ITT has agreed to settle a civil action by the SEC involving allegations that the company violated the FCPA’s books and records and internal controls provisions as a result of improper payments to officials in China by employees or agents of ITT’s wholly owned subsidiary in China, Nanjing Goulds Pumps Ltd. (NGP). The SEC alleged that NGP employees or agents paid officials of SOEs in China to influence the design of infrastructure projects so as to require the use of NGP pumps. NGP employees also paid third-party agents to facilitate payments to foreign officials, with the understanding that payments would be made to foreign officials that recommended NGP pumps or directly pay employees of the SOE that purchased the pumps.
ITT’s illicit payments totaled approximately US$200,000 and generated more than US$4 million in improper NGP sales. NGP’s books and records disguised these payments as increased commissions, which were consolidated in ITT’s financial statements filed with the SEC. ITT also allegedly failed to make or keep books and records in reasonable detail so as to accurately and fairly reflect the illicit payments by NGP and the related disposition of assets. Finally, ITT failed to devise and maintain a system of internal controls sufficient to provide reasonable assurances that: (a) transactions were executed in accordance with management’s authorization; (b) transactions were recorded to maintain accountability of assets; and (c) access to assets was permitted only in accordance with management’s authorization.
Without admitting or denying the SEC’s allegations, ITT consented to the entry of a final judgment permanently enjoining it from future books and records and internal controls violations. ITT further agreed to disgorge approximately US$1 million in profits and pay a US$250,000 civil penalty