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Technology company PTC will pay $28.5 million in bribery investigation

Wed 17 Feb 2016

Parametric Technology Corporation (PTC), a global technology services company employing over 6,000 staff worldwide, has agreed to pay $28.5 million to settle bribery investigations by the US government.

The Department of Justice and the Securities and Exchange Commission were conducting independent investigations into the company’s practices in China, concerned that PTC may have violated the US Foreign Corrupt Practices Act, a law that forbids bribes to foreign government officials.

The investigation covered the period of 2006-2011, during which PTC’s Hong Kong and Shanghai business units arranged and paid for several employees of Chinese state-owned companies to travel to the United States for training. The purported training, however, was revealed to be more recreational than business-related, thereby potentially violating the FCPA.

During the five-year period under investigation, PTC’s Hong Kong and Shanghai satellites spent more than $1 million on US trips for Chinese agencies and enterprises, while entering into more than $13 million in contracts with those companies. A statement on the finding released by the US Department of Justice stated, “Company employees typically accompanied the Chinese officials on these trips.  PTC China admitted that the cost of these recreational trips was routinely hidden within the price of PTC China’s software sales to the Chinese state-owned entities whose employees went on the trips. “ The SEC said that a typical ‘training’ week would include a one-day visit to PTC’s Massachusetts headquarters and followed by leisure activities including sightseeing, golfing, and travel to New York, Las Vegas, and Hawaii.

As part of the agreement to settle the investigation without prosecution, PTC agreed to pay the criminal penalty of $14.5 million, and to tighten its compliance program in China to prevent future missteps. The Department of Justice did not give PTC full cooperation credit under the investigation because they found that, at the time of the initial disclosure, PTC “failed to disclose relevant facts that it had learned in connection with a prior internal investigation and did not disclose those facts until the department uncovered additional information independently and brought them to PTC China’s attention.” The Securities and Exchange Commission did, however, agree to defer civil bribery charges against an employee of PTC China who cooperated with their investigation, a precedent-setting first in an FCPA investigation.

PTC changed its policies as a result of the investigation, stating that it has terminated employees associated with the misconduct, as well as instituting a compliance program in its Chinese offices. It agreed to pay $14.5 million to avoid prosecution, as well as returning $11.9 million in profits earned in the activities under investigation, and an additional $1.8 million in interest.

Just last month, PTC announced their acquisition of IoT specialist company Kepware, hoping to accelerate their entry into Industrial Internet of Things (IIoT).

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business legal news U.S.
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