THE FCPA: A CONTINUOUS SERIES OF PAYMENTS AND PROMISES
The FCPA continues to be a key area of focus for the SEC with the filing of a settled administrative proceeding, In the Matter of Avery Dennison Corporation, File No. 3-13564 (Filed July 29, 2009); see also SEC v. Avery Dennison Corp., Civil Action No. CV 09-5493 (C.D. Cal. Filed July 29, 2009). This proceeding, based on a series of alleged FCPA violations, concerns Avery (China) Co. Ltd., an indirect subsidiary of California multinational, Avery Dennison Corporation. As with many FCPA cases, Avery discovered the violations, conducted an internal investigation, and self-reported to the Commission.
The Order for Proceedings is based on a series of payments and promises of payments by Avery China’s Reflective Division. That division sold materials typically used in printing, road signs and emergency vehicle marking. In China, the Ministry of Public Security requires that all such products meet the requirements of an authorized government entity such as the Traffic Management Research Institute, known as the Wuxi Institute. The Reflective Division of Avery China sought to obtain business from this Institute. The series of payments and promises involving the Institute and others are:
• In January 2004, an Avery China sales manager went to a meeting with officials from the Institute and bought each a pair of shoes with a combined value of $500.
• In May 2004, the subsidiary hired a former Wuxi Institute official as a sales manager because his wife was still employed at the Institute and was in charge of two projects the company wanted to pursue.
• In August 2004, Avery China obtained two contracts to install new graphics on police cars through the Institute. The Reflectives China Sales Manager agreed that the total sales price of the contracts would be inflated so the additional charges could be paid back to the Institute as a “consulting fee.” Total sales under these contracts were about $677,000, with profits of about $363,000. The kickback payments, which would have been about $41,000, were discovered by another division and halted prior to payment.
• In December 2002, a Reflectives Division salesman hosted a sightseeing trip for five government officials. Two reimbursement requests were used to conceal the expenses for the trip.
• In August 2004, the Reflectives China National Manager approved a kickback to another state owned enterprise to secure a sales contract. Total sales under the contract were about $106,000, with profits of about $61,000. The $2,415 kickback was not paid after it was discovered by company officials.
• In late 2005, during a sales conference hosted by Avery China at a famous tourist destination, the Reflectives China National Sales Manager paid for sightseeing trips for at least four government officials.
• In August 2005, after self-reporting to the SEC, the company discovered two additional instances of possible improper payments by acquired companies.
To resolve the matter, the company agreed to cease and desist order from committing or causing any violations and future violations of Sections 13(b)(2)(A) and (B) of the Exchange Act. The company also agreed to pay disgorgement of about $273,000 and prejudgment interest. In the related civil action the company agreed to a penalty of $200,000. See also Lit. Rel. 21156 (Jul. 29, 2009).