be a books and records offense. See 15 U.S.C. § 78m and SEC Staff Accounting Bulletin: No. 99 – Materiality.
CBRE self disclosed the payments to the DOJ and SEC in February this year. It has been cooperating with the agencies and has taken other unspecified "remedial measures."
The company said it also started a separate internal investigation during the third quarter of 2010. It involves the "use of a third party agent in connection with a purchase in 2008 of an investment property in China for one of the funds" CBRE manages. The investigation is ongoing, according to the statement, and the results will be reported to the DOJ and SEC.
The China real estate market was also involved in Morgan Stanley's SEC disclosure in February 2009. The bank said in a short statement then that it "uncovered actions initiated by an employee based in China in an overseas real estate subsidiary that appear to have violated the Foreign Corrupt Practices Act. Morgan Stanley terminated the employee, reported the activity to appropriate authorities and is continuing to investigate the matter."
In December 2008, Morgan Stanley's China-based managing director of real estate in Shanghai, Garth Peterson, left the bank. And the firm's global head of property investing, Sonny Kalsi, was placed on administrative leave. Some of Morgan Stanley's property projects involved investments with government-linked Chinese enterprises. Several high-ranking Chinese officials from Shanghai were arrested in 2008 and 2009 for corruption in connection with deals in the property market.
CB Richard Ellis Group, Inc. trades on the NYSE under the symbol CBG.
Download CBRE's October 5, 2010 Form 8-K here.