On February 11, 2009, ITT Corporation (“ITT”), a publicly-traded New York-based global multi-industry company engaged in the design and manufacture of a wide range of engineered products and related services, settled an SEC Complaint charging it with violations of the books and records and internal controls provisions of the FCPA in connection with approximately $200,000 in bribes allegedly paid by its wholly-owned Chinese subsidiary, Nanjing Goulds Pumps Ltd. (“NGP”), to employees of state-owned entities in China.23 Without admitting or denying the SEC’s allegations, ITT agreed to pay $1,041,112 in disgorgement, $387,538 in pre-judgment interest, and a civil fine of $250,000, and to an injunction preventing future violations of the records and controls provisions of the FCPA. In reaching this disposition, the SEC considered the fact that ITT self-reported the conduct at issue, cooperated fully with the investigation, and instituted remedial measures.
According to the Complaint, NGP, which was a part of ITT’s Fluid Technology Division, was a distributor of water pump products sold to power plants, building developers, and general contractors throughout China.24 Between 2001 and 2005, NGP allegedly, either directly through its employees or indirectly through third party agents, made “illicit” payments to employees of various state-owned entities to influence the purchase of NGP water pumps for large infrastructure projects in China. The Complaint alleged that many of the payments were made to employees of state-owned “Design Institutes” that were responsible for making recommendations to other state-owned entities on products to be used in infrastructure projects. The improper payments made by NGP employees were purportedly either made directly to the personal bank accounts of Design Institute employees, or paid to such employees in cash. With regard to the payments made through third parties, the Complaint charged that the illicit funds were generated by paying inflated commissions to the agents. In all instances, however, NGP improperly recorded the payments as “commission payments” in its books and records, which were consolidated within the records of ITT. As a result of the illicit payments, NGP allegedly generated approximately $4 million in sales, from which ITT realized improper profits of more than $1 million. The payments were purportedly discovered in response to an anonymous complaint from NGP employees to ITT’s Corporate Compliance Ombudsman.