The Securities and Exchange Commission announced on Monday that Dun & Bradstreet, a commercial data and analytics provider, will pay $9 million for violations of the Foreign Corrupt Practices Act arising from improper payments made by two of its indirect Chinese subsidiaries, Shanghai Huaxia Dun & Bradstreet Business Information Consulting (HDBC) and Shanghai Roadway D&B Marketing Services (Roadway). Meanwhile, the Department of Justice said it has declined prosecution “consistent with the FCPA Corporate Enforcement Policy.”
In March 2012, Dun & Bradstreet first announced that it had “suspended” its Roadway operations in China, “pending an investigation into allegations that its data collection practices may have violated local Chinese consumer data privacy laws.” In its annual report filed on Feb. 22, the company announced it had subsequently ceased all operations of Roadway.
At that time, Dun & Bradstreet said it was reviewing allegations that it may have violated the FCPA and other laws in its China operations and voluntarily contacted the SEC and Department of Justice to advise both agencies of that investigation and its conclusion.
In September 2012, Roadway was charged in a Bill of Prosecution, along with five former employees, by the Shanghai District Prosecutor with illegally obtaining private information of Chinese citizens. Then, in December 2012, the Chinese court imposed a monetary fine on Roadway and fines and imprisonment on four former Roadway employees. A fifth former Roadway employee was separated from the case.
From approximately 2006 through 2012, Dun & Bradstreet’s HDBC and Roadway subsidiaries made unlawful payments to obtain or retain business. HDBC and Roadway “used third-party agents to make unlawful payments to obtain data vital to Dun & Bradstreet’s business as a provider of business financial information,” the SEC said.
HDBC, part of a joint venture with a Chinese company, acquired non-public financial statement information on Chinese entities, in violation of Chinese law, by making unlawful payments to Chinese government officials. Roadway made improper payments to third parties to acquire non-public personal data that was used in its products and made improper payments to obtain specific business in violation of Chinese law.
“Despite concerns raised during pre-acquisition due diligence efforts, Dun & Bradstreet failed to take appropriate action to stop the improper payments or the false entries into the subsidiary’s books and records, which continued for several years post-acquisition,” the SEC said.
According to the administrative order, the unlawful payments were not accurately reflected in the books and records of HDBC and Roadway, which were consolidated into Dun & Bradstreet’s books and records. “During the relevant period, D&B also failed to devise and maintain sufficient internal accounting controls to detect or prevent the improper payments,” according to the administrative order.
Without admitting or denying the allegations, the company agreed to pay disgorgement of $6 million, prejudgment interest of $1.1 million, and a civil penalty of $2 million.
Justice Department declination
On April 23, 2018, the Justice Department’s Fraud Section notified Dun & Bradstreet that it was declining prosecution “consistent with the FCPA Corporate Enforcement Policy. We have reached this conclusion despite the bribery committed by employees of the company’s subsidiaries in China,” the regulator said in a letter to the company.
In declining to prosecute, the Justice Department considered the following:
The fact that Dun & Bradstreet identified the misconduct;
Dun & Bradstreet’s prompt voluntary self-disclosure;
The thorough investigation undertaken by Dun & Bradstreet;
Its full cooperation in the matter, including identifying all individuals involved in, or responsible for, the misconduct, “providing the Justice Department all facts relating to that misconduct, making current and former employees available for interviews, and translating foreign language documents to English”; and
The steps that Dun & Bradstreet took to enhance its compliance program and its internal accounting controls.
Moreover, Dun & Bradstreet’s full remediation also was a factor, the Justice Department said. Such remediation efforts included terminating the employment of 11 individuals involved in the China misconduct, including an officer of the China subsidiary and other senior employees of one subsidiary; and disciplining other employees by reducing bonuses, reducing salaries, lowering performance reviews, and formally reprimanding them.
That the company will be repaying the full amount of disgorgement as determined by the SEC, the Justice Department said, was also a determining factor.