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In the Matter of Johnson Controls, Inc.

 
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Johnson Controls, Inc.
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SEC Civil
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July 11, 2016
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In the Matter of Johnson Controls, Inc.
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In the Matter of Johnson Controls, Inc., Admin. Pro. File No. 3-17337 (2016).
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The DOJ separately declined to bring charges under the FCPA Pilot Program given the company’s self-disclosure, cooperation, and remediation.

The SEC’s enforcement action against Johnson Controls comes after the company resolved an FCPA enforcement action against York International Corporation in 2007—a subsidiary that Johnson Controls acquired in 2005.
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Service- Refrigeration & air conditioning service & repair shops
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China
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2007; 2008; 2009; 2010; 2011; 2012; 2013
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Unnamed Chinese foreign officials.
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Johnson Controls is a Milwaukee, Wisconsin based global provider of automatic temperature control systems for buildings, industrial facilities, and ships. Johnson Controls operates in 150 countries around the world with approximately 15,000 employees and maintains a class of securities on the New York Stock Exchange.

According to the SEC, beginning in 2007, a pair of Johnson Controls’ wholly owned Chinese subsidiaries (“China Marine”) engaged in a scheme to inflate vendor sales contracts to create a slush fund to bribe foreign officials and enrich local managers. The SEC claims nearly every individual employed by China Marine was complicit in the scheme and took affirmative steps to avoid detection by the parent company.

Specifically, China Marine officials allegedly conspired with local vendors to prepare inflated vendor invoices for which the company would approve payment. The difference between the actual vendor sale price and inflated sale price was used as a slush fund to enrich China Marine officials and bribe employees of Chinese government-owned shipyards and ship-owners (as well as other unknown individuals). In total, China Marine allegedly paid over $4.9 million to vendors for goods and services which were never provided and obtained $11.8 million in profits from the sham vendor agreements.

On July 11, 2016, the SEC announced that it had resolved an FCPA enforcement action against Johnson Controls for the actions of China Marine through an administrative proceeding. As part of a cease-and-desist order, Johnson Controls agreed to disgorge $11.8 million and pay a civil penalty of $1.18 million plus prejudgment interest of 1,382,561—totaling $14,362,561. Separately, the DOJ announced that it would decline to pursue charges against Johnson Controls on account of the company’s voluntary disclosure, cooperation, and remediation.
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Books and records (Issuer), Internal controls (Issuer)
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Cease and Desist
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$11,800,000 in disgorgement, $1,180,000 civil penalty, and $1,382,561 prejudgment interest.
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14,362,561
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0
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Issuer
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U.S.
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United States
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Contract Procurement/Retention
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11,800,000
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Cash
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Subsidiary Company
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4,900,000
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China
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No
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Yes