On February 17, the SEC announced that South Korea’s largest telecommunications company had agreed to pay $6.3 million to settle SEC allegations that the company had violated the books and records and provisions on FCPA’s internal accounting controls. According to the SEC, the company “lacked sufficient internal accounting controls over expenses, including executive bonuses and gift card purchases, which allowed managers and executives to generate slush funds.” This allegedly allowed company employees to provide improper benefits and payments to government officials in Korea and Vietnam and to seek business from government customers.
Regarding corporate conduct in Korea, the SEC alleged that “from at least 2009 through 2017, [company executives] maintained slush funds, consisting of both off-book accounts and physical reserves of cash, to provide valuables to government officials, among others. These slush funds were then allegedly used for gifts and entertainment, as well as illegal political contributions to Korean government officials who had the ability to influence company business. The SEC also said that between 2015 and 2016, the company allegedly made more than $1.6 million in payments to three organizations at the request of senior government officials. All of those payments were recorded as charitable donations or sponsorships, and the company took no steps to determine whether the payments were legitimate donations, the SEC said.
Regarding the company’s conduct in Vietnam, the SEC alleged that between 2014 and 2018, company employees “discussed internally providing money to third parties linked to government officials in Vietnam to to obtain contracts for two projects”. The company allegedly arranged with a construction company to pay a senior official around $95,000 in 2014 to secure a contract, then later falsely booked a payment of $200,000 to the construction company as “[s]business performance support/advice (completed). Meanwhile, the SEC claimed the company “lacks sufficient internal third-party accounting controls and no relevant due diligence compliance policies” and has “taken no meaningful action in response to allegations of payments.” abuses related to contracts”.
Without admitting or denying wrongdoing, the company consented to a cease and desist order and agreed to pay approximately $3.5 million in civil penalties and $2.8 million in restitution interest and before judgement. The company and 14 executives were charged by South Korean authorities in November 2021 with criminal offenses related to political contributions.