Software company PTC Inc. has agreed to pay more than $28 million to settle charges that it funded leisure travel to Hawaii, Las Vegas, and other destinations for Chinese government officials and made other improper payments to win sales contracts.
According to the U.S. Securities and Exchange Commission, two China-based subsidiaries of PTC provided improper travel, gifts, and entertainment totaling nearly $1.5 million to employees of state-owned entities in China that were PTC customers. The sightseeing trips were typically arranged in conjunction with a visit to a PTC facility.
As part of a settlement of parallel criminal and civil actions, the company will pay $11.85 million in disgorgement of illicit profits and $1.76 million in prejudgment interest to the SEC and another $14.54 million to the Department of Justice.
“PTC failed to stop illicit payments despite indications of potential corruption by agents working with its Chinese subsidiaries, and the misconduct continued unabated for several years,” Kara Brockmeyer, chief of the SEC Enforcement Division’s Foreign Corrupt Practices Act unit, said in a news release.
The SEC alleged in an administrative order that the subsidiaries made improper payments between 2006 and 2011 in part by providing nearly $1.2 million to business partners in China, who would use the money, disguised as commissions or subcontracting fees, to pay for non-business related foreign travel for the Chinese government officials.
“The trips typically consisted of one day of business activities at PTC’s facility, followed or preceded by additional days of sightseeing visits that lacked any business purpose, all of which were paid for by the business partners using funds from their grossed up success fees and subcontracting payments,” the SEC said.
Typical travel destinations in the United States included New York, Las Vegas, San Diego, Los Angeles, and Honolulu, and involved guided tours, golfing, and other leisure activities.
Additionally, PTC allowed its sales staff to provide officials with gifts and excessive entertainment of over $274,313, including cell phones, iPods, and GPS systems as well as gift cards, wine, and clothing, the SEC said.