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FCPA Blog Daily News

Entries in India (222)

Thursday
Feb142008

Wabtec Resolves FCPA Violations Related To India

Westinghouse Air Brake Technologies Corporation ("Wabtec") will pay about $675,000 and enter into a deferred prosecution agreement to resolve Foreign Corrupt Practices Act offenses caused by its Indian subsidiary, Pioneer Friction Limited. In the Securities and Exchange Commission's administrative proceeding, Wabtec will disgorge $259,000 and prejudgment interest of $29,351. It will also retain an independent consultant to review and make recommendations concerning its FCPA compliance. The SEC's federal civil action further requires Wabtec to pay a civil penalty of $87,000. Separately, the company will pay a fine of $300,000 to the Department of Justice and enter into a non-prosecution agreement imposing a strict compliance program and further cooperation with the DOJ.

In 2006, Pennsylvania-based Wabtec -- which has about 5,000 employees worldwide and manufactures brakes and related products for train locomotives and cars, among other things -- discovered that over the prior five years, Pioneer had paid more than $137,400 in cash to various officials from an agency in India’s Ministry of Railroads. According to the DOJ, "The payments were made in order to: assist Pioneer in obtaining and retaining business with the [Indian Railway Board]; schedule pre-shipping product inspections; obtain issuance of product delivery certificates; and curb what Pioneer considered to be excessive tax audits." Wabtec investigated the payments and voluntarily disclosed its findings to U.S. authorities. It also took remedial compliance measures.

Wabtec's consolidated financial statements include Pioneer's results. So in addition to causing Wabtec to violate the FCPA's antibribery provisions, Pioneer's financial improprieties triggered Wabtec's violation of the books-and-records and internal controls provisions of the FCPA. According to the SEC's complaint, Pioneer's agents "submitted invoices for materials that Pioneer did not receive in whole or in part. Pioneer issued checks to the marketing agent for the amount of the invoice and the marketing agent returned cash (less the service fee and any amount owed for any material actually received) to Pioneer. Pioneer maintained the cash generated through the use of marketing agents in a locked metal box, and documented each unlawful payment on a voucher that was maintained with the cash. Pioneer also kept track of the unlawful payments on a spreadsheet. The vouchers and the spreadsheet were maintained separately from Pioneer's other books and records and were not subject to review during annual audits."

As a result, Wabtec violated Sections 13(b)(2)(A), 13(b)(2)(B) and 30A of the Securities Exchange Act of 1934 [15 U.S.C. §§ 78m(b)(2)(A), 78m(b)(2)(B) and 78dd-1].

The SEC's complaint noted that although Wabtec's Code of Conduct in effect from 2001 to 2006 prohibited giving anything of value to improperly influence any person in a business relationship with Wabtec, the company had no FCPA policy and did not provide training or education to any of its employees, agents, or subsidiaries regarding the requirements of the FCPA. Wabtec also failed to establish a program to monitor its employees, agents, and subsidiaries for compliance with the FCPA.

Wabtec trades on the New York Stock Exchange under the symbol WAB.

View the SEC's Litigation Release No. 20457 (February 14, 2008) here.

View the SEC's Complaint in SEC v. Westinghouse Air Brake Technologies Corporation, Civil Action No. 08-CV-706 (E.D.Pa.) here.

View the DOJ's February 14, 2008 Release here.

Tuesday
Dec182007

Making History In Pune

Pune, India was the site of a groundbreaking conference on December 16, 2007 about the U.S. Foreign Corrupt Practices Act. The first-ever FCPA compliance event to be staged in India was organized by Indiaforensic, a non-profit group for anti-fraud professionals. Presenters included Anil Roy, partner and head of Grant Thornton India, Sidarth Khasu, manager, E & Y, India, Jagdeep Singh, associate director, KPMG, Dr Vishnu Kanhere, director of KCPL and Vidya Rajarao, Associate Director of PWC India. Host Indiaforensic was founded in 2003 by Chartered Accountant Mayur Joshi (pictured above), who serves as the group's chairman.

