On July 11, Johnson Controls, Inc. (JCI) agreed, pursuant to an administrative cease and desist order and without admitting or denying the SEC’s findings, to pay $14.3 million to settle the SEC’s allegations that JCI violated the books and records and internal controls provisions of the FCPA. The charges related to actions taken by managers and employees of JCI’s wholly-owned Chinese subsidiary, China Marine, between 2007 and 2013, to make payments to sham vendors to effect bribes and improper payments to employees of Chinese government owned shipyards, ship-owners, and others, as well as to obtain and retain business and personally enrich China Marine employees. JCI’s settlement includes a disgorgement of $11,800,000, prejudgment interest of $1,382,561, as well as a civil penalty of $1,180,000. JCI also agreed to a one-year period of self-reporting to the SEC on the status of its FCPA and anti-corruption related remediation and compliance enhancements.
On the same day, the DOJ Fraud Section released a declination letter sent on June 21, 2016, to JCI, in which DOJ declined prosecution of possible FCPA violations “despite the bribery by employees of JCI’s subsidiary in China.” The DOJ letter stated that its decision is consistent with the FCPA Pilot Program , a one-year program launched in April 2016, to encourage companies “to voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs.” DOJ determined that JCI had voluntarily self-reported potential FCPA violations, conducted a thorough internal investigation, and continues to cooperate fully and remediate its internal controls.
No individuals have been charged in this matter, but DOJ noted in its declination letter that JCI removed from the company all 16 employees determined to have been involved in the misconduct. JCI also agreed to continue to cooperate in any ongoing investigation of individuals.
This is the third declination letter issued by the DOJ since its FCPA Pilot Program was announced it April 2016. Prior FCPA Scorecard coverage on the FCPA Pilot Program can be found here.