On December 31, 2009, UTStarcom, Inc. (“UTSI”), an Alameda, California-based telecommunications company, agreed to pay approximately $3 million in combined fines and penalties to settle DOJ and SEC enforcement actions in connection with improper payments and promises of improper payments to foreign government officials in Asia.
Pursuant to the SEC’s complaint, UTSI was charged with violations of the books and records, internal controls, and anti-bribery provisions of the FCPA. The SEC alleges that from 2002 through 2007, UTSI paid nearly $7 million for approximately 225 overseas trips by employees of Chinese government-controlled telecommunications companies, purportedly to provide customer training. In reality, the trips were entirely or primarily for sightseeing. During the same time period, the SEC alleges that UTSI provided lavish gifts and all-expenses-paid executive training programs in the United States for existing and potential foreign government customers in China and Thailand. These executive training programs were not specifically related to UTSI’s products or business and included excessive cash allowances and field trips to various tourist destinations.
The SEC also alleges that UTSI provided foreign government customers and their family members with work visas and purportedly hired them to work for UTSI in the United States, when in reality they did no work for the company.
Finally, the SEC alleges that UTSI made payments to consultants in China and Mongolia who provided no documented services, under circumstances that showed a high probability that the payments would be used to bribe foreign government officials.
Without admitting or denying the SEC’s allegations, UTSI agreed to the entry of a permanent injunction against future FCPA violations and to provide the SEC with annual FCPA compliance reports and certifications for four years. The company agreed to pay $1.5 million to settle the action with the SEC. UTSI also agreed to pay $1.5 million as part of its agreement with the DOJ, whereby the government agreed not to prosecute UTSI or its subsidiaries in connection with the improper payments. DOJ recognized UTSI’s cooperation in voluntarily disclosing the matter, its “thorough self-investigation” and remedial efforts. Per the agreement, UTSI also agreed to implement “rigorous internal controls.”