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Sep 18, 2018

United Technologies settles FCPA action

Company will pay almost $14 million to resolve SEC enforcement

United Technologies Corporation (UTC) has agreed to pay almost $14 million to settle allegations it violated the FCPA through subsidiaries’ actions in Asia.

The SEC alleges in an administrative proceeding that UTC from around 2012 until 2014, via its subsidiary Otis Elevator Company, made unlawful payments to Azerbaijan officials to facilitate the sales of elevator equipment. According to the agency, improper payments were also made in connection with a kickback scheme to sell elevators in China in 2012.

In addition, the SEC says UTC through International Aero Engines – a joint venture of UTC division Pratt & Whitney – made ‘unsupported payments’ to an agent from 2009 to 2013, ‘disregarding the high probability that at least some of the money would be used to make unlawful payments to a Chinese official to obtain confidential information to sell engines to a Chinese state-owned airline.’

According to the SEC, from 2009 through 2015, UTC – through Pratt & Whitney and Otis Elevator Company – improperly provided trips and gifts to foreign officials in China, Kuwait, South Korea, Pakistan, Thailand and Indonesia in connection with its business.

UTC policies required the company’s legal department to review and approve all leisure travel and entertainment as gifts to a foreign official, the SEC states. But it adds that employees frequently circumvented this requirement by submitting foreign officials’ travel for approval without disclosing the leisure and entertainment component. On occasion, the travel was included as a cost component in the contract with the end-customer and was therefore not submitted for appropriate approval, the agency says.

The SEC alleges that, with regard to these various alleged schemes, UTC failed to accurately and fairly record transactions in its books and records and failed to devise and maintain a sufficient internal accounting controls system.

‘US companies with global operations must implement policies and procedures that prevent bribery and motivate employees to perform ethically,’ Tracy Price, deputy chief of the SEC enforcement division’s FCPA unit, says in a statement. ‘Issuers with weak internal accounting controls open the door to corruption and other financial misconduct.’

Under the settlement, UTC agrees – without admitting or denying wrongdoing – to pay roughly $9 million in disgorgement, $919,392 in interest and a $4 million civil penalty.

The SEC states that, in reaching a settlement with the Farmington, Connecticut-based company, it took into account remedial acts UTC took promptly and co-operation it extended to agency officials. UTC self-reported the alleged misconduct and provided facts developed during its internal investigation.

The agency adds that UTC co-operated by timely producing documents – including key binders and translations of documents as needed – and making current or former employees available, including those who needed to travel to the US.

In addition, the SEC says UTC gave the agency information about its remedial efforts, including terminating employees and third parties responsible for the alleged misconduct and enhancements to its internal accounting controls.

According to the commission, UTC also:

  • Strengthened its global compliance organization
  • Enhanced its policies and procedures regarding travel, due diligence and the use of third parties
  • Created positions to address potential risks
  • Increased training of employees on anti-bribery issues.

The company says in a statement on the settlement: ‘We are pleased to have reached a final civil administrative resolution with the SEC regarding these matters. Following our voluntary disclosure in 2013 and our own internal investigations, we took immediate steps to reinforce that UTC is committed to doing business the right way. This included disciplinary action including employee terminations, enhancement of our internal controls, policies and compliance resources, and more robust training programs.’