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Technology / Software / Electronics
Melbourne, Florida, United States
Nationality of Foreign Officials: China
Summary of Allegations:
On 4 April 2011, Harris Corporation ("Harris") completed the acquisition of CareFx Corporation (“CareFx”), thereby acquiring its subsidiaries, including Hunan CareFx Information Technology, LLC (“CareFx China”). At the time, Jun Ping Zhang ("Ping") was CareFx's Executive Vice President and Chief Technology Officer, in addition to his position as the Chairman and CEO for CareFx China. Following the acquisition, Ping's title at Harris was Vice President of Technology.
Between April 2011 and April 2012, CareFx China sales staff allegedly requested cash reimbursements for sham expenses labeled as legitimate expenses, such as "entertainment," "office expenses," and "transportation," which were allegedly used to provide gifts to Chinese officials to influence their decisions to purchase CareFx's China's products and services. Although CareFx sales staff did not need specific authorization for all payments as they had blanket approval for smaller gifts, Ping was allegedly aware of this scheme and did indeed provide authorization for several of the bribes. For example, a CareFx China sales manager allegedly requested approval (through an email on which Ping was copied) to spend approximately USD 3,000 to USD 4,600 to replace the stolen laptop, cell phone and camera of the director of the Zhongnan Hospital of Wuhan University, as well as to pay for vacations for other high-level staff at the hospital. In total, approximately USD 5,600 allegedly was reimbursed to the sales manager through receipts falsely called “business meeting receipts” and recorded as “office expenses” and “conference expenses” on CareFx China’s books and records. Ping allegedly authorized requests to purchase gifts for high-level staff at hospitals and health departments, and allegedly was aware of other requests to buy items like iPhones, shopping cards, bonuses and other gifts to officials at hospitals and health departments.
In total, Ping allegedly directly authorized or indirectly allowed CareFx China to provide between USD 200,000 and USD 1 million in improper gifts to government officials at Chinese state owned hospitals and regional Departments of Health ultimately leading to award of USD 9.6 million in contracts with Chinese state-owned entities.
Although one of Ping's responsibilities was to review CareFx China's monthly expense summary reports before submitting them to Harris, Ping consistently permitted these reports to be submitted to Harris despite alleged knowledge of false information contained in the reports. In addition, Ping allegedly failed to disclose the bribery scheme to Harris during the pre-acquisition due diligence process and allegedly cautioned employees of CareFx China to refrain from providing giving gifts that were too large and told them not to get caught.
Approximate Alleged Payments to Foreign Officials: between USD 200,000 and USD 1 million in improper gifts
Business Advantage Allegedly Obtained: USD 9.6 million in contracts with Chinese state-owned entities
Agencies: Internal Investigation
Results:
Year Resolved:
Compliance Monitor:
Ongoing: No
Details:
In its Form 10-K filed with the U.S. Securities and Exchange Commission ("SEC") on 27 August 2012, Harris disclosed that during the company's integration activities and the subsequent audit of the financials of Carefx China, Harris became aware of certain entertainment, travel and other expenses in connection with the Carefx China's operations that may have been incurred or recorded improperly.
Harris initiated an internal investigation, with the assistance of outside legal counsel, to determine whether violations of the U.S. Foreign Corrupt Practices Act ("FCPA") potentially occurred.
Based on the preliminary findings of the internal investigation, Harris took remedial actions related to the Carefx China operations, including changes to internal control procedures, termination of the gift-giving practice, additional compliance training and termination of the employment of certain individuals. In addition, Harris disclosed the preliminary findings to its Audit Committee, Board of Directors, auditors, and the U.S. authorities.
Agencies: United States: Department of Justice
Results: No Action
Year Resolved: 2016
Compliance Monitor:
Ongoing: No
Details:
In its Form 10-K filed with the SEC on 27 August 2012, Harris disclosed that the company voluntarily disclosed the preliminary results of their internal investigation to both the SEC and the U.S. Department of Justice ("DOJ").
In its Form 10-Q filed with the SEC on 4 May 2016, Harris disclosed that the DOJ has determined not to take any action against Harris in relation to the Chinese allegations during the second quarter of fiscal 2016. The DOJ indicated that it based its decision on its overall view of Harris' level of acquisition due diligence and integration efforts, remediation efforts and voluntary disclosure and continued cooperation with the authorities throughout the investigation.
Agencies: United States: Securities and Exchange Commission
Results: Cease-and-Desist Order, Civil Penalty, Prosecution of Individuals
Year Resolved: 2016
Compliance Monitor:
Ongoing: No
Details:
In its Form 10-K filed with the SEC on 27 August 2012, Harris disclosed that the company voluntarily disclosed the preliminary results of their internal investigation to both the SEC and the DOJ.
On 23 April 2013, Harris received a formal order of investigation from the SEC.
On 12 September 2016, the SEC announced that Jun Ping Zhang agreed to settle charges with the SEC.
On 13 September 2016, Jun Ping Zhang, without admitting or denying the findings, entered into cease-and-desist order to settle the SEC's charges that Ping violated, and caused Harris to violate, the books and records provisions of the FCPA by knowingly allowing and facilitating the entry of false information in CareFx China’s books and records, thereby circumventing Harris’s system of internal accounting controls. As part of the settlement, Ping will pay a civil penalty of USD 46,000.
Agencies: United States: Securities and Exchange Commission
Results: No Action
Year Resolved: 2016
Compliance Monitor:
Ongoing: No
Details:
In its Form 10-K filed with the SEC on 27 August 2012, Harris disclosed that the company voluntarily disclosed the preliminary results of their internal investigation to both the SEC and the DOJ.
On 23 April 2013, Harris received a formal order of investigation from the SEC.
On 12 September 2016, the SEC announced that the SEC determined not to bring charges against Harris. The SEC noted that the agency considered Harris' efforts at self-policing that led to the discovery of Jun Ping Zhang’s misconduct shortly after the acquisition of CareFx China, voluntary disclosure, remediation, and cooperation with the SEC’s investigation in coming to such conclusion.
Discovery Method: Voluntary Disclosure
Details:
In its Form 10-K filed with the SEC on 27 August 2012, Harris disclosed that the company voluntarily disclosed the preliminary results of their internal investigation to both the SEC and the DOJ.
Country: China