John Deere Reaches $9.9 Million Settlement with SEC over FCPA Violations

The U.S. Securities and Exchange Commission (“SEC”) recently instituted proceedings against Deere & Company (“John Deere”), a leading global manufacturer of agricultural and heavy machinery, for multiple violations of the Foreign Corrupt Practices Act (“FCPA”). These violations arose from improper activities undertaken by its wholly owned subsidiary, Wirtgen Thailand. The underlying misconduct—which occurred between late 2017 and 2020—included the provision of illicit payments and other perquisites to foreign government officials in Thailand. These activities revealed significant deficiencies in John Deere’s internal controls, particularly in the integration of its acquired subsidiary into its overall compliance framework.

The violations centered on a series of bribery schemes orchestrated by Wirtgen Thailand to secure government contracts from key agencies, including the Royal Thai Air Force (“RTAF”), the Department of Highways (“DOH”), and the Department of Rural Roads (“DRR”). Wirtgen Thailand engaged in improper practices such as providing cash payments, organizing lavish factory visits under false pretenses, and offering various forms of entertainment to government officials. These expenditures, inaccurately recorded as legitimate business expenses, facilitated the awarding of government tenders and generated significant financial benefits for John Deere.

A particularly egregious example of misconduct involved Wirtgen Thailand’s use of extravagant entertainment, including visits to massage parlors and luxury sightseeing trips. These activities, intended to improperly influence Thai government officials, were in direct violation of Wirtgen Group’s Code of Business Conduct, which explicitly prohibits any attempt to improperly sway the actions of public officials. Despite clear policies against such behavior, the improper expenses were routinely approved by Wirtgen Thailand’s management and falsely documented in the company’s financial records. The SEC investigation revealed that over $58,000 in improper expenses were incurred to influence tender awards. In addition to these entertainment-related violations, Wirtgen Thailand also engaged in bribery through the payment of cash to officials from the DOH and DRR, facilitated through a third-party agent. These payments were made under the guise of commission fees, with the true purpose being to secure lucrative contracts for the sale of machinery. Wirtgen Thailand’s failure to disclose the true nature of these payments in its financial records further compounded the severity of the violations. The SEC’s findings indicate that these bribes allowed the company to obtain substantial contracts, resulting in illicit profits of approximately $2.7 million.

The SEC found that John Deere’s internal controls were found to be insufficient in detecting or preventing the improper activities of its subsidiary. More specifically, the SEC noted that John Deere had not fully integrated Wirtgen Thailand into its broader compliance and control systems, leading to lapses in oversight and accountability. These lapses allowed the misconduct to persist unchecked for several years, in direct contravention of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act, which require accurate record keeping and the maintenance of adequate internal accounting controls.

To resolve the underlying FCPA violations, John Deere has stipulated to an administrative settlement with the SEC, which provides for the payment of approximately $9.9 million in disgorgement, prejudgment interest, and civil penalties. The company has also taken steps to enhance its internal compliance programs, including the termination of employees responsible for the misconduct and the implementation of stronger anti-bribery controls. While John Deere’s cooperation with the SEC—including its efforts to remediate the violations—was taken into account, the latest FCPA settlement underscores the need for companies to thoroughly integrate newly acquired entities into existing compliance frameworks. Failure to do so can expose corporations to significant legal and financial risks, as subsidiaries operating in foreign jurisdictions may continue to be involved in illicit activity involving government officials.

You may also like...