Foreign Bribery Of Chinese Officials Allegedly Occurred In The U.S. Huh?

The easy cases that violate the Foreign Corrupt Practices Act are those involving cash payments – bribes – in an effort to obtain business. But that’s not the only type of conduct prohibited by the FCPA. Take a look at a settlement announced last Thursday in which UTStarcom Inc. (UTSI) agreed to pay a $1.5 million fine for violating the statute.

UTSI, a Delaware corporation headquartered in Alameda, CA,  is a global telecommunications company that designs, manufactures and sells network equipment and handsets. According to information contained in the agreement, UTSI has historically focused on Asian markets, with a particular emphasis on China. UTSI generally does business in China through its wholly-owned subsidiary, UTStarcom China Co. Ltd. (UTS-China).
 
As described in the agreement, UTSI acknowledged responsibility for the actions of UTS-China and its employees and agents who arranged and paid for employees of Chinese state-owned telecommunications companies to travel to popular tourist destinations in the United States, including Hawaii, Las Vegas and New York City. The trips were purportedly for individuals to participate in training at UTSI facilities. In fact, UTSI had no facilities in those locations and conducted no training. The government contended that UTS-China then falsely recorded these trips as "training" expenses, while the true purpose for providing these trips was to obtain and retain lucrative telecommunications contracts.
 
The agreement requires that UTSI pay a $1.5 million penalty, implement rigorous internal controls and cooperate fully with the Justice Department. Interestingly, the agreement recognizes UTSI’s voluntary disclosure, thorough self-investigation of the underlying conduct, the cooperation provided by the company to the Justice Department, and the remedial efforts undertaken by the company. As a result of these factors, the Justice Department indicated that it agreed not to prosecute UTSI or its subsidiaries for the making of improper payments, provided that UTSI satisfies its ongoing obligations under the agreement.