Quad/Graphics, Inc. was a Wisconsin-based marketing solutions and printing services company with operations in 10 countries. Quad’s common stock was registered with the SEC and traded on the New York Stock Exchange.
Quad/Graphics Peru S.A. (“Quad Peru”) was a wholly-owned subsidiary of Quad that specialized in printing and assembling packets for educational textbooks and exams. The company also printed directories, magazines, catalogs, retail inserts, board books, and telephone directories.
Quad/Tech Shanghai Trading Company, Ltd. (“Quad/Tech China”) was a wholly-owned subsidiary of Quad that sold automated systems for commercial, newspaper, packaging and publication printers.
According to the documents in this case, between 2011 and 2016, Quad engaged in multiple bribery schemes through its subsidiaries to secure business in Peru and China. There were two separate schemes in Peru. First, Quad Peru bribed government officials at the Peruvian National Institute of Statistics and Information and other government municipalities to secure contracts and other officials with the Peruvian Ministry of Education in order to avoid penalties on existing contracts. Second, Quad Peru bribed and attempted to bribe judges in order to influence the outcome of a tax dispute with the Superintendencia Nacional de Aduanas y de Administraciόn Tributaria, the Peruvian tax authority, which had imposed over $12,000,000 in Value-Added Tax, interest, penalties and fines against the company. The bribes to the judges were paid through local counsel involved in the litigation. In China, Quad/Tech China made improper payments to employees of private and government customers through sham sales agents to secure business. In addition to the bribery, the SEC alleged that Quad Peru also violated U.S. sanctions and export control laws by engaging in commercial transactions with a state-controlled Cuban telecommunications company, Empresa de Telecomunicaciones de Cuba S.A. Neither Quad’s improper payments in Peru or China nor the business in Cuba were accurately reflected in Quad's books and records. In all, Quad made well over $1 million in improper payments and profited by approximately $7 million as a result of these schemes.
In a settled administrative proceeding initiated on September 26, 2019, the SEC ordered Quad to cease and desist violations of the anti-bribery, books and records, and internal controls provisions of the FCPA. Under the terms of the settlement, Quad agreed to pay disgorgement of $6,936,174, prejudgment interest of $959,160, and a civil penalty of $2,000,000, for total payment of $9,895,334, and the company agreed to self-report on the status of its anti-corruption compliance for a term of one year. The SEC noted Quad's voluntary disclosure of the matter as well as the company's cooperation and remediation.
Relatedly, on September 19, 2019, the DOJ issued a letter pursuant to the agency's FCPA Corporate Enforcement Policy to Quad declining to prosecute the company for violations of the FCPA, despite evidence that the company had paid bribes in Peru and China. The DOJ noted Quad's voluntary disclosure, cooperation, remediation, and the disgorgement of ill-gotten profits in this SEC action.
