UNITED TECHNOLOGIES CORPORATION

INDUSTRY

Aerospace / Defense / Security

CORPORATE HEADQUARTERS

Farmington, Connecticut, United States

SUMMARY OF ALLEGATIONS

Nationality of Foreign Officials: Azerbaijan

Summary of Allegations:

Between 2012 and 2014, the Russian division of UTC subsidiary Otis Elevator Co. ("Otis Russia") made various payments to officials at Baku Liftremont, a municipal entity responsible for public-housing elevators in Azerbaijan's capital. The payments were for the most part made indirectly through unvetted and unqualified intermediaries, to whom equipment was sold at a deflated price with the payments to be made from a portion of the resale balance. At one point, Liftremont itself was selected to act as a distributor for Otis Russia. The company failed to act or follow through on complaints and warnings from a JV partner and from Otis Russia's own legal department. In total, the intermediaries received at least USD 11.8 million, some portion of which was intended to be used for bribes. During the relevant period, Otis Russia entered into approximately USD 14.6 million worth of contracts with Liftremont.

 

Approximate Alleged Payments to Foreign Officials:

Business Advantage Allegedly Obtained:

Nationality of Foreign Officials: China

Summary of Allegations:

In 2006, International Aero Engines ("IAE"), a joint venture of UTC operating division Pratt & Whitney, engaged an agent in China to assist with sales. The agent had been recommended by a Pratt executive, even though it had no background or expertise in aeronautics. In early 2009, the agent was helping the company in its bid for a contract with the state-owned Air China Limited. After requesting and receiving from the company a commission advance of USD 2 million—purportedly for an office expansion but without any supporting documentation or rationale—the agent was provided confidential information from a Chinese airline official regarding the Air China tender. The General Manager of IAE and its Vice President of Customer Business both reviewed the information and modified the company's bid accordingly, and won the contract in April 2009. The sales agent paid the airline official more than USD 160,000 over the course of the year, and eventually received USD 4.3 million in success fees from the contract.

Also in 2009, the sales agent arranged for IAE to co-sponsor a golfing event for senior Chinese airline executives, which was eventually held in 2011. The company originally paid USD 30,000 toward the event, then gave another USD 30,000 at the agent's unexplained and undocumented request. IAE executives eventually learned that the agent had provided expensive gifts to the participating airline executives.

 

Approximate Alleged Payments to Foreign Officials:

Business Advantage Allegedly Obtained:

Nationality of Foreign Officials: China, Indonesia, Kuwait, Pakistan, South Korea, Thailand

Summary of Allegations:

Per the SEC's Cease-and-Desist Order: "UTC funded leisure travel and entertainment for foreign officials from several countries, including China, Kuwait, South Korea, Pakistan, Thailand, and Indonesia. UTC policies required the Legal Department to review and approve all leisure travel and entertainment as gifts to a foreign official. Nonetheless, employees frequently circumvented this requirement by submitting travel for foreign officials for approval without disclosing the leisure and entertainment component. On occasion, the travel was included as a cost component in the contract with the end customer and was therefore not submitted for appropriate approval." More than USD 134,000 in travel and entertainment expenses were improperly recorded as legitimate business expenses between 2009 and 2015.

 

Approximate Alleged Payments to Foreign Officials:

Business Advantage Allegedly Obtained:

Nationality of Foreign Officials: China

Summary of Allegations:

A supervisor for the China division of Otis Elevator Co. ("Otis China") agreed to pay USD 98,000 as a kickback to an official at a state-owned bank in exchange for Otis winning an elevator-installation contract. The payment was arranged through the use of a distributor, whom the supervisor brought on board under false pretext and without substantial internal review.

 

Approximate Alleged Payments to Foreign Officials:

Business Advantage Allegedly Obtained:

ENFORCEMENT RESULTS

Agencies: China: Unspecified
Results: Conviction
Year Resolved: 2013
Compliance Monitor:
Ongoing: No
Details:

The Chinese airline official who provided confidential information to IAE's sales agent was arrested in April 2011, and by May 2013 had reportedly been convicted of corruption.



Agencies: United Kingdom: Serious Fraud Office
Results:
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:

In its Form 10-Q filed with the U.S. Securities and Exchange Commission ("SEC") on 24 April 2015, UTC disclosed that the company made voluntary disclosure to the U.K. Serious Fraud Office ("SFO") in December 2013 and January 2014.



Agencies: United States: Department of Justice, United States: Securities and Exchange Commission
Results: Cease-and-Desist Order, Civil Penalty, Disgorgement
Year Resolved: 2018
Compliance Monitor:
Ongoing: No
Details:

In its Form 10-Q filed with the U.S. Securities and Exchange Commission ("SEC") on 24 April 2015, UTC disclosed that the company made voluntary disclosure to the SFO and U.S. Department of Justice ("DOJ) in December 2013 and January 2014.

On 7 April 2014, the SEC issued a subpoena for documents and alerted the company that it was conducting an investigation.

The SEC issued a second subpoena on 9 March 2015 seeking documents concerning internal allegations from the company's businesses about possible violations of anti-bribery laws, including by its business in China. United Technologies said it has cooperated with the investigations and responded to information requests by the SEC and DOJ.

On 12 September 2018, the SEC issued a consensual Cease and Desist Order addressing the activities of the respondent and its subsidiaries and affiliates in Azerbaijan and China and their provision of improper travel and entertainment in half a dozen countries. The Commission found that UTC had violated the anti-bribery, books-and-records, and internal-controls provisions of the FCPA. The company received credit for self-reporting and for its remedial efforts, including terminating responsible individuals, strengthening its compliance organization, enhancing its policies and procedures regarding travel, due diligence, and the use of third parties, and increasing its anti-bribery employee training. The SEC ordered disgorgement of USD 9,067,142, plus USD 919,392 in pre-judgment interest, and imposed a civil penalty of USD 4 million.

The DOJ has reportedly closed its investigation.



ENTITIES/INDIVIDUALS INVOLVED

DETAILS OF HOW CONDUCT WAS DISCOVERED

Discovery Method: Voluntary Disclosure
Details:

United Technologies self-reported to the SEC, DOJ and SFO in December 2013 and January 2014.


Country:

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