The recent implementation of the Foreign Corrupt Practices Act (FCPA) reminded us that everything old is new again when it comes to anti-corruption compliance. The Securities and Exchange Commission’s (SEC) FCPA enforcement case involving Mr. Deere involves a bribery scheme involving gifts, travel, and entertainment that literally rips from the first decade of the 21st century. In other words, it produced the kind of poor results that any compliance officer would see. Yesterday, I provided a broad overview of Deere’s enforcement actions. Today, I’d like to take a multifaceted look at this case and see what lessons this enforcement action holds for compliance professionals in 2024.
From 2017 to 2020, Wirtgen Thai was involved in a series of corrupt practices aimed at obtaining government tenders from key institutions such as the Royal Thai Air Force (RTAF), Department of Roads (DOH), and Department of Regional Roads (DRR). did. . These acts, including bribery, improper entertainment, and falsification of company records, clearly violated Wirtgen Group’s Code of Business Conduct. The total amount of bids won as a result of these corrupt practices exceeded $6 million. Below is a detailed description of the amounts paid and profits obtained through these illegal activities.
massage parlor
If an expense claim is submitted that references “massage parlors,” it will immediately raise a red flag and be held for further investigation. (And you’d be right.) But Deere’s enforcement actions included sending foreign government officials to massage parlors multiple times.
From late 2017 to 2020, Wirtgen Thailand regularly entertained government officials from RTAF, DOH, and DRR at various massage parlors in Thailand. These expenses are incorrectly recorded as legitimate business expenses and are often rounded to reduce suspicion. Wirtgen’s Managing Director for Southeast Asia and Wirtgen Thailand’s Managing Director approved these expenses despite company policy explicitly prohibiting bribery and undue influence.
RTAF. In November 2019 and March 2020, Wirtgen Thailand paid for massage parlors to entertain senior RTAF officials involved in the bidding process. Senior RTAF officials responsible for drafting and awarding bids were entertained on multiple occasions, resulting in Wiltgen Thailand winning two bids valued at approximately $665,000 in March and April 2020. ah. Wirtgen Thailand also conducted similar activities to influence DOH officials. For example, in March 2017, a $15,000 expense was recorded for entertaining 15 DOH bid committee members at a massage parlor. This pattern continued for subsequent entertainment expenses, including July 2018 and December 2018. As a result, Wirtgen Thailand received multiple bids, including a bid of $2,303,294 in December 2018, a bid of $498,567 in October 2019, and a bid of $1,451,432 in November 2019. In December 2019, Wirtgen Thailand entertained disaster prevention personnel at a massage parlor, incurring approximately 60 million yen in expenses. $10,000. This effort paid off in April 2020 when DRR awarded a bid of $1,283,905 to Wiltgen Thailand. Notably, two of the four DRR signatories to this tender were entertained by Wirtgen Thailand during their December 2019 visit.
In total, Wirtgen Thailand spent more than $58,000 providing inappropriate massage parlor entertainment to government employees. These expenses were falsely recorded in the company’s books and records, often listed as round numbers with vague descriptions such as “entertainment.” This widespread bribery directly influenced the outcome of several tenders, leading to the award of contracts worth millions of dollars.
Bribery through sightseeing trips disguised as “factory visits”
In another scheme, Wirtgen Thailand paid for an elaborate eight-day sightseeing trip for four Ministry of Defense employees and two of their spouses on the pretext of a “factory visit” to its facilities in Germany. Paid. However, the itinerary consisted of luxury sightseeing in Switzerland, including visits to Interlaken, Zermatt, and Lake Lucerne, shopping tours, and stays in luxury hotels. The total cost of this trip was approximately $47,500.
During this period, Wirtgen Thai submitted a bid for the DOH tender. After the trip, Wiltgen Thailand won the bid worth $498,567 on October 16, 2019. A month later, on November 20, 2019, Wirtgen received another bid worth $1,451,432. This trip and subsequent award was organized without following Deere’s internal compliance procedures, which require detailed documentation and prior approval for such visits. The managing director for Southeast Asia knowingly authorized these expenditures, citing the need to “obtain information and build trust” with government clients.
What went wrong with these trips? Basically, everything. What makes all of this even more egregious is that the rules regarding customer gifts, travel, and entertainment have long been in place since at least 2007, when the Department of Justice (DOJ) issued Opinions 07-01 and 07-02. It was known. He detailed the Department of Justice’s expectations for future GTE.
The important elements are:
The purpose of the visit is to help the representative understand the nature and scope of the client’s business and capabilities and to help establish the client’s business credibility. The visit will be for four days, and domestic economy class travel will be limited to one base in the United States. The claimants also intend to cover the domestic accommodation, local transportation, and meal costs for the six officials. Foreign governments will pay for international airfare. The company did not select representatives to participate in the visit. The Company pays all costs directly to the Provider. No funds are paid directly to foreign governments or representatives. We do not cover any expenses for spouses, family members, or other related guests. Memorabilia provided by the Requester to the Representative shall reflect the Requester’s name and/or logo and shall have nominal value. We do not fund, host or sponsor entertainment or leisure activities for our officers, nor do we provide salaries or expenses to our officers.
falsification of records
Expenses related to both massage parlor entertainment and tourism were improperly recorded as legitimate business expenses in Wirtgen Thailand’s books. None of these activities complied with the company’s policies and procedures regarding interactions with government officials. Senior management routinely approved these expenses without due diligence, bypassing the company’s compliance framework.
As stated in Opinion Release 07-01 above, “All costs and expenses incurred by the Claimant in connection with the visit shall be properly and accurately recorded in the Claimant’s books and records.” This This means that not only are companies required to accurately record legitimate travel expenses in their books and records, but failure to do so is a separate violation. Deere did not meet this standard.
The total amount of fraudulent payments and benefits provided to RTAF, DOH, and DRR personnel through these schemes exceeds $105,500, while the total amount of bids awarded to Wiltgen Thailand due to these illegal activities exceeds $6 million. Exceeded.
Wirtgen Thailand’s actions highlight serious failures in compliance oversight and internal controls. The company’s intentional falsification of records and use of bribes to secure government contracts violated the company’s own code of business conduct and exposed it to serious legal and reputational risks. These events serve as a stark reminder to compliance professionals of the importance of robust compliance oversight and the need for strict enforcement of anti-bribery policies.
To prevent such violations, companies must ensure that their compliance programs are well-designed, actively implemented, and continually monitored to detect and address potential violations. This case highlights the need for a proactive approach to compliance, where ethics and integrity are prioritized at all levels of the organization.
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