In February, 2007, Westinghouse Air Brake Technologies Corporation (Wabtec), a Pennsylvania headquartered company listed on the New York Stock Exchange, agreed to settle parallel DOJ and SEC FCPA enforcement actions concerning business activity in India. Pursuant to the settlements, Wabtec agreed to pay approximately $675,000 in combined fees and penalties and engage an independent compliance consultant.
Wabtec, a manufacturer of brake subsystems and related products for locomotives, freight cars, and passenger vehicles, operates in India through Pioneer Friction Limited (Pioneer), a fourth-tier wholly-owned subsidiary. According to the DOJ release, Wabtech acknowledged responsibility for the actions of Pioneer and its employees and agents who made improper payments to various Indian Ministry of Railroad officials. These payments assisted Pioneer in obtaining and retaining business awarded by the Ministry and also assisted Pioneer in scheduling pre-shipping product inspections, obtaining product delivery certificates, and curbing what it viewed as excessive tax audits. Pursuant to a three-year non-prosecution agreement, the DOJ agreed not to prosecute Wabtec for the FCPA violations provided that Wabtec, among other things, pay a $300,000 penalty and adopt "rigorous" internal controls. In resolving the matter, the DOJ specifically noted that Wabtec voluntarily disclosed the conduct at issue, implemented certain remedial measures, and cooperated fully with the DOJ's investigation.
The SEC's filed complaint charges Wabtec with violating the FCPA's anti-bribery provisions as well as its books and records and internal control provisions. According to the complaint, from at least 2001-2005, Pioneer made approximately $135,000 in improper cash payments to various Ministry of Railroad officials in order to have its bids for government business granted or considered. The SEC alleged that Pioneer's Chairman, a non-U.S. citizen who is also a Wabtec Vice President, "knew about and did nothing to prevent" the improper payments. According to the SEC, Pioneer used marketing agents who submitted false invoices to the company to generate the cash to make the improper payments. Payments to the marketing agents were improperly recorded on Pioneer's books and records (which were consolidated with Wabtec's for financial reporting purposes) as "consulting expenses and supplies" even though Pioneer did not receive any supplies or services from the agents. Throughout the relevant time period, the SEC alleged that Wabtec did not have an FCPA policy or provide FCPA training or education to any of its employees or agents. Based on the above conduct, and without admitting or denying the SEC's allegations, Wabtec agreed to pay an $87,000 civil penalty. Based on this same conduct, the SEC also issued an administrative order finding that Wabtec violated the FCPA. Pursuant to the order, Wabtec is required to pay approximately $290,000 in disgorgement and prejudgment interest and engage an independent compliance consultant to ensure future FCPA compliance.