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Manufacturing
Milwaukee, Wisconsin, United States
Nationality of Foreign Officials: China
Summary of Allegations:
From 2004 to 2006, York Refrigeration Marine (China) Ltd. (“YRMC”), entity within China Marine, allegedly made improper payments, through use of third party agents, to Chinese public officials at shipyards to obtain business. Payments allegedly were described in YRMC's books and records as commissions, sales and marketing expenditures, or gifts and entertainment.
Following Johnson Controls' acquisition of China Marine as part of its 2005 York International acquisition, Johnson Controls terminated the individuals involved in the YRMC conduct and hired a new managing director of China Marine to oversee the business. In addition, Johnson Controls conducted multiple compliance training, including FCPA training, for the China Marine employees, conducted audits on China Marine, and restructured its business model to require all sales to go through its internal sales team based in China, limiting the use of third party agents.
Despite Johnson Controls' efforts, China Marine employees, including the managing director and approximately eighteen employees in three offices, continued the scheme through an alternate method. Instead of using third party agents, China Marine employees begin utilizing third party vendors, taking advantage of the fact that vendor transactions were considered low risk, and thus subject to less rigorous internal controls, by Johnson Controls due to the low dollar value of the transactions. Average vendor payment was approximately USD 3,400. China Marine employees fashioned the transactions to remain below such threshold to avoid triggering a review.
From 2007 to 2013, Johnson Controls obtained a benefit of USD 11.8 million as a result of over USD 4.9 million improper payments made.
Approximate Alleged Payments to Foreign Officials: USD 4.9 million
Business Advantage Allegedly Obtained: USD 11.8 million
Agencies: United States: Department of Justice
Results: No Action
Year Resolved: 2016
Compliance Monitor:
Ongoing: No
Details:
In Johnson Controls' Form 10-Q filed with the SEC on 2 May 2014, the company disclosed that it self-reported the alleged possible FCPA violations in China to the U.S. Department of Justice ("DOJ") in June 2013.
On 21 June 2016, Johnson Controls received a letter from the DOJ that it closed its investigation into allegations in China against Johnson Controls' Chinese subsidiary based on the information available to them and consistent with the FCPA Pilot Program. The DOJ noted that the decision was partly based on Johnson Controls' full cooperation, commitment to enhanced compliance program and its internal accounting controls, full mediation, and disgorgement and civil penalty to be paid to the SEC.
Agencies: United States: Securities and Exchange Commission
Results: Cease-and-Desist Order, Civil Penalty, Disgorgement
Year Resolved: 2016
Compliance Monitor:
Ongoing: No
Details:
In Johnson Controls' Form 10-Q filed with the SEC on 2 May 2014, the company disclosed that it self-reported the alleged possible FCPA violations in China to the U.S. Securities and Exchange Commission ("SEC") in June 2013.
On 11 July 2016, the SEC announced that Johnson Controls settled charges with the SEC that it violated the books and records and internal accounting controls provisions of the FCPA. Without admitting or denying the findings in the SEC's Cease-to-Desist Order, Johnson Controls agreed to pay disgorgement of USD 11,800,000 plus prejudgment interest of USD 1,382,561, pay a civil penalty of USD 1,180,000, and to report to the SEC for one year on the status of its FCPA and anti-corruption related remediation and implementation of compliance measures.
Discovery Method: Voluntary Disclosure
Details:
Johnson Controls self-reported to the SEC and DOJ in June 2013.
Country: China
Discovery Method: Whistleblower
Details:
In December 2012, shortly after China Marine's managing director left the company, Johnson Controls received the first of two anonymous hotline reports alleging that certain China Marine employees were making payments to sham vendors that did not provide goods or services in order to personally profit and/or bribe Chinese officials.
Country: China