Quad/Graphics Settles SEC FCPA Case for Nearly $10 Million
Quad/Graphics, a Wisconsin print and digital marketing company agreed to pay the SEC almost $10 million to settle FCPA charges for foreign bribery violations in Peru and China. (Here). Quad/Graphics also violated OFAC sanctions violations for transactions involving a Cuban telecommunications company. The Justice Department declined to prosecute Quad/Graphics under its FCPA Corporate Enforcement Policy (Here).
During the period of 2011 to 2016, Quad/Graphics failed to implement a robust compliance program and maintain appropriate accounting controls. In fact, the SEC commented that in 2010 Quad/Graphics’ compliance program was virtually non-existent. Quad/Graphics also failed to conduct any employee compliance training.
In China, from 2010 to 2015, a Quad/Graphics subsidiary used sham sales agents to make improper payments to government and commercial customers in exchange for increased business. Quad/Graphics conducted no due diligence on the sham third-party agents and took no steps to verify that the third parties provided any specific services. The improper payments in China were falsely recorded as “commissions.”
In Peru, a Quad/Graphics subsidiary paid bribes to Peruvian government officials to win sales contracts and avoid penalties, and improperly attempted to influence the judicial outcome of a dispute with a Peruvian tax authority. Quad/Graphics’ Peru subsidiary engaged in prohibited transactions with a state-owned Cuban telecommunications company and created false records to hide the transactions.
Specifically, Quad/Graphics paid bribes to government officials from the Peruvian National Institute of Statistics and Information (“INEI”) and other government municipalities. In addition, the Quad/Graphics subsidiary participated in a judicial bribery scheme when it tried to influence the outcome of a tax dispute with the Peruvian tax authority, which had imposed $12 million in Value-Added Tax (“VAT”). In 2012 and 2013, Quad/Graphics Peru paid over $200,000 in bribes through a local counsel to judges involved in the litigation. Two executives from Quad/Graphics in the U.S. approved an invoice from a Peru law firm for more than $400,000, knowing that the law firm was the intermediary that would make the bribery payments to the Peru judges.
Quad/Graphics remedial actions included firing employees involved in the improper conduct, expanding the compliance department and assigning additional resources to the compliance function, hiring a new International Trade Manager and recruiting and training new compliance and internal audit staff with anti-corruption expertise.
Under the SEC settlement, Quad/Graphics disgorged $6.9 million and prejudgment interest of $960k and agreed to pay a civil penalty of $2 million.
The Justice Department’s declination letter was issued pursuant to its FCPA Corporate Enforcement Policy. Quad/Graphics voluntarily disclosed the conduct to the Justice Department; conducted a comprehensive and thorough internal investigation; fully cooperated with the investigation; and implemented timely remediation including enhancement of its compliance program, termination of employees involved in the scheme, terminating its relationship with third parties involved in the Peru bribery scheme, and terminating third parties and employees involved in the China bribery scheme.
DOJ explicitly reserved the right to prosecute Quad/Graphics individuals involved in the China and Peru bribery schemes.