Quad/Graphics, Inc. (“Quad”), a Wisconsin-based corporation, is a marketing solutions and printing services provider with operations in ten countries. Quad maintains a class of securities on the New York Stock Exchange and is registered pursuant to Section 12(b) of the Securities Exchange Act.
Quad/Graphics Peru S.A. (“Quad Peru”) and Quad/Tech Shanghai Trading Company (“Quad/Tech China”) are Quad subsidiaries operating in Peru and China, respectively.
According to the SEC, Quad was engaged in multiple bribery schemes to secure business by paying, or promising to pay, over a million dollars in bribes through its subsidiaries in Peru and China. The SEC alleged that Quad Peru paid or promised bribes to government officials in Peru to win sales contracts from Peruvian government municipalities and to avoid penalties on existing contracts. Specifically, Quad Peru allegedly paid sham companies posing as Quad Peru’s vendors for false invoices the sham companies submitted and the sham vendors would assist Quad Peru in redirecting those funds as bribes to government officials and private clients. In 2012 and 2013, Quad Peru also allegedly participated in a “judicial bribery scheme” in which it paid approximately $200,000 through its local counsel to judges to “influence the outcome of a [VAT] tax dispute” between Quad Peru and the Peruvian tax authority. The SEC alleged that Quad approved sham invoices from local counsel “despite the possibility the money would be used for bribery.”
The SEC also alleged that Quad Peru knowingly “violated U.S. sanctions and export control laws” – which prohibits transactions with specific countries sanctioned under U.S laws – by selling telephone directories to a Cuban telecommunications company. Quad Peru allegedly violated the FCPA’s books and records provision by creating false records to hide these transactions.
According to the SEC, Quad engaged in a similar scheme in China from 2010 to 2015 in which Quad/Tech China made approximately $182,000 in improper payments as “commissions” to sales agents who redirected the funds as bribes to government and private sector employees to obtain business.
The SEC alleged that “[n]one of Quad’s improper payments in Peru or China were accurately reflected in its books and records and Quad failed to have sufficient internal accounting controls in place to detect or prevent the various misconduct.”
On September 26, 2019, the SEC settled its enforcement action against Quad for violations of the FCPA’s anti-bribery, books-and-records, and internal controls provisions. The SEC took into consideration Quad’s self-disclosure, cooperation with the investigation, and remedial efforts taken, including terminating those involved with the schemes and strengthening its compliance procedures and department. According to the cease-and-desist order, Quad agreed to pay $7,895,334 total in disgorgement and prejudgment interest. Additionally, Quad agreed to pay a $2,000,000 civil penalty.
Quad also agreed to self-report to the SEC for a one-year period and provide updates of its compliance procedures and “remediation” of the issues identified.