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Board and Fraud is a blog that aims to bring a practical approach to issues facing the board of directors and the audit committee specifically in the area of governance, risk management, compliance, and internal audit, with a strong focus on fraud, ethics, and internal controls.

United Technologies Charged With Violating FCPA and Pays almost $14.0 million to Settle

According to the SEC’s order, United Technologies, a Delaware corporation that was founded in 1934 and is headquartered in Farmington, Connecticut, subsidiary Otis Elevator Co., who manufactures and maintains elevators, escalators and moving walkways, made unlawful payments to Azerbaijani officials to facilitate the sales of elevator equipment for public housing in Baku and as part of a kickback scheme to sell elevators in China.

According to the SEC, Otis Elevator Co. unit hired agents from Russia without doing any due diligence. These agents had no local experience in Azerbaijan or reliable experience in either import/export or the elevator industry.

The order also found that United Technologies, through its joint venture, made payments to a Chinese sales agent in a bid to obtain confidential information from a Chinese official that would help the company win engine sales to a Chinese state-owned airline.

The SEC’s order also found that United Technologies improperly provided trips and gifts to various foreign officials in China, Kuwait, South Korea, Pakistan, Thailand, and Indonesia through its Pratt & Whitney a division and Otis, who designs, manufactures, and services aircraft engines and auxiliary power units for commercial and military aircraft subsidiary in order to obtain business.

The gifts and trips were provided in an effort to retain business, according to the SEC.

United Technologies agreed to disgorge $9,067,142, plus interest of $919,392, and pay a civil money penalty of $4,000,000.

In determining to accept the Offer, the SEC considered remedial acts promptly undertaken and cooperation afforded the Commission staff. United Technologies self- reported the misconduct and timely provided facts developed during its internal investigation.

The SEC settled this case through an internal administrative order without going to court.

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