FLIR Systems, Inc. [FLIR] and the Securities and Exchange Commission (SEC) on Wednesday said the company has reached a nearly $10 million settlement agency to resolve previously disclosed violations of the Foreign Corrupt Practices Act (FCPA) committed by two employees of the company dating back to 2008.
The $9.5 million settlement includes $7.5 million in profit disgorgement, a $1 million civil penalty, and $970,584 in prejudgment interest. The company previously took a reserve for the settlement in its fourth quarter 2014 financial results.
FLIR self-reported the violations but the SEC hit the company for inadequate controls over gifts and travel out of its foreign sales offices that led to the FCPA violations.
“FLIR’s deficient financial controls failed to identify and stop the activities of employees who served as de facto travel agents for influential foreign officials to travel around the world on the company’s dime,” Kara Brockmeyer, chief of the SEC Enforcement Division’s FCPA Unit, said in a statement.
The SEC said that two FLIR employees in the company’s Dubai office provided “expensive watches” to officials with the Saudi Ministry of Interior and arranged for a nearly three-week world trip to cities that included Casablanca, Paris, Dubai, Beirut and New York City. The value of these gifts was falsely recorded in FLIR’s financial records as legitimate business expenses, the SEC said.
The SEC also said between 2008 and 2010 FLIR paid about $40,000 for travel by Saudi government officials and accepted “cursory invoices” from a company partners to pay for extended travel by Egyptian officials in 2011. The travel and gifts paid for by FLIR were to government officials that “played key roles in decisions to purchase FLIR products,” the agency said.
The SEC also said that FLIR cooperated in its investigation.
“FLIR takes compliance very seriously and has policies and procedures in place to prevent such conduct,” Andy Teich, president and CEO of FLIR, said in a statement. “We self-reported the employee’s activities to the relevant authorities upon discovering them and cooperated with the government’s investigation. We have taken action to bolster our training, controls and policies. The actions of the two former employees involved do not reflect the values of FLIR or the high standards to which we hold ourselves accountable.”
The settlement also directs FLIR to report on its FCPA compliance activities to the SEC for the next two years.