The SEC has announced it has settled charges against Gartner, Inc, a technological research, consulting and conferences company based in Connecticut, for violating the anti-bribery, books and records, and internal accounting controls provisions of the Foreign Corrupt Practices Act (FCPA).

Without admitting or denying the SEC’s findings, Gartner agreed to a cease-and-desist order and to pay disgorgement a $1,600,000 civil penalty and prejudgment interest totaling $856,764.

The SEC’s charges and order stem from as what the SEC deemed a scheme to obtain and retain business from a South African government entity called the South Africa Revenue Service (SARS).

Senior officials

At the direction of SARS senior officials, a manager of Gartner’s consulting segment authorized Gartner to enter into sub-contracts with a South African information technology consulting company. At the time of the sub-contracts, the manager knew or consciously disregarded the possibility that all or part of the money paid to the private company would be offered, given, or promised, directly or indirectly, to those SARS officials, to induce the officials to award multi-million dollar sole-source contracts to Gartner.

The purported justification for hiring the private company offered by the Gartner consulting manager was that Gartner needed to sub-contract with the private company to meet the requirements of South Africa’s Broad-Based Black Economic Empowerment legislation (B-BBEE) and neither Gartner nor its local sub-agents qualified under the law.

This justification was false because Gartner, through its local sub-agents, did in fact qualify under the B-BBEE.

When the Gartner consulting manager provided senior Gartner management with an update on the contracts, he referred to the private company’s executive director as “extremely well connected within Government and SARS.”

Gartner’s invoices to SARS omitted any reference to the participation of the private company, and they contained only a single line item for “professional fees.”

Red flags

During the relevant time period, Gartner’s internal FCPA risk assessments identified the company’s “[s]ales agent, consultant or third-party relationships with public sector clients” as a potential “bribery red flag”.

Gartner’s policy regarding the hiring of third-party consultants did not adequately address anti-corruption risks. “At the time of the SARS engagement, the company lacked risk-based screening procedures for hiring third-party contractors, had no anticorruption related vendor onboarding procedures, and lacked adequate monitoring procedures,” the SEC said.

Gartner also failed to devise and maintain sufficient internal accounting controls around identified FCPA risks relating to sales agents, consultants, and third-party relationships with public sector clients.

Remedial efforts

In determining to accept the offer for a cease and desist order from Gartner, the SEC considered company’s self-disclosure following press reports in South Africa, cooperation, and remedial efforts.

Its cooperation included providing regular updates and sharing facts identified in the course of its own internal investigation, making foreign-based employees available for interviews in the United States, and encouraging cooperation by former employees. And its remediation included revising and enhancing relevant policies and procedures and training programs, increasing both financial and human resources for compliance, and enhancing its due diligence procedures.