Congratulations to Indiaforensic for this unique event. And our thanks to Pradeep Akunoor for the heads up.

Tuesday
Oct232007

Compliance Resources -- India and Nigeria

Signs that the influence of the U.S. Foreign Corrupt Practices Act is felt around the world come today from India and Nigeria.

Pradeep Akkunoor lets us know about a December 16, 2007 FCPA Conference sponsored by Indiaforensic. It's a non-profit group founded in 2003 by Chartered Accountant Mayur Joshi to raise compliance awareness and bring together the anti-fraud professionals in India. "We call it India's first organized effort to combat white-collared crime," says Mr. Akkunoor. "What began as a one-man effort is today a network of over 600 professionals from across India. Indiaforensic conducts research, informs and supports those engaged in fighting fraud around the country." Messrs. Akkunoor and Joshi also run Indiaforensic Consultancy Services, which specializes in fraud examinations and forensic accounting in India, as well as training and education in bank forensic accounting, anti-money laundering and corporate forensic accounting.

From Nigeria, we hear from ddcheck.com. It does one thing: due diligence checks on Nigerian companies. Run by a group of FCPA-savvy lawyers accredited by the Nigerian Corporate Affairs Commission to conduct public-records searches, it has an interesting approach. No up-front fees, and if the company being searched doesn't exist, there's no charge at all. The people at ddcheck.com acknowledge that "Nigerians are frequently considered 'high risk' business partners . . . . Until now, international businesses have found it very difficult to obtain urgent and reliable background or due diligence information about Nigerian companies. We solve this problem for you by obtaining all the important information you want from the Nigerian Corporate Affairs Commission and other official sources. We save you significant time, effort and money so that you can easily verify information about Nigerian companies quickly, conveniently and confidentially." Finally, if the target or its principals don't look legitimate, ddcheck.com will help their client file reports with appropriate anti-corruption agencies.

Monday
Oct012007

York International Pays $22 Million To Resolve Global Corruption Case

Internal Investigation into Oil-For-Food Abuses Uncovered Widespread Bribery

York International Corporation has reached a settlement with U.S. prosecutors of numerous violations of the U.S. Foreign Corrupt Practices Act -- relating to bribes paid under the United Nations oil-for-food program and kickbacks for other government contract work in Bahrain, Egypt, India, Turkey, the United Arab Emirates and China. York -- a subsidiary of Johnson Controls, Inc. since 2005 -- provides heating, ventilation, air conditioning, and refrigeration products and services worldwide.

Under York's three-year deferred prosecution agreement with the U.S. Department of Justice, it will pay a $10 million criminal penalty, cooperate with the DOJ’s related investigations and appoint an independent compliance monitor. York also consented to the Securities and Exchange Commission’s filing of a complaint for FCPA violations and agreed to disgorge about $10 million and pay $2 million in civil penalties.

From 2001 through 2006, York paid over $7.5 million in bribes through subsidiaries and agents to obtain work on commercial and government projects throughout the world. York referred to the payments internally as "consultancy payments" but no bona fide services were involved. It made 854 improper consultancy payments on more than 770 contracts -- 302 projects involved government end-users, such as government-owned companies, public hospitals, or schools.

The payments violated the anti-bribery provisions of the FCPA, and York failed to devise and maintain an effective system of internal controls to prevent or detect the bribes. It also failed to accurately record in its books and records the kickbacks to Iraq, bribes in the UAE, and the bogus consultancy payments made in various countries. York consented to the entry of a final judgment with the SEC permanently enjoining it from future violations of Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934. The DOJ’s three-count criminal Information charged York with conspiracy to commit wire fraud and to falsify books and records in violation of 15 U.S.C. §§ 78m(b)(2)(A), 78m(b)(5) and 78ff(a).

York self-reported the violations and worked with the DOJ and the SEC to investigate the illegal conduct. The criminal Information also mentions "Employee A" and “Employee B,” citizens of the United Kingdom and Syria respectively, who were involved in the bribery, as well as "Company X," a consulting company based in Jordan that acted as a sales agent for York in the Middle East. They have not yet been charged with FCPA violations.

