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In the Matter of FLIR Systems, Inc.

 
:
FLIR Systems, Inc.
:
SEC Civil
:
April 8, 2015
:
In the Matter of FLIR Systems, Inc.
:
In the Matter of FLIR Systems, Inc., Admin. Pro. File No. 3-16478 (2015)
:
The SEC’s charges focused entirely on how providing expensive gifts and entertainment to foreign officials will violate the FCPA.
:
Aerospace/Defense
:
Egypt, Saudi Arabia
:
2008; 2009; 2010; 2011
:
Saudi Arabian Ministry of Interior officials; Egyptian Ministry of Defense officials.
:
FLIR Systems, Inc. is an Oregon-based corporation whose common stock is registered under Section 12(b) of the Exchange Act and is listed on the NASDAQ Global Select Market. FLIR markets and manufactures thermal imaging, night vision, infrared cameras, and other sensing products and systems.

In 2008, FLIR entered into a contract with the Saudi Arabian Ministry of Interior (“MOI”) to sell thermal binoculars for approximately $12.9 million. As part of the sales agreement between FLIR and the MOI, FLIR agreed to conduct a “Factory Acceptance Test” that would be attended by MOI officials. FLIR believed that the successful execution of the contract, along with the “Factory Acceptance Test,” would lead to additional business with the MOI in the future.

The “Factory Acceptance Test” was planned for July 2009 in Billerica, Massachusetts. However, in arranging the MOI officials’ travel, FLIR employees (Stephen Timms and Yasser Ramahi) organized a 20-night trip with stops in Casablanca, Paris, Boston, New York, Beirut, and Dubai. Timms and Ramahi referred to the MOI officials’ travel as the “World Tour.” According to the SEC, none of the stops, outside of Boston, served a business purpose.

The SEC also contends that FLIR employees gave expensive watches worth approximately $7,000 in total to five MOI officials and that FLIR paid for additional travel and entertainment expenses for MOI officials valued at approximately $40,000 from 2008 and 2010.

After July 2009, the MOI placed additional orders with FLIR for binoculars for the price of $1.2 million. In total, FLIR earned revenues of over $7 million in profits in connection with its sale of binoculars to the MOI.

Apart from the alleged payments made to MOI officials, the SEC claims that the FLIR officials paid for $43,000 in travel costs for nine officials of the Egyptian Ministry of Defense to FLIR’s Stockholm factory, which also included a non-essential visit to Paris. In total, the officials traveled fourteen days but only engaged in legitimate business activity on four days.

During the relevant time, the SEC asserts that FLIR had a code of conduct with a specific anti-bribery policy and that those policies required that employees record information accurately and honestly. FLIR’s employees also received training. According to the SEC, FLIR had few internal controls over travel and gifts to customers, particularly the use of foreign travel agencies, and sales manager were solely responsible for expense approvals for sales staff.

On April 8, 2015, the SEC settled its enforcement action against FLIR for violations of the books-and-records and internal controls provisions of the FCPA through a cease and desist order. According to the order, FLIR agreed to pay disgorgement of $7,534,000, prejudgment interest of $970,584, and a civil penalty of $1,000,000.
:
Anti-bribery (Issuer), Books and records (Issuer), Internal controls (Issuer)
:
Cease and Desist
:
$7,534,000 in disgorgement; $970,584 in prejudgment interest; $1,000,000 in civil monetary penalty.
:
9,504,584
:
0
:
Issuer
:
U.S.
:
United States
:
Contract Procurement/Retention
:
14,100,000
:
Entertainment, Gifts, Travel
:
Not stated.
:
Egypt, Saudi Arabia
:
No
:
No