The Securities and Exchange Commission Monday charged Bruker Corporation with violating the Foreign Corrupt Practices Act by paying for sightseeing trips and shopping expenses for Chinese government officials responsible for buying the company's products.
Bruker agreed to pay about $2.4 million to settle the SEC’s charges.
The SEC used an administrative order to settle the case and didn't go to court.
Billerica, Massachusetts-based Bruker makes scientific instruments. It self-reported its misconduct and "provided extensive cooperation during the SEC’s investigation," the SEC said.
In March 2012, Bruker said in an SEC filing that it fired workers at its Bruker Optics subsidiary in China and Hong Kong who failed to comply with "corporate policies and standards of conduct." It also terminated third-party agents.
The SEC said Monday Bruker "lacked sufficient internal controls to prevent and detect approximately $230,000 in improper payments out of its China-based offices that falsely recorded them in books and records as legitimate business and marketing expenses."
Bruker made about $1.7 million in profits from bribe-tainted contracts with state-owned enterprises, the SEC said.
Kara Brockmeyer, chief of the SEC enforcement division’s FCPA unit, said: “Bruker’s lax internal controls allowed employees in its China offices to enter into sham ‘collaboration agreements’ to direct money to foreign officials and send officials on sightseeing trips around the world."
A Bruker office in China paid more than $111,000 to Chinese government officials under a dozen "suspicious collaboration agreements" that didn't require any work from the Chinese state-owned enterprises.
Bruker used the sham agreements to pay for one official's shopping trips to Frankfurt and Paris. Some officials went to New York and Los Angeles. The travel had no business purpose. There were also sightseeing trips to the Czech Republic, Norway, Sweden, Switzerland, and Italy, the SEC said.
An affirmative defense in the FCPA allows companies to pay foreign officials for expenses that are “reasonable and bona fide” and relate directly to “the promotion, demonstration, or explanation of products or services." 15 U.S.C. §§ 78dd-1(c)(2)(A) and 78dd-2(c)(2)(A). Bruker's payments under sham agreements for non-business travel didn't fall within the exception.
The SEC’s administrative order found that Bruker violated the internal controls and books and records provisions of the Securities Exchange Act of 1934. The company agreed to pay $1,714,852 in disgorgement, $310,117 in prejudgment interest, and a $375,000 penalty.
Bruker consented to the order without admitting or denying the findings.
The SEC said it "considered the company’s significant remedial acts as well as its self-reporting and cooperation with the investigation when determining a settlement."
Bruker Corporation trades on NASDAQ under the symbol BRKR.
The SEC's order as Securities and Exchange Act of 1934 Release No.73835, Accounting and Auditing Enforcement Release No. 3611, and Administrative Proceeding File No. 3-16314 (all dated December 15, 2014) is here (pdf).
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.