Adm. Proc. File No. 3-14585 (Oct 13, 2011) is an action against the company and Lessen Chang. Watts manufactures and sells water valves and related products. Its shares are traded on the NYSE. Watts operated in China through its wholly owned subsidiary, Watts Valve Changsha Co. Ltd or CWV, established in 2005. It was sold in 2010. Mr. Chang, a U.S. citizen, was vice president of sales for Watts’ management subsidiary in China.

CWV produced and supplied large valve products for infrastructure products in China that were largely done with state-owned entities. Those entities routinely retain state-owned design institutes to assist. It is alleged that from 2006 through 2009 improper payments were made to employees of certain design institutes by CWV. The purpose was to influence the institutes to recommend CWV products to the state-owned enterprises involved with the infra-structure projects. They were also intended to create design specifications that favored CWV products. The payments were booked incorrectly as commissions in CWV’s books and records which caused those of Watts to be inaccurate. Respondent Chang approved many of the payments. The company realized about $2.7 million in profits from the payments.

The violations were discovered, investigated and reported to the staff by the company. In early 2009 Watts’ General Counsel learned of a Commission enforcement action against another company involved with unlawful payments to employees of Chinese design institutes. As a result the company implemented anti-corruption and FCPA training for the Chinese subsidiary of Watts. Following a training session the Watts China in-house corporate counsel learned of possible FCPA violations which caused the company to undertake an internal investigation conducted by outside counsel and forensic accountants. Subsequently, the company initiated a series of remedial steps.

To resolve the case the company consented to the entry of a cease and desist order based on Exchange Act Sections 13(b)(2)(A) and 13(b)(2)(B), agreed to pay disgorgement of $2,755,815 along with prejudgment interest and a civil penalty of $200,000. Respondent Change consented to a cease and desist order based on the same sections and agreed to pay a civil penalty of $25,000. The Order notes that “the Commission considered remedial acts promptly undertaken by Watts and the cooperation afforded the staff.