PTC Units to Pay $14 Million Enter Non Prosecution Agreement to Settle FCPA Case

Two subsidiaries of Massachusetts software company PTC Inc. entered into a non-prosecution agreement and will pay $14.54 million penalty to resolve a federal investigation into whether the companies improperly provided recreational travel to Chinese government officials in violation of the Foreign Corrupt Practices Act (FCPA).


The companies were represented by Roger Witten of Wilmer Cutler in New York.

Parametric Technology (Shanghai) Software Company Ltd. and Parametric Technology (Hong Kong) Ltd. (PTC China), through local business partners, arranged and paid for employees of various Chinese state-owned enterprises to travel to the United States, ostensibly for training at PTC Inc.’s headquarters in Massachusetts, but primarily for recreational travel to other parts of the United States, including New York, Los Angeles, Las Vegas and Hawaii.

PTC China paid a total of more than $1 million through its business partners to fund these trips, while during the same time period, PTC China entered into more than $13 million in contracts with the Chinese state-owned entities.

Company employees typically accompanied the Chinese officials on these trips.  PTC China admitted that the cost of these recreational trips was routinely hidden within the price of PTC China’s software sales to the Chinese state-owned entities whose employees went on the trips.

As part of the non-prosecution agreement, PTC China agreed to pay the criminal penalty, to continue to cooperate with the department, to enhance its compliance program and to periodically report to the department on the implementation of its enhanced compliance program.  The department reached this resolution based on a number of factors.

Among other factors, PTC China did not receive voluntary disclosure credit or full cooperation credit because, at the time of its initial disclosure, it failed to disclose relevant facts that it had learned in connection with a prior internal investigation and did not disclose those facts until the department uncovered additional information independently and brought them to PTC China’s attention.

By the conclusion of the investigation, however, the companies had provided to the department all relevant facts known to them, including information about individuals involved in the FCPA misconduct.

In a related matter, PTC Inc. reached a settlement today with the U.S. Securities and Exchange Commission (SEC) under which it agreed to pay $11,858,000 in disgorgement.

University of Virginia Law Professor Brandon Garrett says that the agreement highlights the malleability of the Department’s guidelines on corporate cooperation and prosecutions.

“There are multiple ways to get credit for cooperation,” Garrett said. “A company that does not self-report can still get credit for cooperation in providing information about individuals; perhaps even if no individuals are ultimately charged.  The Department should not be using completely out of court non-prosecution agreements, and to do so for a company that concededly did not self-report calls into question whether the new Department corporate charging policies have any teeth.”


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