Risk & Compliance

Panasonic Fined $280M Over Airline Scheme

The company's avionics unit allegedly provided a lucrative consulting job to an official of a government airline with which it was doing business.
Matthew HellerApril 30, 2018

Japan’s Panasonic Corp. has agreed to pay $280 million in criminal and regulatory penalties to settle charges that it engaged in a bribery scheme to secure business from a government-owned airline for in-flight entertainment systems.

The U.S. Securities and Exchange Commission said the scheme involved offering a lucrative consulting position with Panasonic’s avionics unit to a government official at the airline while Panasonic Avionics Corp. (PAC) was negotiating two agreements valued at more than $700 million with the airline.

As a consultant, the official provided “little to no services” but was paid more than $875,000 between April 2008 and January 2014, using an unrelated third-party vendor to conceal the payments, the SEC said in an administrative order.

Panasonic will pay about $143 million in disgorgement and pre-judgment interest to settle the SEC charges and an additional $137 million to resolve a related criminal probe by the Department of Justice.

“Investors rightfully expect that the companies they invest in will not engage in bribery or fraud,” Antonia Chion, associate director of the SEC’s Enforcement Division, said in a news release. “Issuers must implement effective controls for the selection and engagement of consultants and agents to ensure compliance with anti-bribery statutes.”

According to the SEC, PAC in 2004 negotiated a ten-year supply agreement with the unidentified airline that ultimately grossed well over $1 billion. In 2006, a sales rep who had an office in Dubai and reportedly directly to PAC executives allegedly began negotiating two deals worth a total of $713 million with the airline official to supply additional products.

During the negotiations, the airline official allegedly “solicited the sales rep for personal benefits” and while seeking those payments, “provided valuable information to help PAC gain an improper advantage in obtaining and retaining business” from the airline.

In September 2007, the commission said, the official was offered the consultant position for $200,000 per year plus travel expenses. According to the Justice Department, PAC earned over $92 million in profits from portions of the contract over which the consultant had some involvement or influence while employed with the airline.