CORPORATE CRIME REPORTER
Faro
Technologies China Bribery Charge Settled with Non Pros Agreement
22 Corporate Crime Reporter 23, June 5, 2008
Faro Technologies Inc., a public company that specializes in computerized measurement
devices and software, will pay a $1.1 million criminal penalty in connection
with corrupt payments to Chinese government officials in violation of the Foreign
Corrupt Practices Act (FCPA).
To settle the charges, the company entered into a non prosecution agreement with the Justice Department that requires the company to engage an independent corporate monitor.
The company was represented by Gregory Bruch of Willkie Farr in Washington, D.C.
Faro, headquartered in Lake Mary, Florida, develops and markets portable computerized measurement devices and software to perform three-dimensional inspections of parts, assemblies and machines for the manufacturing sector, including the automotive, aerospace and consumer goods industries.
Faro began direct sales of its products in China in 2003 through its subsidiary, Faro China, which is based in Shanghai.
On several occasions in 2004 and 2005, a Faro employee authorized other Faro employees to make corrupt payments, termed "referral fees" within Faro, directly to employees of state-owned or controlled entities in China to secure business for Faro.
In 2004 and 2005 Faro promised to make and did make corrupt payments disguised as referral fees to secure contracts worth approximately $4.9 million.
The statement of facts also reveals that certain Faro employees decided in 2005 to route the corrupt payments to Chinese government officials through a shell company to "avoid exposure," according to internal e-mails.
As a result, in January 2005 Faro China entered into a bogus services contract with an intermediary, using it to pay the bribes on behalf of Faro.
The intermediary aggregated the bribe payments it paid on behalf of Faro and sent regular invoices to Faro for payment based on its services contract.
Faro also falsely recorded at least $238,000 in improper payments in its books and records, inaccurately describing the bribe payments as referral fees.
Also, between approximately May 2003 and February 2006, Faro failed to devise and maintain a system of internal controls with respect to foreign sales activities sufficient to ensure compliance with the FCPA.
The
Justice Department said that in recognition of Faro's voluntary disclosure and
thorough review of the improper payments, its cooperation with the Department's
investigation, the company's implementation of and commitment to implement in
the future enhanced compliance policies and procedures, and the company's agreement
to engage an independent corporate monitor, the Department has agreed to enter
into a non-prosecution agreement with a
term of two years.
If
Faro abides by the terms of that agreement, the Department will not prosecute
Faro for the conduct admitted in the statement of facts.
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