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U.S. v. Faro Technologies, Inc.

 
:
Faro Technologies - Faro Technologies, Inc.
:
DOJ Criminal
:
June 4, 2008
:
U.S. v. Faro Technologies, Inc.
:
This case demonstrates the potential danger of FCPA violations when a company is transitioning from sales through foreign distributors to establishing its own foreign sales organization.
:
Computer & Information Technologies-Hardware
:
China
:
2003; 2004; 2005; 2006
:
Chinese government officials
:
Faro Technologies, Inc. ("Faro") develops and markets portable computerized measurement devices and software for the manufacturing sector. Faro began direct sales in China in 2003 when it established a subsidiary, Faro China, in Shanghai. Previously, Faro had relied on a Chinese distributor to sell its products in China. Faro hired a former employee of its former Chinese distributor as its new country sales manager in China.

In 2004 and 2005, a certain Faro executive gave Faro China approval to make corrupt payments directly to employees of Chinese state-owned or controlled entities on several occasions. In 2005, the same Faro executive granted Faro China approval to make corrupt payments through an agent to "avoid exposure," according to internal e-mails. Faro China entered into a false services contract with the agent. The agent paid the bribes and sent regular invoices to Faro China for reimbursement.

These kickback payments were referred to internally as "referral fees" and were made to secure contracts for Faro worth approximately $4,944,234. In total, Faro promised $533,163 in corrupt payments and actually paid $444,492.

Faro falsely recorded at least $238,000 in improper payments to the intermediary in its books and records, describing the bribe payments as "referral fees." Between approximately May 2003 and February 2006, Faro also failed to devise and maintain a system of internal controls to ensure compliance with the FCPA.

The DOJ entered a 2-year non-prosecution agreement with Faro in light of Faro's (1) voluntary and timely disclosures; (2) cooperation with the DOJ and related SEC investigation; and (3) remedial efforts undertaken by Faro and to be undertaken under the non-prosecution agreement, including adopting internal controls and engaging an independent compliance monitor.
:
Anti-bribery (Issuer), Books and records (Issuer), Internal controls (Issuer)
:
Compliance Monitor, Fine, Non-prosecution Agreement
:
$1.1 million monetary penalty
:
1,100,000
:
0
:
Issuer
:
U.S.
:
Contract Procurement/Retention
:
4,944,234
:
Cash
:
Direct, Sales Agent/Consultant, Subsidiary Company
:
533,163
:
China
:
No