The alleged misconduct occurred in the midst of D&B’s efforts to expand its China-based operations through a series of mergers, acquisitions, and joint ventures. Between 2006 and 2012, two of D&B’s indirect subsidiaries allegedly made improper payments to obtain confidential business information and personal data from Chinese government authorities.
In 2006, D&B entered into a joint venture with Chinese company Huaxia International Credit Consulting Co. Limited, together referred to as HDBC. Huaxia was targeted as a partner because of its connections to the Chinese government. In its due diligence, D&B discovered that Huaxia was sourcing information about Chinese businesses from various government agencies rather than publicly available sources. Business information, such as the type integral to D&B business model, is kept on file at Chinese government agencies. Access to such data is highly regulated under Chinese law, is granted in only limited circumstances, and there are express prohibitions against using the files for commercial activities. According to the SEC, D&B’s management in China knew of these restrictions, but knew it could obtain this information by bribing Chinese government officials. To circumvent the legal restrictions on confidential business information, HDBC engaged third-party agents to make improper payments to government officials in an attempt to avoid legal liability. HDBC falsely recorded the illicit payments as legitimate data acquisition expenses.
In addition, the SEC alleges that D&B knowingly engaged an indirect subsidiary to obtain personal data on Chinese citizens in violation of Chinese law. Specifically, Roadway, an indirect subsidiary of D&B and a provider of direct marketing services in China, allegedly violated provisions of the FCPA by making improper payments to officials to obtain the non-public personal data, which D&B then used for its business operations. According to the SEC, D&B knew that Chinese law forbids obtaining citizens’ private data from Chinese government entities or organizations. D&B also knew through its due diligence that Roadway obtained much of its information from third-parties, and that Roadway could not certify that no “rebates” were paid to obtain personal data. D&B is alleged to have conducted insufficient due diligence as to the legality of the Roadway-acquired data or potential rebates paid to third-parties for providing the data.