The SEC has announced that Deere & Company, which does business as John Deere, agreed to pay nearly $10m to resolve SEC charges that it violated the Foreign Corrupt Practices Act (FCPA) arising out of bribes paid by its wholly owned subsidiary, Wirtgen Thailand. The company is an Illinois-based global manufacturer of agricultural machinery and heavy equipment.
The SEC’s order alleges that, from at least late 2017 through 2020, Wirtgen Thailand employees bribed Thai government officials within the Royal Thai Air Force, the Department of Highways, and the Department of Rural Roads to win multiple government contracts, and also bribed employees of a private company to win sales to that company.
The order finds that the bribes included cash payments, massage parlor visits, and international travel for the government officials and private company employees. According to the SEC’s order, Wirtgen Thailand made approximately $4.3m in profits as a result of the bribes.
“This action is a reminder for corporations to promptly ensure newly acquired subsidiaries have all the necessary internal accounting control processes in place.”
Charles Cain, Chief, SEC Enforcement Division FCPA Unit
The improper payments were inaccurately recorded as legitimate expenses in Deere’s books and records, in violation of the FCPA’s recordkeeping and internal accounting control provisions. The SEC’s order describes in one instance how an invoice accompanying a business trip for Thai officials was described as a factory visit, when the trip really was a sightseeing expedition to Switzerland, including travel to Interlaken, Zermatt, and Lake Lucerne.
The company consented to disgorging its illicit profits from the illegal activity (about $5.4m) and paying a civil penalty of $4.5m. And it was found to have violated Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, the Act’s recordkeeping and internal controls provisions.
Company statement and cooperation
In a statement following the settlement, Deere & Company officials say they conducted a thorough investigation “upon discovering these issues.” The company adds it fully cooperated with the SEC once the allegations were discovered.
“These allegations represent a clear violation of our company policies and ethical standards,” Deere officials said. “Furthermore, they are in direct conflict with our core values – particularly our commitment to integrity – and we strongly condemn such practices. The individuals involved in this matter are no longer with the company.”
The SEC said Deere & Co. cooperated with its investigation by taking such steps as providing translations of certain relevant documents, making current and former employees available to the Commission staff, including witnesses located overseas, and providing the details of facts developed during its internal investigation in a timely manner, including the sharing of forensic accounting analysis, relevant emails and company documents, and information pertaining to current and former employees
The company also terminated the contracts of the employees responsible for the misconduct and improved its internal audit and compliance programs, the SEC said. Training on anti-bribery issues and third-party management was also enhanced.
Compliance newsletter and podcast
The SEC said the company updated its Code of Business Conduct, including its anti-bribery and corruption and travel policies, and introduced new compliance initiatives for the company as a whole to consume.
These enhancements included circulating a company-wide, bimonthly compliance newsletter, and a new podcast dedicated to a discussion of compliance issues.
“After acquiring Wirtgen Thailand in 2017, Deere failed to timely integrate it into its existing compliance and controls environment, resulting in these bribery schemes going unchecked for several years,” said Charles Cain, Chief of the SEC Enforcement Division’s FCPA Unit.
“This action is a reminder for corporations to promptly ensure newly acquired subsidiaries have all the necessary internal accounting control processes in place.”
Due diligence that passes regulatory scrutiny includes a meticulous analysis of the new subsidiary’s financial statements, including balance sheets, income statements, and cash flow statements, and contracts with suppliers, customers, and employees. The parent firms must also understand its operations, which includes knowing if its employees have been trained and are being monitored for compliance with laws and regulations as important (reputationally and financially) as the FCPA.
