Nutritional product marketing firm Usana Health Sciences (USANA) disclosed in a regulatory filing Monday that the Department of Justice and the Securities and Exchange Commission advised the company they’ve closed their respective Foreign Corrupt Practices Act investigations and will not be filing any charges.
In an annual report filed with the SEC in February 2018, USANA disclosed it was conducting a voluntary internal investigation into potential FCPA violations regarding certain conduct and policies at its China subsidiary BabyCare, “including BabyCare’s expense reimbursement policies.” During that time, the company also announced it had voluntarily contacted the SEC and the Justice Department to advise both agencies that an internal investigation was underway.
Specifically, USANA disclosed that “a material weakness in our internal control over financial reporting was reported” for the fiscal year ended Dec. 31, 2016. The material weakness related to:
- A member of senior management at BabyCare, who failed to demonstrate integrity and ethical values;
- Ineffective training of BabyCare personnel regarding compliance with relevant laws and regulations impacting financial reporting; and
- Ineffective controls over the review and approval of cash disbursements and supporting documentation at BabyCare.
“The ineffectiveness of these internal controls did not result in a restatement of previously issued interim or annual consolidated financial statements,” the company stated in its disclosure. USANA said it subsequently provided additional information to both the SEC and Justice Department and cooperated with both agencies since first advising them of the investigation.
During fiscal year 2017, the company implemented several actions to remediate the issues it discovered. These compliance actions involved:
- Terminating certain BabyCare employees and senior management whose conduct may have violated the FCPA;
- Enhancing its global anti-corruption and ethics program, including additional training and education at BabyCare, with the objective of promoting company-wide ethics and preventing and detecting violations of applicable anti-corruption laws, including the FCPA; and
- Revising and communicating BabyCare’s accounting controls, policies, and procedures relating to signing authority, supporting documentation requirements, and reimbursable expenses so they now contain additional detail with the submission of supporting documentation to provide further transparency.
In Monday’s regulatory filing, the company said it was informed by the SEC on June 24 that the agency “had closed its investigation and declined any enforcement action. The SEC stated that it had reached this conclusion based on a number of factors, including, but not limited to, the company’s (i) prompt, voluntary self-disclosure of the matters underlying the investigation, (ii) thorough internal investigation, (iii) full cooperation with the SEC, and (iv) remediation of the matters underlying the investigation.”
Additionally, on June 26, the Justice Department “informed the company by letter that it had closed its investigation into this matter, noting the company’s cooperation during the investigation.
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