Scientific instruments manufacturer Bruker will pay a $2.4 million penalty to the Securities and Exchange Commission to resolve charges that it violated the Foreign Corrupt Practices Act by providing non-business related travel and improper payments to various Chinese government officials in an effort to win business.
An SEC investigation found that Bruker violated the internal controls and books and records provisions of the Securities Exchange Act, because it 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. As a result, Bruker was able to gain a profit of approximately $1.7 million from sales contracts with state-owned entities in China whose officials received the improper payments.
“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,” Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit, said in a statement. “The company has since taken significant remedial steps to revise its compliance program and enhance internal controls over travel and contract approvals.”
According to the SEC, a Bruker office in China paid more than $111,000 to Chinese government officials under 12 suspicious collaboration agreements contingent on state-owned entities providing research on Bruker products or using Bruker products in demonstration laboratories. The collaboration agreements did not specify the work product that the state-owned entities had to provide in order to be paid, and no work product was actually provided to the Bruker office by the state-owned entities. Certain collaboration agreements were executed directly with a Chinese government official rather than the state-owned entity itself, and in some cases Bruker’s office paid the official directly.
The other improper payments involved reimbursements to Chinese government officials for leisure travel to the United States, Czech Republic, Norway, Sweden, France, Germany, Switzerland, and Italy. These officials often were responsible for authorizing the purchase of Bruker products, and the leisure trips typically followed business-related travel for the officials funded by the company.
For example, Bruker paid for the purported training expenses of a Chinese government official who signed the sales contract on behalf of a state-owned entity, but the payment actually was reimbursement for sightseeing, tour tickets, shopping, and other leisure activities in Frankfurt and Paris. Bruker also funded some trips for Chinese government officials that had no legitimate business component.
Bruker self-reported its misconduct and provided extensive cooperation during the SEC’s investigation. It agreed to pay $1.7 million in disgorgement, $310,117 in prejudgment interest, and a $375,000 penalty. “Bruker consented to the order without admitting or denying the findings, and the SEC considered the company’s significant remedial acts as well as its self-reporting and cooperation with the investigation when determining a settlement,” the SEC stated.