Risk & Compliance

Two Firms Fined $1 Million Over China Bribes

“Akamai and Nortek each promptly tightened their internal controls after discovering the bribes and took swift remedial measures," said an SEC offi...
Matthew HellerJune 7, 2016

An internet services provider and a construction products manufacturer have agreed to pay nearly $1 million between them to settle charges that foreign subsidiaries bribed Chinese officials to obtain contracts and receive preferential treatment.

Both Akamai Technologies of Cambridge, Mass., and Nortek of Providence, R.I., self-reported the misconduct promptly, avoiding a potential prosecution under the Foreign Corrupt Practices Act. As part of settlements with the U.S. Securities and Exchange Commission, they will forfeit any illicit profits from their dealings with China.

Akamai’s subsidiary in Beijing allegedly arranged $40,000 in payments to induce government-owned entities to purchase more services than they actually needed and employees allegedly provided improper gift cards, meals, and entertainment to officials to build business relationships.

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At Nortek’s Linear Electronics unit in Shenzhen, China, the SEC said, employees including the accounting manager made about $290,000 in improper payments and gifts to officials to receive preferential treatment, relaxed regulatory oversight, or reduced customs duties, taxes, and fees.

“Akamai and Nortek each promptly tightened their internal controls after discovering the bribes and took swift remedial measures to eliminate the problems,” Kara Brockmeyer, chief of the SEC Enforcement Division’s FCPA unit, said Tuesday in a news release. “They handled it the right way and got expeditious resolutions as a result.”

Akamai Technologies has agreed to pay $652,452 in disgorgement plus $19,433 in interest. According to the SEC, its employees schemed with a partner in China to bribe employees of three customers, two of which were state-owned entities, to purchase up to I00 times more network capacity from the channel partner than each customer actually needed.

The “partner would in turn purchase this capacity from Akamai-China, add its own markup, and sell the capacity to the end customers,” the SEC said.

Nortek, meanwhile, will resolve the SEC’s investigation by paying $291,403 in disgorgement plus $30,655 in interest. From at least 2009 to 2014, subsidiary Linear Electronics’ employees allegedly made more than 400 payments to local Chinese officials as well as bribes in the form of gift cards, meals, travel, accommodations, and entertainment.