Rockwell Automation said on May 3 that it has settled a previously disclosed civil matter with the Securities and Exchange Commission (SEC) involving civil violations of the books and records and internal controls provisions of the U.S. Foreign Corrupt Practices Act that took place in 2006 and earlier by one of its former Power Systems subsidiaries in China.
Under the terms of the settlement, Rockwell Automation will forfeit $1.8 million in profit, plus interest and a $400,000 penalty.
The company said it discovered the potential violations through its normal financial review process. It voluntarily self-reported to the SEC, publicly disclosed this matter in its Form 10-K in November 2006, and fully cooperated with SEC staff during the course of the government's investigation.
"Rockwell Automation is a company with a robust compliance program that found an isolated problem at a Chinese subsidiary through its regular audit process and took appropriate actions in response to what it uncovered," said Alexandra Wrage, president and founder of the international anti-corruption/anti-bribery organization TRACE International. "Whereas the Department of Justice declined to pursue the matter, the SEC reached a different conclusion. This is a great example of why companies are reluctant to self-disclose: there is no predictability, even across enforcement agencies, and the good actors that find, fix and disclose problems nevertheless face the expense and disruption of protracted settlement discussions.
Wrage added that "while the fine itself is relatively small, the ancillary costs (financial and otherwise) for an FCPA settlement are invariably high."
The China subsidiary was divested by Rockwell Automation in January 2007 as part of the sale of its entire Power Systems business to the Baldor Electric Co.