California-based Panasonic Avionics Corporation (PAC), a subsidiary of Japan-based electronics giant Panasonic Corporation, agreed to pay a $137.4 million criminal penalty to settle claims it violated the Foreign Corrupt Practices Act (FCPA). In a related settlement with the SEC, Panasonic agreed to pay $143 million for a total company payout of roughly $280 million. PAC designs and distributes in-flight entertainment systems and communication services for airlines and airplane makers. See DOJ Press Release; SEC Press Release.
According to the government, PAC caused Panasonic to falsify its books and records with respect to PAC’s retention of consultants for improper purposes. The consultants performed no actual consulting work but were used merely to improperly secure foreign business for the company. One such consultant, for example, was at the same time employed by a state-owned airline and was involved in negotiating a lucrative contract amendment on behalf of the airline with PAC. The consultant was ultimately paid $875,000 by PAC while PAC earned more than $90 million in profits from the contract.
PAC also admitted that employees in its Asia region concealed the company’s use of sales agents who did not pass internal compliance controls. While PAC officially terminated its relationship with these employees, it secretly maintained their relationship by rehiring them as sub-agents of another company. Through this scheme, PAC hid more than $7 million in payments to at least 13 sub-agents. Through mischaracterizing payments to consultants and sales agents, along with providing false representations and Sarbanes-Oxley certifications to Panasonic about PAC’s financials and financial controls, PAC caused Panasonic to falsify its books, records, and accounts in violation of the FCPA.
In a related proceeding with the SEC, Panasonic agreed to pay roughly $143 million in disgorgement, raising to more than $280 million the combined total amount of criminal and regulatory penalties to be paid by Panasonic and PAC. PAC received a 20 percent discount off the low end of the U.S. Sentencing Guidelines fine range because of its cooperation and remediation. This included separating from the company several senior executives who were either involved in or aware of the misconduct.
In announcing the settlement, the government stressed its commitment to enforcing the FCPA: “Enforcement of the Foreign Corrupt Practices Act is critical in maintaining a fair and competitive international market to which all businesses are entitled. . . . Along with our federal partners and the Department of Justice, the FBI will continue to aggressively investigate violations of the Foreign Corrupt Practices Act.”
* * *If you would like more information or would like to speak to a member of Constantine Cannon’s whistleblower lawyer team, please click here.