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SEC v. Con-way Inc.

 
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Con-way Inc.
:
SEC Civil
:
August 27, 2008
:
SEC v. Con-way Inc.
:
SEC v. Con-way, Inc., No. 08-1478 (D.D.C. 2008); In the Matter of Con-way Inc., SEC Administrative Proceeding File No. 3-13148 (Aug. 27, 2008)
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This case may offer insight into the government's view of the distinction between facilitation payments and "obtain or retain business" payments. In the end, however, the SEC brought charges based on inaccurate books & records and lack of internal controls.
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Transportation-Shipping
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Philippines
:
2000; 2001; 2002; 2003
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officials at the Philippines Bureau of Customs, officials at the Philippine Economic Zone Area, and officials at fourteen state-owned airlines that conducted business in the Philippines.
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Emery Transnational, a former subsidiary of Con-way Inc. based in the Philippines, allegedly made $244,000 in improper payments to officials at the Philippines Bureau of Customs and the Phillippines Economic Zone area. This payment total allegedly consisted of hundreds of small cash payments designed to induce officials to violate customs regulations, settle customs disputes, and reduce or not enforce legitimate fines.

In addition to the payments to customs officials, Emery also allegedly paid approximately $173,000 in cash to officials of state-owned airlines that did business in the Philippines between 2000 and 2003. These payments allegedly were made to induce the airline officials to either improperly reserve space for Emery Transnational on their airplanes (called "weight shipped" payments) or to induce the airline officials to falsely under-weigh the shipments, resulting in lower shipping charges (called "gain share" payments).
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Books and records (Issuer), Internal controls (Issuer)
:
Civil penalty, Civil Settlement, Injunction/Cease and desist
:
300,000
:
0
:
Issuer
:
U.S.
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Customs Clearance
:
Not stated.
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Cash
:
Direct, Subsidiary Company
:
417,000
:
Philippines
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"Facilitation Payment": Con-way's former subsidiary, Emery Transnational, allegedly made numerous small payments to customs officials to: (i) violate customs regulations by allowing Emery Transnational to store shipments longer than otherwise permitted; and (ii) improperly settle customs disputes, or reduce or not enforce otherwise legitimate fines. Emery Transnational also allegedly paid foreign officials at airlines operating in the Philippines to: (i) improperly reserve shipping space on airlines; and (ii) falsely under-weigh shipments to reduce shipping charges. Although some of these payments may arguably fall on one side or the other of the "obtain or retain business" nexus, Con-way's liability arose from its alleged failure to account for these payments on its books and records and its alleged failure to maintain a system of internal controls. It is unclear whether the SEC would have brought an action based solely on such small arguably facilitation payments without the books and records and internal controls violations.
:
No