Massachusetts software company, PTC, Inc. (“PTC”) agreed to pay a $14.5 million criminal penalty to resolve a Department of Justice (“DOJ”) investigation into payments for recreational travel by Chinese government officials that violated the Foreign Corrupt Practices Act “(“FCPA”) and a civil settlement with the U.S. Securities and Exchange Commission (“SEC”) by disgorging $11.8 million. PTC entered into a three-year Non-Prosecution Agreement (“NPA”) with the DOJ wherein they agreed to cooperate fully with any and all matters relating to improper conduct, implement a robust corporate compliance program and report periodically on the implementation of the compliance program.
The SEC also entered into a three-year Deferred Prosecution Agreement with Yu Kai Yuan, an employee at one of company’s Chinese business units, because he cooperated with the agency’s investigation. This is notable because this is the SEC’s first against an individual in an FCPA case and it is yet another clear indication of the government’s new found zest for prosecuting individuals in civil and criminal investigations.
The company first disclosed its FCPA scrutiny in August 2011 and in May of 2014, PTC received an SEC subpoena in connection with the DOJ’s FCPA investigation. The violations involved Parametric Technology (Shanghai) Software Company Ltd. and Parametric Technology (Hong Kong) Ltd. (“PTC China”), through local business partners, arranging and paying for employees of various Chinese state-owned enterprises to travel to the U.S., often accompanied by PTC China employees. The travel was supposed to be for training at the company’s Needham, MA headquarters. However, PTC China admitted that the trips were primarily recreational travel to New York, Las Vegas, Los Angeles and Hawaii and that the cost of the trips was hidden within the price of PTC China’s software sales to Chinese state-owned enterprises. “PTC-China’s books and records were consolidated into PTC’s books and records, thereby causing PTC’s books and records to be inaccurate,” the SEC said in statement.
PTC China did not receive voluntary disclosure credit or full cooperation credit because, at the time of the initial disclosure, it failed to disclose relevant facts that it had learned in a prior internal investigation and did not disclose those facts until the DOJ investigation uncovered additional information independently through other sources. By the conclusion of the investigation, PTC had fully cooperated by providing all relevant known facts, including information about individuals involved in the misconduct.
Trading under symbol PTC, the company is a technology firm that provides digital and online technology services to businesses, specifically 2D and 3D design software, product lifecycle management, and service management solutions. The company serves manufacturers in the industrial equipment, automotive, high tech and electronics, aerospace and defense, retail, consumer, and medical device industries.