Four months after resolving Foreign Corrupt Practices Act charges Panasonic Avionics, a provider of in-flight entertainment and communication systems and a subsidiary of Japanese parent Panasonic Corporation, has appointed a new chief compliance officer.
Catherine Razzano will be responsible for overseeing Panasonic’s compliance with laws, regulatory requirements, policies and procedures. She will report directly to the general counsel of Panasonic North America (also a subsidiary of Panasonic Corporation) with a dotted line reporting structure to Panasonic Chief Executive Officer Hideo Nakano. Razzano joins Panasonic from General Dynamics, where she held the position of assistant general counsel and director since 2010.
In April, Panasonic Avionics agreed to be a combined $280 million settlement to resolve charges that it retained consultants for improper purposes and concealed payments to third-party sales agents, in violation of the accounting provisions of the FCPA. The settlement called for Panasonic Avionics to pay a $137.4 million criminal penalty as part of a deferred prosecution agreement with the Department of Justice.
In a related proceeding, the Securities and Exchange Commission filed a cease and desist order against Panasonic, in which it agreed to pay approximately $143 million in disgorgement to the SEC, including prejudgment interest, making the combined total amount of U.S. criminal and regulatory penalties to be paid by Panasonic and Panasonic Avionics was just over $280 million.
Panasonic North America was not involved in the federal settlements.
According to admissions and court documents, Panasonic Avionics “knowingly and willfully” caused Panasonic to falsify its books and records with respect to Panasonic Avionics’ retention of consultants for improper purposes. “The consultants, which did little or no actual consulting work for Panasonic Avionics, were retained through a third-party service provider and were paid for out of a budget over which a senior Panasonic Avionics executive had complete control and discretion, without meaningful oversight by anyone at Panasonic Avionics or Panasonic,” the Justice Department stated.
Panasonic Avionics also admitted that employees in its Asia region concealed use of certain sales agents who did not pass the company’s internal diligence requirements. According to admissions and court documents, Panasonic Avionics formally terminated its relationship with these sales agents, as required by its compliance policies, but Panasonic Avionics employees then secretly continued to use the agents by having them rehired as sub-agents of another company, which had passed Panasonic Avionics’ due diligence checks. Through this process, employees hid more than $7 million in payments to at least 13 sub-agents.
By mischaracterizing the payments made to consultants and sales agents and providing false or incomplete representations and Sarbanes-Oxley sub-certifications to Panasonic about Panasonic Avionics’ financials and financial controls, Panasonic Avionics’ caused Panasonic to falsify its books, records, and accounts in violation of the FCPA.
The SEC order found that Panasonic fraudulently overstated pre-tax and net income by prematurely recognizing more than $82 million in revenue for the fiscal quarter ending June 30, 2012. The fraud was accomplished by Panasonic Avionics backdating an agreement with a state-owned airline and providing misleading information to Panasonic Avionics’ auditor, according to the SEC.
The SEC order further found that Panasonic lacked sufficient internal accounting controls and failed to make and keep accurate books and records concerning purported consultants retained by Panasonic Avionics, as well as sales agents used to solicit business from state-owned airlines and other customers throughout the Middle East and Asia.
“This is a very exciting time to be joining Panasonic, and I look forward to working alongside my colleagues to ensure the company’s policies are robust in today’s business environment,” Razzano said.