RAE systems to pay almost $3 million to settle in China corruption
Equipment maker RAE Systems has agreed to pay almost $3 million in charges to settle criminal and civil allegations of bribing Chinese officials in an effort to obtain significant government contracts for its gas and chemical detection products, the SEC said on Friday.
The San Jose based firm is faced with separate agreements from the Department of Justice (DoJ) and the SEC. Now, the company is set to pay about $1.15 million in restitution with $109,000 added interest to settle the SEC’s civil charges. Also, the company will pay $1.7 million in criminal penalties to the DoJ.
According to authorities, RAE Systems will avoid prosecution since the company voluntarily informed and disclosed its unethical practices to the DoJ, initiated an internal investigation and immediately took action. Moreover, the DoJ said that RAE Systems accepts full responsibility for violating provisions of the Foreign Corrupt Practices Act (FCPA), which prohibits bribery of foreign government officials or company executives to secure and retain its business.
Under the settlement, the company neither admitted or denied the allegations. The SEC claims that the gas detection device firm paid up to $400,000 in bribes that lead to the purchase of contracts worth $3 million for gas and chemical detection equipment and garnered more than $1.1 million in profits.
RAE Systems ‘was aware of improper commissions, kickbacks and under-table greasing to get deals' by sales employees based in China, the DoJ says. Despite this, the company moved forward and ‘chose to implement internal controls only ‘halfway’ so as not to choke the sales engine and cause a distraction for the sales guys.’
Kirsten Chapman, a RAE spokeswoman, said management was 'pleased to have resolved the lawsuit.'
She added it was "positive in that the settlement amount is less than what RAE had accrued for the settlement.'
‘RAE Systems develops products to detect harmful emissions, yet it did not have adequate measures in place to detect and root out internal wrongdoing,’ says Cheryl Scarboro, chief of the SEC’s FCPA unit.
In October, RAE Systems disclosed that it had reserved $3.5 million to settle the FCPA investigation.
