November 29, 2021

In a first, SEC offers DPA to Exec accused of bribery

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U.S. Securities and Exchange Commission building in Washington, D.C.  September 4, 2014.  Photo by Diego M. Radzinschi/THE NATIONAL LAW JOURNAL.

U.S. Securities and Exchange Commission building in Washington, D.C. September 4, 2014. Photo by Diego M. Radzinschi/THE NATIONAL LAW JOURNAL.

By Sue Reisinger, From Corporate Counsel

Two subsidiaries of Massachusetts software company PTC Inc. agreed to pay more than $28 million in civil and criminal penalties Tuesday to resolve federal investigations into payments for recreational trips for Chinese government officials, in violation of the U.S. Foreign Corrupt Practices Act.

As part of the case, the Securities and Exchange Commission reached its first deferred prosecution agreement with an individual in an FCPA matter. The Department of Justice operated a parallel investigation into the company.

PTC reached a non-prosecution agreement with DOJ in which it admitted arranging and paying more than $1 million for employees of various Chinese state-owned entities to travel to the U.S. under the guise of training at the company’s headquarters. But in reality the trips were primarily recreational and included visits to New York, Las Vegas and Hawaii.

Under terms of the three-year deal, PTC agreed to pay over $14.5 million criminal penalty to settle the bribery case. PTC also agreed to continue to cooperate with the department’s ongoing investigation, to enhance its compliance program and to periodically report on its compliance progress.

In a statement the company said, “PTC has implemented extensive remedial measures related to these matters, including the termination of the responsible employees and business partners, the establishment of an entirely new leadership team in China, the establishment of a dedicated compliance function, and other enhancements to compliance programs.”   

The two subsidiaries, Parametric Technology (Shanghai) Software Company Ltd. and Parametric Technology (Hong Kong) Ltd., had entered into more than $13 million in contracts with the Chinese state-owned enterprises involved in the trips.

PTC outside counsel Roger Witten, of Wilmer Cutler Pickering Hale and Dorr, signed the deal for the company.

In a statement, DOJ said PTC did not receive voluntary disclosure credit or full cooperation credit because, at the time of its initial disclosure, “it failed to disclose other relevant facts” until the Justice department uncovered additional information independently.

In a separate settlement with the SEC, the company agreed to pay $11.8 million in disgorgement and nearly $1.8 million in prejudgment interest. The SEC’s cease and desist order finds that PTC violated the anti-bribery, internal controls, and books and records provisions of the Securities Exchange Act of 1934. 

The SEC also said it was deferring prosecution of Yu Kai Yuan, a former employee of one of the China subsidiaries, to recognize and reward the “significant cooperation he has provided during the SEC’s investigation.” Under the deal, the charges against Yuan could be dropped in three years.

The agency has signed DPAs before with companies, but not individuals.

The PTC statement added, “The company is pleased to have resolved this matter.”

IMAGE: Diego M. Radzinschi

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