On February 16, the SEC and DOJ announced a settlement with a Massachusetts-based technology company, PTC Inc., for violations of the FCPA. PTC and two Chinese subsidiaries agreed to pay $28 million to settle the parallel civil and criminal actions, with PTC paying approximately $13.5 million in disgorgement and prejudgment interest to settle the SEC’s charges, and its two Chinese subsidiaries paying approximately $14.54 million in penalties in a Non-Prosecution Agreement with the DOJ.
PTC admitted that its subsidiaries in Shanghai and Hong Kong provided non-business related travel and other improper payments to Chinese government officials to win business. Specifically, from 2006 to 2011, the two subsidiaries provided nearly $1.5 million to Chinese officials in improper travel, gifts, and entertainment. The Chinese officials were employed by state-owned entities that were PTC customers. The travel and entertainment expenses included overseas trips to visit PTC facilities, including cooperate headquarters in Massachusetts, but the majority of the time on the trips was spent on recreational excursions unrelated to the purported business purpose. For example, PTC paid for Chinese officials to visit New York, Las Vegas, San Diego, Los Angeles, and Honolulu, as well as guided tours, golfing, and other leisure activities during those trips. Employees of PTC’s subsidiaries also provided gifts to the Chinese officials, including cell phones, iPods, gift cards, wine, and clothing. The payments were recorded in the company’s books and records as legitimate commissions or business expenses.
As part of the investigation, the SEC also entered into its first Deferred Prosecution Agreement (DAP) with an individual in an FCPA case. The SEC announced that it would wait three years to bring any FCPA charges against a former employee of one of the subsidiaries, Yu Kai Yuan, because of the cooperation he provided during the SEC’s investigation.