New York Securities Fraud Lawyers Blog
The Securities and Exchange Commission (SEC) announced on February 16, 2016 a settlement with Massachusetts-based PTC, Inc. involving alleged violations of the Foreign Corrupt Practices Act (FCPA). In total, PTC was reported to agree to pay approximately $28 million, including nearly $12 million in disgorgement and more than $14 million in a non-prosecution agreement with the United States Department of Justice in a parallel action.
According to the SEC Order, PTC’s China-based subsidiaries made payments to China officials in an effort to win business, including:
- Provided improper travel, gifts, and entertainment totaling nearly $1.5 million to Chinese government officials who were employed by state-owned entities that were PTC customers.
- Gained approximately $11.8 million in profits from sales contracts with state-owned entities whose officials received the improper payments.
- Compensated Chinese officials directly and through third-party agents for sightseeing and tourist activities.
- Provided improper gifts and entertainment to Chinese government officials, including small electronics such as cell phones, iPods, and GPS systems as well as gift cards, wine, and clothing.
- Disguised improper payments as legitimate commissions or business expenses in company books and records.
The SEC Order characterized the payments as bribes, and noted that the company failed to devise and maintain a system of accounting controls. FCPA violations sometimes occur when U.S. companies own or acquire foreign entities, where paying bribes is considered normal business procedure. The SEC, in the Order against PTC, has made clear that these sorts of payments constitute violative bribes and extracted a substantial settlement as a result.
There are many statutes that provide whistleblowers with awards for notifying regulators or violations of law. For example, the Dodd-Frank Act enacted in 2010 provides for an award of 10-30% for whistleblowers who provide information to the SEC that leads to a recovery of $1 million or more. This would include information regarding FCPA violations, and the SEC’s recent 2015 Dodd-Frank Annual Report shows that tips related to the FCPA continue to increase from the inception of the program. Malecki Law regularly represents whistleblowers who report violations of securities laws, including the Dodd-Frank Act.