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Catch of the Week — United Technologies

Posted  September 14, 2018

This week’s Catch of the Week goes to the SEC for securing a nearly $14-million settlement with United Technologies, a Connecticut-based building systems and aerospace company, for violations of the Foreign Corrupt Practices Act (FCPA). The settlement resolves allegations that United Technologies, through various subsidiaries, paid bribes across the globe to advance its elevator and aircraft-engine businesses.

According to the SEC’s order filed on September 12, United Technologies engaged in an illicit kickback scheme to sell elevators in China, and, through its subsidiary International Aero Engines, paid unjustified sums to an agent from 2009 to 2013, while disregarding the significant risk that some of the money would be used to bribe Chinese officials. Separately, the SEC alleged that United Technologies, through its subsidiary Otis Elevator One, paid bribes to Azerbaijan officials from 2012 to 2014 to boost its sales of elevator equipment.

The company also allegedly provided lavish quid-pro-quo trips and gifts to officials from countries across Asia and the Middle East. For example, Otis Elevator Company organized a trip to Italy and Greece for seven foreign officials in 2011, superficially for the inspection of subway equipment on $27.6-million contract. In reality, the trip was nothing more than leisure travel. These perks were provided to foreign officials in China, Kuwait, South Korea, Pakistan, Thailand, and Indonesia

Moreover, the SEC claimed that United Technologies violated the FCPA’s “books and records” provision by failing to properly record the transactions at issue in these wide-ranging schemes. In total, the various bribery schemes generated over $9 million for the company, which it agreed to pay as disgorgement. United Technologies did not admit or deny the SEC’s findings as part of the settlement.

“U.S. companies with global operations must implement policies and procedures that prevent bribery and motivate employees to perform ethically,” said Tracy L. Price, Deputy Chief of the SEC Enforcement Division’s FCPA Unit. “Issuers with weak internal accounting controls open the door to corruption and other financial misconduct.” The SEC investigation was conducted by Ilana Z. Sultan and M. Shahriar Masud and supervised by Tracy L. Price, with assistance from the Fraud Section of the Department of Justice and the U.S. Postal Inspection Service.

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