Polycom Pays $36 Million, Settles with SEC, and Earns DOJ Declination for Bribery in China
Polycom, Inc., a U.S. communication technology company, which was recently acquired by Plantronics, earned a DOJ declination and entered into an SEC settlement for FCPA violations in China. DOJ released a declination letter (here); and the SEC issued an administrative order (here).
Polycom earned the declination under the FCPA Corporate Enforcement Policy. Polycom identified the misconduct and voluntarily disclosed to the government; Polycom conducted a thorough investigation; Polycom’s full cooperation including making employees available for interviews and assisting the Department’s efforts to interview a former employee, translating foreign documents, and identifying other misconduct for investigation and potential prosecution; and Polycom’s remediation, including enhancement of its compliance program and internal accounting controls, terminating the employment of 8 individuals involved in the misconduct, disciplining 18 other employees and terminating its relationship with a channel partner.
Polycom agreed to disgorge $30.1 million, $10.6 million of which would be paid to the SEC as part of its settlement. Another $5.6 million will be paid to the SEC. The total settlement paid by Polycom is approximately $36 million.
The scheme outlined in the SEC settlement involved Polycom China, where the Vice President devised a long-standing plan to obtain additional business from public-sector customers through payment of bribes to government officials. Polycom carried out the plan with the assistance of its distributors in China.
Interestingly, Polycom China implemented a separate sales management system outside of Polycom’s centralized, company-approved system, and relied on non-Polycom email addresses to communicate about the sales and bribery scheme.
Polycom’s China distributors made cash payments to government officials responsible for purchasing decisions. Polycom funded the bribes by passing on discounts to the distributor for equipment to be sold to public-sector customers. The discounts were intended to cover the cost of the payments to the Chinese government officials.
Polycom China tracked the discounts into the separate management system for approval by senior managers and recorded the reason for the payment in the same separate system. Polycom China’s senior managers knew that the discounts were in fact used to fund bribes. Polycom’s Vice President maintained a spreadsheet with all of the bribery information.
Polycom China made entries for each deal into the centralized management system and included false justifications for the discounts, including “competition” and “end-user fees.” Polycom China’s senior managers were authorized to approve discounts up to a certain threshold, while discounts above the threshold had to be approved by Singapore-based officials. Polycom China provided false reasons to Singapore-based officials for such discounts.
Polycom failed to devise and maintain adequate controls to confirm the veracity of the reasons for discounts entered into its centralized management system.
Polycom also failed to translate anti-corruption training materials into Polycom China employees’ local language, Mandarin, and frequently failed to follow up if Polycom China personnel failed to attend anti-corruption training.
In 2013, Polycom learned during due diligence of a distributor that the distributor was alleged to have made a bribery payment unrelated to Polycom to a Chinese government official in the past. Despite learning this information, Polycom never completed its due diligence review of the distributor and continued to use the distributor in selling its products to public sector customers.