By Neil Halligan
SEC finds Oregon-based firm earned more than $7m in profits from sales influenced by improper travel, gifts
A US defence contractor has agreed to pay $9.5 million to settle charges of bribery related to sales that were influenced by gifts.
The US Securities and Exchange Commission (SEC) charged Oregon-based FLIR Systems Inc – a thermal imaging company – with violating the Foreign Corrupt Practices Act (FCPA) by financing what an employee termed a “world tour” of personal travel for government officials in the Middle East who played key roles in decisions to purchase FLIR products.
The SEC said FLIR earned more than $7 million in profits from sales influenced by the improper travel and gifts, in a press release issued on its website.
FLIR, which develops infrared technology for use in binoculars and other sensing products and systems, agreed to settle the SEC’s charges by paying more than $9.5 million and reporting its FCPA compliance efforts to the agency for the next two years. The SEC previously charged two FLIR employees in the case.
“FLIR’s deficient financial controls failed to identify and stop the activities of employees who served as de facto travel agents for influential foreign officials to travel around the world on the company’s dime,” said Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit.
According to the SEC’s order instituting a settled administrative proceeding against FLIR, the company had few internal controls over gifts and travel out of its foreign sales offices.
Two employees in its Dubai office provided expensive watches to government officials with the Saudi Arabia Ministry of Interior in 2009, and they arranged for the company to pay for a 20-night excursion by Saudi officials that included stops in Casablanca, Paris, Dubai, Beirut, and New York City.
The value of the gifts and the extent and nature of the travel were falsely recorded in FLIR’s books and records as legitimate business expenses, and the company’s internal controls failed to catch the improper payments despite documentation suggesting that extravagant gifts and travel were being provided.
The SEC, in its order, said that from 2008 to 2010, FLIR paid approximately $40,000 for additional travel by Saudi government officials, including multiple New Year’s Eve trips to Dubai with airfare, hotel, and expensive dinners and drinks. FLIR also accepted cursory invoices from a FLIR company partner without any supporting documentation to pay extended travel of Egyptian officials in mid-2011.
FLIR, which self-reported the violations, said in a statement on its own website that it has since taken action to improve training, controls, and policies.
“FLIR takes compliance very seriously and has policies and procedures in place to prevent such conduct,” said FLIR President and CEO, Andy Teich. “We self-reported the employees’ activities to the relevant authorities upon discovering them and cooperated with the government's investigation. We have taken action to bolster our training, controls, and policies. The actions of the two former employees involved do not reflect the values of FLIR or the high standards to which we hold ourselves accountable. I am very pleased that we have fully resolved this matter and put it behind us.”
Under the terms agreed with the SEC, FLIR consented to the order without admitting or denying the findings and agreed to pay disgorgement of $7,534,000, prejudgment interest of $970,584 and a penalty of $1 million for a total of $9,504,584.