Nortek disclosed yesterday in a securities filing that the Department of Justice has decided not to recommend an enforcement action against it in connection with a previously disclosed investigation into potential violations of the Foreign Corrupt Practices Act. The declination came in the same week that the company entered into a non-prosecution agreement with the SEC.
In a securities filing, dated June 7, the maker of home security and thermostat systems said the Justice Department informed the company on June 3 by letter that it had closed its investigation into the matter. A copy of the letter, citing the FCPA Pilot Program, can be found here.
As Compliance Week previously reported, Nortek first disclosed in a regulatory filing with the SEC in January 2015 that it had launched an internal investigation into potential violations of the FCPA concerning potential improper payments made by its Chinese manufacturing unit. In that Form 8-K, dated Jan. 15, Nortek said it discovered “certain questionable hospitality, gift and payment practices, and other expenses” at its Chinese subsidiary, Linear Electronics, as part of its routine internal audit activities.
The Justice Department said in its letter to the company that it reached its conclusion, “despite the conduct at issue,” based on a number of factors, including but not limited to:
The fact that the company's internal audit function identified the misconduct;
The company's prompt voluntary self-disclosure;
The thorough investigation undertaken by the company;
Its fulsome cooperation in this matter;
The steps that the company has taken to enhance its compliance program and its internal accounting controls;
The company's full remediation (including terminating the employment of all five individuals involved); and
The fact that the company will be disgorging to the SEC the full amount of disgorgement as determined by the SEC.
The Justice Department's declination came in the same week that the company entered into a non-prosecution agreement (NPA) with the SEC. In that resolution, Nortek has agreed to pay $291,403 in disgorgement plus $30,655 in interest. Under an NPA, companies are not charged with violations of the FCPA and do not pay additional monetary penalties.
The SEC credited Nortek with self-reporting the misconduct promptly and cooperating extensively with the ensuing SEC investigations, the agency said. “When companies self-report and lay all their cards on the table, non-prosecution agreements are an effective way to get the money back and save the government substantial time and resources while crediting extensive cooperation,” Andrew Ceresney, Director of the SEC Enforcement Division, said in a statement.
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