Among recent enforcement actions were charges against a defense contractor by the Securities and Exhange Commission for Foreign Corrupt Practices Act violations regarding a “world tour” for government officials and a Department of Labor action that resulted in the restoration of $485,000 to a Connecticut retirement plan. The Financial Industry Regulatory Authority censured and fined a firm for failures surrounding the sale and purchase of corporate bonds.
SEC Charges Defense Contractor With ‘World Tour’ of Bribery
Oregon-based FLIR Systems Inc., a defense contractor, has been charged by the SEC with violating the Foreign Corrupt Practices Act (FCPA) for financing what an employee termed a “world tour” of personal travel for government officials in the Middle East who were instrumental in decisions to purchase FLIR products. FLIR made out on the deal, making more than $7 million in profits from the sales won by travel and gifts.
According to the agency, FLIR, which develops infrared technology for use in binoculars and other sensing products and systems, didn’t have much internal control over gifts and travel originating from its foreign sales offices.
In Dubai, two employees not only gave expensive watches to government officials with the Saudi Arabia Ministry of Interior in 2009, they also arranged for the company to pay for a 20-night excursion by Saudi officials that included stops in Casablanca, Paris, Dubai, Beirut and New York City.
The watches and trips were disguised as legitimate business expenses, and documentation that should have acted as red flags for inappropriate spending was disregarded.
From 2008 to 2010, the SEC says, FLIR paid approximately $40,000 for additional travel by Saudi government officials, including multiple New Year’s Eve trips to Dubai with airfare, hotel and expensive dinners and drinks. FLIR also accepted cursory invoices from a FLIR company partner without any supporting documentation to pay extended travel of Egyptian officials in mid-2011.
The company self-reported the misconduct to the SEC, and cooperated with the ensuing investigation. Without admitting or denying the charges, the company agreed to pay disgorgement of $7.53 million, prejudgment interest of $970,584 and a penalty of $1 million for a total of $9.5 million. Two employees were previously charged in the case.
Fiduciaries Ordered to Return $485,000 to Connecticut Retirement Plan
The fiduciaries of a Bridgeport, Connecticut-based retirement plan have been ordered by the Department of Labor to return a grand total of $485,560.77 to the plan after an Employee Benefits Security Administration investigation revealed that, while deductions were made from employee paychecks, the money never arrived at the plan.
According to the DOL, in 1984, architectural, engineering and interior design firm Fletcher-Thompson Inc. established The Fletcher-Thompson Savings Plan to provide retirement benefits for its participants, company employees and their beneficiaries. Fletcher-Thompson, Inc. is the plan sponsor; Michael Marcinek, the company’s president, managing partner and majority owner, is the plan trustee. Both are fiduciaries of and parties in interest to the plan.
Beginning in 2008, DOL said, the company became delinquent in remitting employee deferrals and loan repayments to the plan. As of May 2012, the company completely stopped making any contributions to the plan. However, it continued to withhold contributions and loan repayments from participants’ pay. As the result of a complaint filed in June of 2014 by DOL against the company and Marcinek, both fiduciaries agreed to a consent judgment. They are required to restore the total amount outstanding, including lost interest, of $485,560.77.
The judgment has ordered them to restore that amount in installments of no less than $40,463.40 per month for 12 months, ensure that nonfiduciary plan participants receive the share to which they are entitled and provide a full accounting to EBSA each month. The order also prohibits Marcinek from ever again serving as a fiduciary to an ERISA-covered benefit plan.
FINRA Fines, Censures Firm on Bond Sale Failures
FINRA censured Fort Lauderdale-based Newbridge Securities Corp., fined it $138,000 and required it to revise its written supervisory procedures after it found that the firm bought and sold corporate bonds but failed to do so at fair prices.
According to the agency, in transactions for or with a customer, the firm did not use reasonable diligence to find the best interdealer market, and also failed to buy or sell in that market so that the customer’s price was the best available under prevailing market conditions. It also failed to execute orders fully and promptly.
FINRA also found that the firm’s supervisory system was not adequate to achieve compliance, with no WSPs providing for any of the four minimum requirements for WSPs regarding corporate bond best execution, sales transactions, Order Audit Trail System (OATS), trade reporting, other trading rules (related to clearly erroneous trades), and other rules. In addition, FINRA found numerous other failures regarding the reporting of short sales, their orders, reporting and ledger inaccuracies and inaccurate report data.
Without admitting or denying FINRA’s findings, the firm consented to the sanctions.