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FCPA Blog Daily News

« Former General Cable exec settles FCPA allegations | Main | Reconsidered: Odebrecht and Braskem are on our FCPA Top Ten list »
Thursday
Dec292016

General Cable pays $75 million for FCPA settlement

General Cable Corporation will pay the DOJ and SEC $75.75 million to resolve FCPA violations in Angola, Bangladesh, China, Egypt, Indonesia, and Thailand.

Between 2002 and 2013, General Cable subsidiaries paid $13 million to third-party agents and distributors. Some of the money was used to bribe government officials to obtain business, netting the company $51 million in profits.

With the DOJ, Kentucky-based General Cable entered into a non-prosecution agreement on December 22 and agreed to pay a $20.4 million criminal penalty.

In the SEC settlement, General Cable agreed to pay more than $55.3 million in disgorgement and prejudgment interest.

The combined penalties and disgorgement are about $75.75 million. 

The SEC settled the case through and internal administrative order (pdf) dated December 29 and didn't go to court. It said General Cable violated the anti-bribery, books and records, and internal controls provisions of the FCPA.

General Cable (NYSE: BGC) makes copper, aluminum, and fiber optic wire and cable for the energy, specialty, and communications markets. Revenue last year was about $3.6 billion.

The company admitted that some employees at the parent company and in subsidiaries, including executives, knew that overseas units were using third-party agents and distributors to bribe foreign officials to obtain and retain business.

"In one case the foreign subsidiary made corrupt payments directly to foreign officials," the DOJ said

The bribery started in 2002. In 2011, employees from a General Cable subsidiary "expressed concerns to regional and parent-level executives."

But "General Cable nevertheless failed to implement and maintain a system of internal accounting controls designed to detect and prevent such corruption and otherwise illegal payments," the DOJ said. 
 
The bribes were discussed openly in email messages.

  • In June 2012, a sales agent in Bangladesh emailed an executive and other employees of General Cable’s subsidiary in Thailand and said that a portion of the money that the Thailand subsidiary paid the sales agent would “be shared by decision makers in [the] customer, concerned higher ups in [the] Ministry[,] and some top executives at [the] bidder.” 
  • In May 2013, the executive approved a payment to the Bangladeshi sales agent. 
  • In 2011, the same executive, who was at that time working at General Cable’s Thailand subsidiary, informed a General Cable executive that payments to a distributor in Thailand were being used for corrupt purposes. 

General Cable didn't investigate the payments, which continued to be made.

The SEC said General Cable had a Code of Ethics that applied globally to its subsidiaries and employees. The Code prohibited employees from "offering or giving any person any payment which may be illegal or unethical."

But the company didn't provide adequate "guidance or training . . . to ensure compliance with the FCPA," the SEC said.

As a result, some General Cable employees weren't aware of the FCPA or that it applied to them. So although they signed compliance questionnaires representing that they knew and understood the company's Code of Ethics, they didn't do anti-corruption due diligence on third-party entities or require FCPA compliance in contracts with third parties.

But the DOJ said it gave the the company a non-prosecution agreement and a discount of 50 percent off the bottom of the U.S. Sentencing Guidelines fine range. General Cable "voluntarily and timely disclosed" the FCPA violations, the DOJ said. The company also cooperated fully.

It conducted a thorough internal investigation and made foreign-based employees available for interviews in the United States. It also produced documents, including translations, to the DOJ from foreign countries "in ways that did not implicate foreign data privacy laws," the DOJ said.

Some information General Cable disclosed to the DOJ was "outside the scope of its initial voluntary self-disclosure" and included information about individuals and third parties involved in the FCPA violations.

General Cable also took "employment action" against 13 employees who participated in the misconduct, resulting in their departure from the company. And it terminated relationships with 47 third-party agents and distributors who had a role in the bribery.

In a statement Thursday, General Cable said as of the third quarter of 2016, it had accrued $33 million for the FCPA-related investigations and will record a charge of about $49.3 million in the fourth quarter of 2016.

In a separate administrative order (pdf) released Thursday not related to the FCPA action, the SEC penalized General Cable $6.5 million for other accounting violations. The SEC said the company's Brazil unit overstated its inventory by about $47 million from 2008 until the second quarter of 2012.

Michael T. McDonnell, President and CEO said Thursday: “[O]ver the past two years, we have invested significant time and resources to implement a world-class compliance program. At the same time, we have transformed our business strategy under an entirely refreshed strategic leadership team committed to maintaining a strong performance and compliance culture. We are a different and better company today as a result of these actions.”

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Richard L. Cassin is the publisher and editor of the FCPA Blog.