On February 16, 2016, the U.S. Securities and Exchange Commission (SEC) and the U.S. Department of Justice (DOJ) announced that PTC, Inc. (PTC), a Massachusetts-based provider of industrial and retail software, had agreed to pay more than $28 million to settle parallel civil and criminal investigations into alleged violations of the Foreign Corrupt Practices Act (FCPA). The SEC also announced the agency's first deferred prosecution agreement (DPA) with an individual accused of violating the FCPA.
Under the agreement, PTC's Chinese subsidiaries paid a $14.5 million criminal penalty to the DOJ, and PTC paid $13.6 million in disgorgement and prejudgment interest to the SEC.
According to the DOJ and the SEC, PTC's Chinese subsidiaries provided approximately $1.5 million in improper travel and gifts to Chinese officials employed by state-owned entities. In particular, PTC financed Chinese officials' trips to New York, Las Vegas, San Diego, Los Angeles and Honolulu. While travel was usually arranged in conjunction with a business visit to PTC's headquarters in Massachusetts, following one day of business activities, the remainder of the officials' trips lacked any business purpose. Additionally, PTC provided the officials with small electronics (such as cell phones and iPods), as well as gift cards, wine and clothes. In exchange for the travel and gifts the officials received, the state-owned entities for which they worked awarded PTC $13 million in contracts.
Pursuant to the DPA, the SEC will defer charges against Yu Kai Yuan, a former sales executive at a Chinese subsidiary of PTC, for three years as a result of his cooperation. The SEC's specific claims against Yuan included violation of the FCPA's internal control provisions relating to books and records. While Yuan neither admitted to nor denied the allegations, he agreed to accept responsibility for his actions and did not challenge the SEC's findings of fact.
Use of a DPA in this context illustrates the potential benefits of individual cooperation during an SEC investigation. In announcing the DPA with Yuan, the SEC noted that DPAs "reward cooperation in SEC investigations by foregoing an enforcement action against an individual who agrees to cooperate fully and truthfully throughout the period of deferred prosecution."
For more information, please see previous coverage from Red Notice, PTC's press release and coverage from Reuters and the FCPA Blog.
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