Among the details mentioned by prosecutors, York’s Danish subsidiary, which sells refrigeration equipment to ship builders and ship yards owned by the Chinese government, made illegal payments from 2004 through 2006 to agents and to Chinese officials connected with the shipyards. “Hundreds of thousands of dollars for nebulous and undocumented services” were processed through York’s Danish subsidiary, which also provided Chinese ship yard employees with lap top computers and other electronics.

York's parent company, Johnson Controls, Inc. (NYSE: JCI) will not be prosecuted on the facts admitted by York.

View the DOJ’s October 1, 2007 News Release Here.

View the October 1, 2007 Deferred Prosecution Agreement and Criminal Information Here.

View the SEC’s Litigation Release No. 20319 / October 1, 2007 Here.

View the SEC’s Complaint Here.

Wednesday
Sep262007

A.T. Kearney's Former India President Violated The FCPA

The U.S. Securities and Exchange Commission announced on September 25, 2007 two settled enforcement actions based on violations of the books and records provisions of the Foreign Corrupt Practices Act. The actions involved the founder and former president of A.T. Kearney Ltd's India business, Chandramowli Srinivasan, and Kearney's former parent company, Electronic Data Systems Corp.

Between 2001 and 2003, Srinivasan made corrupt payments of over $720,000 in the form of cash transfers, gifts and services to employees of two private energy companies partly owned by the Indian government in order to retain their buisness. To fund the bribes, Srinivasan and a Kearney-India contract accountant fabricated invoices that Srinivasan subsequently signed to authorize payment. This caused EDS to record the payments incorrectly in its accounting books and records. EDS recognized over $7.5 million in revenues from the Indian companies' contracts after Kearney-India began paying the bribes.

For violating Sections 13(b)(5) and 30A of the Securities Exchange Act of 1934, Srinivasan paid a civil penalty of $70,000. EDS paid $358,800 in disgorgement and $132,102 in prejudgment interest for violating Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Exchange Act Rules 12b-20 and 13a-13, and Regulation FD in connection with a separate offense.

Kearney, which EDS owned from 1995 to 2006, is now "an independent, privately owned management consultancy, with 100 percent of the equity owned by officers in the firm." Srinivasan, whom EDS terminated in 2004, resides in Delhi, India. Kearney's change in ownership, Srinivasan's departure from Kearney / EDS and his foreign residency are all reasons why the Department of Justice may decide not to bring criminal prosecutions for the FCPA violations.

Electronic Data Systems Corp. trades on the New York Stock Exchange under the symbol EDS.

View the SEC's September 25, 2007 Litigation Release No. 20296 and Accounting and Auditing Enforcement Release No. 2726 Here.

View the SEC's Complaint Against Srinivasan Here.

View the SEC's Administrative Proceeding Order Against EDS Here.

Friday
Aug242007

Textron's FCPA Violations Caused by Fifth Tier French Subsidiaries

Textron Inc., without admitting or denying books and records and internal controls allegations, consented to the entry of a final judgment with the SEC permanently enjoining it from future violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934, ordering it to disgorge $2,284,579 in profits, plus $450,461.68 in pre-judgment interest, and to pay a civil penalty of $800,000. Textron will also pay a $1,150,000 fine pursuant to a non-prosecution agreement with the DOJ.

The SEC complaint alleges that from approximately 2001 through 2003, two of Textron's fifth tier French subsidiaries that it acquired in 1998 and 1999 authorized and made approximately $650,539 in kickback payments in connection with its sale of humanitarian goods to Iraq under the U.N. Oil for Food Program. The complaint also alleges that Textron's subsidiaries made illicit payments of $114,995 to obtain thirty-six contracts in the United Arab Emirates, Bangladesh, Indonesia, Egypt, and India from 2001 to 2005.

View the SEC’s Litigation Release Here.

View the SEC’s Complaint Here.

View the DOJ's Press Release Here.

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