On May 3, 2011, Rockwell Automation Inc. (Rockwell) settled an administrative proceeding with the Securities and Exchange Commission (SEC). The SEC alleged that Rockwell violated the FCPA’s books and records and internal control provisions in connection with the activities of its former Chinese subsidiary, Rockwell Automation Power Systems (Shanghai) Ltd. (RAPS), between 2003 and 2006.
According to the SEC, RAPS employees paid $615,000 to Design Institutes, which were state-owned enterprises that could influence contract awards by end-user state-owned customers. The payments were made through third-party intermediaries Although the Design Institutes did provide some bona fide services, RAPS could not substantiate the specific services rendered or the value of those services.
The SEC also alleged that during the same period, RAPS paid approximately $450,000 to fund sightseeing and other non-business trips for employees at state-owned companies. The SEC said destinations in the U.S. included New York City, Washington, D.C., and Hawaii. Some of the trips appeared to have no direct business component other than the development of customer good will.
According to the SEC, Rockwell realized approximately $1.7 million in net profits from the alleged payments.
Without admitting or denying the SEC’s allegations, Rockwell consented to the imposition of a cease-and-desist order prohibiting it from future violations of the FCPA’s books and records and internal control provisions. Rockwell also agreed to disgorge $1,771,000, pay $590,091 in prejudgment interest, and pay a civil penalty of $400,000. The SEC noted that it did not impose a greater civil penalty in recognition of Rockwell’s cooperation with the investigation. In particular, the SEC noted that Rockwell discovered the payments through its normal financial review process, promptly investigated the payments, voluntarily disclosed the results of the investigation to the SEC, and undertook numerous remedial measures as a result of its findings.