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Orlando Sentinel May 06, 2013

Harris: SEC investigating allegations of bribery by onetime Chinese unit

By Richard Burnett

Investigators with the Securities and Exchange Commission and U.S. Department of Justice are looking into possible bribery activity by a Chinese health-care technology operation formerly owned by Harris Corp., the Melbourne-based company said in a recent filing with the SEC.

Federal authorities initiated their probe into possible violations of the Federal Corrupt Practices Act nearly two years after Harris paid $155 million to acquire Carefx Corp., a Virginia-based health-care data company which at the time included the Chinese sales operation now under investigation, Harris said.

Harris also said it has received requests from the SEC and Justice Department for documents and information related to the case.

The company noted that it conducted its own investigation of the Carefx overseas unit last year and turned up evidence that some employees of the Chinese operation had provided prepaid gift cards, cash payments and other inappropriate gifts to certain customers and government officials.

Harris terminated those practices, adopted new policies, dismissed the employees involved and severed its ties with the Chinese operation, the company said. It also voluntarily provided results of its investigation to federal authorities, which triggered the government's current action.

"It is our intent to fully cooperate with such investigations," the company stated in its SEC filing. "However, based on the information available to date, we do not believe that this matter will have a material adverse effect on our financial condition, results of operations or cash flows."

Harris is one of the latest U.S. corporations to become caught up in allegations of bribery by an overseas operation. In an April 30 disclosure to the SEC, IBM Corp. said its units in Poland, Argentina, Bangladesh and Ukraine are being investigated for possible violations of the U.S. foreign corrupt-pratices law.

Other big companies caught up in high-profile bribery allegations include Wal-Mart Stores Inc. and its Mexican operation, and Avon Products Inc. and its operations in China.

Since 2008, more than 40 U.S. companies have paid more than $3.6 billion in civil and criminal fines and other penalties in cases involving foreign corrupt-practices allegations, according to federal data compiled by Crain's Chicago Business.

Many American companies have encountered a pay-for-play culture as they expand into the global marketplace, said John Pike, chief executive of GlobalSecurity.org, an aerospace-research firm. Although it can be risky to navigate such markets, most companies consider the potential sales worth the risk, he said.

"They find that a lot of places around the world just don't see anything wrong with it: What we call corruption, they call business as usual," Pike said. "Some companies just consider the fines and penalities as a cost of doing business, and not that big of a cost compared with the revenues they generate."

Copyright 2013, Tribune Newspaper