U.S. FINES PANASONIC’S IN-FLIGHT ENTERTAINMENT ARM $280M FOR FOREIGN CORRUPT PRACTICES ACT VIOLATIONS
June 11, 2018
On April 30, 2018, Panasonic Avionics entered into a deferred prosecution agreement with the Department of Justice (DOJ) for violating the Foreign Corrupt Practices Act. The in-flight media system manufacturer agreed to pay $280 million and to accept future monitoring in order to resolve charges brought by the Department of Justice and Securities and Exchange Commission (SEC) related to making improper payments to consultants in Asia.
According to the DOJ, in 2007, Panasonic Avionics hired a foreign official as a consultant for contract negotiations with an unnamed, government-owned Middle Eastern airline. The official was paid $875,000 over the course of six years despite no record of work completed to warrant such payments. The payments were then recorded as legitimate consulting expenses in Panasonic’s accounting records.
Additionally, the DOJ found that, from 2007 and 2016, employees at the subsidiary concealed Panasonic Avionics’ use of sales agents in Asia who had not met internal due diligence requirements. Though the company formally terminated the agents, certain company employees rehired them as sub-agents after the fact. These employees concealed in excess of $7 million in payments to at least 13 agents. Panasonic employees continued to make secret payments to other agents despite receiving warnings.
The DOJ stated that Panasonic Avionics was required to pay 20% less than commensurate fines based on current U.S. sentencing guidelines. Panasonic Avionics will be required to retain an independent compliance monitor for two years as part of the agreement with DOJ.
Panasonic also entered into an agreement with the SEC over anti-bribery, anti-fraud, and internal accounting controls violations. The company has agreed to disgorge $143 million as part of the agreement, including $126.9 million in profits and $16.3 million in prejudgment interest.
If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com or 202-659-6622); Drew Derco (dderco@eckertseamans.com or 202-659-6665), or Alexander Matthews (amatthews@eckertseamans.com or 202-659-6633).
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