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In the Matter of Faro Technologies, Inc.

 
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Faro Technologies - Faro Technologies, Inc.
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SEC Civil
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June 5, 2008
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In the Matter of Faro Technologies, Inc.
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In re Faro Techs., Inc., SEC Administrative Proceeding File No. 3-13059 (June 5, 2008)
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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.
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Computer & Information Technologies-Hardware
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China
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2004; 2005; 2006
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Chinese government officials
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Faro Technologies, Inc. ("Faro") develops and markets portable computerized measurement devices and software for the manufacturing sector.

Faro settled this action with the SEC without admitting or denying the following facts alleged in the SEC's order. Faro began direct sales in China in 2003 when it established a subsidiary in China, Faro Shanghai Co., Ltd ("Faro China"). 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. From 2004 to 2006, a certain Faro executive allegedly 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 executive allegedly granted Faro China approval to make corrupt payments through a third-party intermediary to "avoid exposure," according to internal e-mails.
Faro China allegedly made these kickback payments, totalling $444,492, and referred to them internally as "referral fees." According to the SEC, Faro secured contracts worth approximately $4,500,000 through these illicit payments. From 2004 to 2006, Faro failed to maintain a system of internal controls to detect and prevent these corrupt payments and failed to properly account for the corrupt payments in its books and records according to the SEC. On June 5, 2008, following an administrative proceeding, the SEC ordered Faro to cease and desist from violations of the FCPA's books and records and internal controls provisions. Under the order, Faro was also required to pay disgorgement and prejudgment interest and retain an independent consultant and compliance monitor for a period of two years to review and evaluate Faro's internal controls, record-keeping, financial reporting, and compliance.
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Anti-bribery (Issuer), Books and records (Issuer), Internal controls (Issuer)
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Civil Settlement, Compliance Monitor, Disgorgement, Injunction/Cease and desist, Prejudgment Interest
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$1,411,306 (disgorgement) and $439,637.32 (prejudgment interest)
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1,850,943
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0
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Issuer
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U.S.
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Contract Procurement/Retention
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4,500,000
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Cash
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Direct, Sales Agent/Consultant, Subsidiary Company
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444,492
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China
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No