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Enforcement Action Dataset

 

Initiation Date:    04/30/2018  Information

Prosecuting Agency:    U.S. Department of Justice

Type of Action:    DOJ Criminal Proceeding

Docket or Case Number:    18-cr-00118

Court:    District of Columbia

Name of Prosecuting Attorneys:   

  • Sandra L. Moser, Acting Chief, Fraud Section, Criminal Division
  • Dennis R. Kihm, Trial Attorney, Fraud Section, Criminal Division
  • Jeremy R. Sanders, Trial Attorney, Fraud Section, Criminal Division

US Assisting Agencies:   

  • U.S. Securities and Exchange Commission

Foreign Enforcement Action/Investigation:    Unknown

Foreign Assistance:    Unknown

Origin of the Proceeding:    Unknown

Whistleblower:    Unknown

Case Status:    Resolved


Summary  Information

Panasonic Corporation, headquartered in Osaka, Japan, was a multinational corporation organized into eight business segments, one of which included Panasonic Avionics Corporation ("PAC"), which was a wholly owned subsidiary based in the U.S. that designed, engineered, manufactured, sold, and installed in-flight entertainment systems and global communications services to airlines, aircraft leasing services, and airplane manufacturers worldwide. PAC’s books and records and financial accounts were consolidated into Panasonic’s books and records and reported on Panasonic’s consolidated financial statements. Panasonic’s shares were registered with the SEC until April 22, 2013, and traded on the New York Stock Exchange. Additionally, from May 1, 2015 through June 20, 2016, Panasonic’s securities were registered with the SEC.

Beginning in about 2007 and continuing through 2017, PAC made a series of payments in the Middle East and Asia that were not properly recorded on PAC's, and thus Panasonic's, books and records. Specifically, between 2007 and 2013, a senior executive at PAC, who had control over the budget for the Office of the President, authorized the retention of a senior contracts official at a Middle Eastern state owned airline to a consulting position. PAC paid the official $875,000 over a six year period for his purported consulting services, though he did little actual work for PAC. During this same period, the same senior executive at PAC authorized payments of an additional $825,000 to a consultant for a domestic airline in order to obtain confidential non-public business information. These payments were not accurately reflected in the company's books and records. Finally, from 2007 to 2016, PAC had a practice of using third party sales agents in some, but not all, regions in which the company did business. In 2007, PAC put into place certain due diligence requirements for screening sales agents, even those with existing contracts with the company. Some of the existing sales agents servicing Asia were unable to meet the new requirements, so PAC engaged a Malaysia based sales agent to act as an stand-in between PAC and the sales agents. The sales agents who could not meet the new requirements became subagents of the Malaysia agent in order to circumvent PAC's internal controls. In all, PAC employees hid more than $7 million in payments to the subagents through this process.

On April 30, 2018, the DOJ filed a single count Information in the District of Columbia against PAC alleging willful violation of the books and records provisions of the FCPA. On the same date, the company entered into a three year deferred prosecution agreement with the DOJ. Under the terms of the agreement, PAC agreed to pay a criminal monetary penalty of $137,403,812, continue to enhance its anti-corruption compliance policies and procedures, and to hire an independent compliance monitor for a term of two years. The monetary penalty represented a 20% departure below the minimum guidelines range, which the DOJ deemed appropriate given the company's cooperation and remediation. However, the DOJ did not give PAC self-disclosure credit because it did not disclose until after the SEC had already requested documents from the company related to possible FCPA violations.

In a related administrative proceeding filed on April 30, 2018, the SEC issued a cease and desist order against Panasonic. Under the terms of the order, the SEC ordered Panasonic to cease and desist violations of the anti-bribery, books and records, and internal controls provisions of the FCPA as well as other securities laws and to pay disgorgement of $126.9 million plus prejudgment interest of $16,299,018.93. In determining to accept the company's settlement offer, the SEC noted Panasonic's cooperation and remedial efforts.

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