Thermal imaging manufacturer FLIR Systems this week reached a $9.5 million settlement with the Securities and Exchange Commission to resolve charges that it violated the Foreign Corrupt Practices Act by financing what an employee termed a “world tour” of personal travel for government officials in the Middle East who played key roles in decisions to purchase FLIR products. 

“FLIR’s deficient financial controls failed to identify and stop the activities of employees who served as de facto travel agents for influential foreign officials to travel around the world on the company’s dime,” said Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit. As a result, FLIR earned more than $7 million in profits from sales influenced by the improper travel and gifts.

According to the SEC, FLIR had few internal controls over gifts and travel out of its foreign sales offices. Two employees in its Dubai office provided expensive watches to government officials with the Saudi Arabia Ministry of Interior in 2009, and they arranged for the company to pay for a 20-night excursion by Saudi officials that included stops in Casablanca, Paris, Dubai, Beirut, and New York City.  The value of the gifts and the extent and nature of the travel were falsely recorded in FLIR’s books and records as legitimate business expenses, and the company’s internal controls failed to catch the improper payments despite documentation suggesting that extravagant gifts and travel were being provided.   

The SEC’s order finds that from 2008 to 2010, FLIR paid approximately $40,000 for additional travel by Saudi government officials, including multiple New Year’s Eve trips to Dubai with airfare, hotel, and expensive dinners and drinks.  FLIR also accepted cursory invoices from a FLIR company partner without any supporting documentation to pay extended travel of Egyptian officials in mid-2011.

FLIR self-reported the misconduct to the SEC and cooperated with the SEC’s investigation and also agreed to pay $7.5 million in disgorgement, $970,584 in prejudgment interest, and a penalty of $1 million. FLIR also must report its FCPA compliance efforts to the SEC for a two-year period. As Compliance Week previously reported, the SEC previously charged two FLIR employees in the case.

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