Telecommunications Company UTStarcom Enters into $3 Million Settlements with DOJ and SEC for Alleged Foreign Corrupt Practices Act Violations
As reported by the Wall Street Journal and DOJ, UTStarcom Inc., a California-based global communications corporation which designs, manufactures and sells network equipment and handsets has agreed to pay $1.5 million in penalties to the government for alleged acts of bribery in the People’s Republic of China in violation of the Foreign Corrupt Practices Act (FCPA). The company simultaneously reached a settlement with the Securities and Exchange Commission over the same conduct in which it agreed to pay an additional $1.5 million.
UTStarcom entered an agreement with the government--in which UTStarcom neither admitted nor denied the allegations--which states that, between 2002 and 2007, the company's employees and agents allegedly arranged and paid for employees of Chinese state-owned telecommunications companies and UTStarcom customers to travel to popular tourist destinations in the U.S., including New York City, Las Vegas and Hawaii, purportedly to participate in training at UTStarcom facilities. However, UTStarcom purportedly had no facilities in the locations and conducted no training. UTStarcom recorded the trips as alleged "training" expenses. The government charged that the trips were for the alleged purpose of securing telecommunications contracts in China. The value of the trips and other gifts to foreign employees was alleged to be approximately $7 million.
The SEC has also alleged that UTStarcom obtained work visas for employees of its foreign customers to work in the U.S. and paid the individuals salaries and benefits although the individuals allegedly did no work. It claims that UTStarcom allegedly falsely accounted for payments to the individuals as employee compensation and created false annual performance reviews for personnel files of the individuals.
In addition to paying penalties, the agreement requires UTStarcom to implement various internal controls and to cooperate fully with the Department of Justice. The agreement also recognizes UTStarcom's voluntary disclosures to, and cooperation with, the government, and the company's efforts to correct the conduct. DOJ has agreed not to prosecute UTStarcom or its subsidiaries in exchange for its cooperation and its compliance with the agreement.
UTStarcom's focus has been Asian markets, in particular China. The company does business in China through UTStarcom China Co. Ltd., a wholly-owned subsidiary.
