If issuers make a facilitation payment in a jurisdiction where that payment is illegal, but they record it accurately, they're essentially creating evidence of a crime.
Entries in Wabtec (2)
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.