The California-based gas--detection device maker RAE Systems Inc agreed to pay a US$1.7 million fine for making “improper payments” to Chinese officials, the US Department of Justice said on Friday.
The payments were made to “foreign officials in the People’s Republic of China [PRC]” through two joint ventures the company struck with Chinese firms to sell its products and services in China, the statement said.
“In both instances, RAE Systems learned of corrupt practices [of both joint ventures] and knowingly failed to implement effective systems of internal controls and failed to properly classify the improper payments in its books and records,” it added.
One of the reasons for overlooking the bribes was “so as not to choke the sales engine and cause a distraction for the sales guys,” the department said quoting from the agreement.
The company was found to have violated the Foreign Corrupt Practices Act (FCPA). It has also agreed to cooperate with investigations into its case and to “enhanced” corporate compliance and reports, and to submit periodic reports to the department.
Separately, RAE Systems also reached a settlement on Friday with the US Securities and Exchange Commission, agreeing to pay US$1.3 million in fines for the same FCPA violations, the department said.
RAE Systems manufactures rapidly deployable, multi-sensor chemical and radiation detection monitors and networks, which it sold through two subsidiaries organized as joint ventures with local Chinese entities: RAE-KLH (Beijing) Co Limited and RAE Coal Mine Safety Instruments (Fushun) Co Ltd (RAE Fushun).
The products were sold through the subsidiaries in China to “government departments and bureaus, and large state-owned agencies and instrumentalities, including regional fire departments, emergency response departments and entities.”
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