Tyco to pay $26 million to settle FCPA charges

25 Sept 2012

Payments to a “site project team” in China, “renovation work” in Thailand, and “business introduction services” in France were all bribes paid to government officials by Swiss-based Tyco International. The SEC reached a settlement with the company today for $13 million dollars. According to court papers the company ran 12 illicit payments schemes between 2006 and 2009.

The misconduct took place in several countries. In China, the company paid $3,700 to a “site project team” of Chinese Ministry of Public Security to in a $770,000 contract, with a financial benefit of $192,500. In Thailand, Tyco supplied closed circuit television cameras to the government under a contract for which it paid $50,000 to a Thai entity that acted as a consultant, billing the work to renovations.

The bigger issues involved Tyco’s German subsidiary TWW, which made a variety of payments to agents in China, Libya, India, Croatia, UAE, Saudi Arabia, Serbia, and Syria to avoid penalties or secure contracts from 2004 to 2009. The SEC alleges the gain from the misconduct by TWW netted Tyco over $4 million. In France, a Tyco subsidiary caused payments to be made to a government official of Mauritania in connection with various contracts with a net benefit of $1.2 million.

While most of the allegations involve Tyco’s security services, the payments by a Tyco healthcare subsidiary in Saudi Arabia arose from US authorities’ now consistent effort to target payments to doctors and hospital officials where it alleges that those officials are acting as instrumentalities of a government. In this case, Tyco’s subsidiary made $1.9 million in illicit payments. Interestingly the government was willing to go into the weeds on this case.

In the case of a Tyco subsidiary in Poland, the SEC alleged that the company offered “service contracts” to Polish public healthcare officials to perform training sessions, clinical studies, and to distribute marketing material. The SEC alleges that five contracts contained falsified information while twenty-six other contracts were incompletely documented. The net payments involved only about $14,000.

The most interesting allegations involve payments by Tyco to a New York City-based agent which routed the funds to Turkish government officials in connection with a contract for microwave equipment. The SEC specifically described internal company emails:

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.” The benefit obtained by Tyco as a result of the September 2006 deal was $44,513.
So that’ll do Tyco, that’ll do. The SEC complaint reminds us that in April 2006 the regulator ordered Tyco to pay $1 in disgorgement and $50 million civil penalty in connection with falsification of its books and records arising out of illicit payments. As a part of that settlement, Tyco commenced a deeper FCPA review, which brings us to today’s settlement based on the uncovered wrongdoing.

The SEC stated that “In arriving at the settlement, the Commission considered Tyco’s extensive efforts to identify and remediate its wrongdoing. Tyco conducted a global review and internal investigation for potential FCPA violations and voluntarily disclosed its findings to the SEC while implementing significant, broad-spectrum remedial measures.” What kind of measures did Tyco take? Well:

Those remedial measures include: the initial FCPA review of every Tyco legal operating entity­ ultimately including 454 entities in 50 separate countries; active monitoring and evaluation of all of Tyco’s agents and other relevant third-party relationships; quarterly ethics and compliance training by over 4,000 middle-managers; FCPA-focused on-site reviews of higher risk entities; creation of a corporate Ombudsman’s office and numerous segment-specific compliance counsel positions; exit from several business operations in high-risk areas; and the termination of over 90 employees, including supervisors, because of FCPA-compliance concerns.
Wow. Well, that sounds pretty thorough to me. But that wasn’t all for Tyco today.

In a separate, parallel action, the DOJ levied a $13.68 million fine against Tyco Valves & Controls Middle East Inc. (TVC ME), which pleaded guilty to violating the FCPA in federal court in Virginia. The company entered into a non-prosecution agreement with the government. The government alleged that employees at TVC ME, which supplies valve components to the petrochemical, water treatment and commercial construction industries bribed officials at Saudi Aramco to win contracts.

The conspiracy is alleged to have taken place over a ten year period from 1999 – 2009. Tyco agreed to periodic reporting to the government as part of continued remedial efforts.

http://fcpamonitor.com/2012/09/25/tyco-to-pay-26-million-to-settle-fcpa-charges/