Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Wednesday, May 4, 2011

Rockwell Settles FCPA Charges Involving China Subsidiary

The SEC, on May 3, settled charges against Rockwell Automation, Inc. (Rockwell) arising out of violations of the FCPA through a former subsidiary in China, Rockwell Automation Power Systems (Shanghai) Ltd. (RAPS-China). As described in the Commission’s Order, from 2003 to 2006, certain employees of RAPS-China paid approximately $615,000 to Design Institutes, which were typically state-owned enterprises that provided design engineering and technical integration services that can influence contract awards by end-user state-owned customers. The payments were made through third-party intermediaries at the request of Design Institute employees and at the direction of RAPS-China’s Marketing and Sales Director. RAPS-China’s Marketing and Sales Director intended that these funds be paid directly to the Design Institute employees, with the expectation that they would influence the ultimate state-owned customers to purchase RAPS products. Rockwell realized approximately $1.7 million in net profits on sales contracts with end-user Chinese government-owned companies that were associated with payments to the Design Institutes. During the same period, employees of RAPS-China paid approximately $450,000 to fund sightseeing and other non-business trips for employees of Design Institutes and other state-owned companies. As further described in the Commission’s Order, Rockwell voluntarily self-reported the Design Institute payments, provided relevant facts from its internal investigation and otherwise cooperated with the Commission staff’s investigation, and undertook numerous remedial measures.

Rockwell consented to the entry of the Order which orders it to pay disgorgement of $1,771,000, prejudgment interest of $590,091 and a civil money penalty of $400,000.

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