NORTEK INC.

Industry

Manufacturing

Corporate Headquarters

Providence, Rhode Island, United States

Summary of Allegations:

Nationality of Foreign Officials: China

Summary of Allegations:

Between 2009 to 2014, employees of Linear Electronics (Shenzhen) Co. Ltd. (“Linear China”), Chinese subsidiary of Nortek Inc. ("Nortek"), allegedly made or approved improper payments and gifts to local Chinese officials in an attempt to receive preferential treatment, relaxed regulatory oversight, and/or reduced customs duties, taxes and fees. 

During the time period, Linear China allegedly made more than 400 payments, totaling USD 290,000, in form of cash payments, gift cards, meals, travel, accommodations, and entertainment.

The bribe payments were inaccurately recorded in Linear China's books, records and accounts, and then later consolidated into the books and records of Nortek.

Approximate Alleged Payments to Foreign Officials: USD 290,000

Business Advantage Allegedly Obtained: preferential treatment, relaxed regulatory oversight, and/or reduced customs duties, taxes and fees

Enforcement Results

Agencies: Internal Investigation

Results:

Year Resolved:

Compliance Monitor:

Ongoing: Yes

Details:

In its SEC Form 8-K filed on 15 January 2015, Nortek announced the discovery of certain questionable hospitality, gift and payment practices, and other expenses at Nortek's subsidiary, Linear China, which are inconsistent with the Nortek's policies and raise concerns under the U.S. Foreign Corrupt Practices Act (“FCPA”) and perhaps under other applicable anti-corruption laws. These discoveries were made as part of Nortek's routine internal audit activities and the company has initiated an internal investigation into these practices and payments with the assistance of outside counsel.

In their SEC Form 10-K filed on 29 February 2016, Nortek disclosed that in the fiscal year ended 31 December 2015 and 2014, approximately USD 2.3 million and USD 0.8 million, respectively, was recorded for legal and other professional services incurred related to the internal investigation of this matter. Nortek also expect to incur additional costs relating to the investigation of this matter in 2016.

Agencies: United States: Department of Justice

Results: Acquittal/Dismissal

Year Resolved: 2016

Compliance Monitor:

Ongoing: No

Details:

On 8 January 2015, Nortek voluntarily contacted the U.S. Department of Justice ("DOJ") to advise the agency of company's internal investigation. The company announced its intention to cooperate with any of their investigation into the matter.

On 7 June 2016, the DOJ notified Nortek that the agency had closed its investigations.  Nortek's prompt voluntary self-disclosure and cooperation was noted as the basis for the DOJ's decision not to prosecute.  

Agencies: United States: Securities and Exchange Commission

Results: Disgorgement, Non-Prosecution Agreement

Year Resolved: 2016

Compliance Monitor:

Ongoing: No

Details:

On 7 January 2015, Nortek voluntarily contacted the U.S. Securities and Exchange Commission ("SEC") to advise the agency of company's internal investigation. The company announced its intention to cooperate with any of their investigation into the matter.

On 7 June 2016, the SEC announced its non-prosecution agreement ("NPA") with Nortek.  As part of the settlement, Nortek agreed to pay disgorgement of USD 291,403 and prejudgment interest of USD 30,655. The NPA noted that Nortek is not charged with violations of the FCPA and would not pay additional monetary penalties.

The SEC further added that Nortek's self-report, extensive cooperation with the agency's investigation, prompt tightening of their internal controls, and swift remedial measures to eliminate the problems resulted in the NPA.

ENTITIES / INDIVIDUALS INVOLVED
  • Nortek Inc. ("Nortek")
  • Linear Electronics (Shenzhen) Co. Ltd. (“Linear China”) 
Details Of How Conduct Was Discovered

Discovery Method: Voluntary Disclosure

Details:

The company voluntarily disclosed potential violations to the SEC and DOJ.

Country: China