Avery Dennison has settled two related Securities and Exchange Commission cases over alleged Foreign Corrupt Practices Act violations. In an administrative action, the SEC imposed a cease-and-desist order against the consumer product company and ordered it to pay $318,470 in disgorgement and interest. In a civil case, Avery agreed to pay a $200,000 penalty. Avery settled both proceedings without admitting or denying the claims.
The SEC had charged that the Reflectives Division of Avery (China) Co. Ltd. paid kickbacks, sightseeing trips, and gifts to Chinese government officials.
- In January 2004, an Avery China sales manager went to a meeting with government officials and bought each a pair of shoes with a combined value of $500.
- In May 2004, the subsidiary hired a former government official as a sales manager because his wife was still employed at the government institute and was in charge of two projects the company wanted to pursue.
- In August 2004, Avery China obtained two contracts to install new graphics on police cars through the Institute. The sales manager agreed that the total sales price of the contracts would be inflated so the additional charges could be paid back to the Institute as a “consulting fee.” Total sales under these contracts were about $677,000, with profits of about $363,000. The kickback payments, which would have been about $41,000, were discovered by another division and halted prior to payment.
- In December 2002, an Avery salesman hosted a sightseeing trip for five government officials. Two reimbursement requests were used to conceal the expenses for the trip.
- In August 2004, Avery China paid a kickback to another government owned enterprise to secure a sales contract. Total sales under the contract were about $106,000, with profits of about $61,000. The $2,415 kickback was not paid after it was discovered by company officials.
- In 2005, Avery China secured a sale to a state-owned end user by agreeing to pay a Chinese official a kickback of nearly $25,000 through a distributor. Avery China realized $273,213 in profit from this transaction, which it inaccurately booked as a sale to the distributor rather than to the end user.
- In late 2005, during a sales conference hosted by Avery China at a famous tourist destination, a sales manager paid for sightseeing trips for at least four government officials at a cost of $15,000
- After Avery acquired a company, employees of the acquired company continued their pre-acquisition practice of making illegal petty cash payments to customs or other officials in several foreign countries. Those in illegal payments were approximately $51,000.
A spokesperson for Avery told the FCPA Blog, “What’s important to us is the fact, noted in the SEC’s administrative order, that we discovered the questionable actions. We investigated them and took disciplinary action, and reported them to the Securities Exchange Commission and Department of Justice (DOJ). As the SEC’s administrative order notes, in some cases we prevented them. We believe ethical conduct is critical to our reputation and our success, and we back that up with a rigorous training and reporting process to help employees make the right decisions. Our training includes training on the FCPA.”
References:
- Avery Dennison Settles China-Related Violations from The FCPA Blog
- THE FCPA: A Continuous Series of Payments and Promises from SEC Actions
- Avery Dennison Settles FCPA Charges with SEC from the Securities Law Prof Blog
- SEC Litigation Release on Avery Dennison
- SEC order of Proceedings against Avery Dennison (.pdf)
- Avery Dennison case a window on the pitfalls U.S. firms face in China by Don Lee for the Los Angeles Times
