NATCO Group Inc. ("Natco"), headquarters in Houston, Texas, designs, manufactures, and markets oil and gas production equipment and systems. TEST Automation & Controls, Inc., headquartered in Harvey, Louisiana, is a wholly-owned subsidiary of NATCO.
In June 2005, TEST Kazakhstan won a contract to provide instrumentation and electrical services in Kazakhstan. To perform the services, TEST Kazakhstan hired both expatriates and local Kazakh workers. Kazakhstan law required TEST to obtain immigration documentation before an expatriate worker entered the country. Kazakh immigration prosecutors conducted audits and claimed that TEST Kazakhstan's expatriate workers were working without proper immigration documentation. TEST was ordered to pay cash fines, and prosecutors threatened to fine, jail or deport the workers if the fines were not paid. TEST's senior management in Harvey, Louisiana authorized paying $45,000 to the Kazakh immigration prosecutors to cover the fines, and these payments were improperly recorded in TEST's books and records.
TEST Kazakhstan also used consultants to assist in obtaining immigration documentation for its expatriate employees. One of the consultants did not have a license to perform visa services, but had a relationship with an official working at the Kazakh Ministry of Labor. The consultant requested cash from TEST Kazakhstan to help him obtain the visas, and provided TEST Kazakhstan with bogus invoices for "cable" from third-party entities he controlled. TEST Kazakhstan knew these invoices were false, but nonetheless presented them to Kazakh banks to withdraw the requested cash. TEST Kazakhstan submitted false invoices (totalling $80,000) to TEST for reimbursement. TEST reimbursed these requests despite knowing the invoices did not accurately reflect the services rendered.
On January 11, 2010, the SEC filed a complaint against Natco, charging the company with violating the internal controls and books and records provisions of the FCPA. At the same time, without admitting or denying the SEC's allegations, Natco consented to the entry of a final judgment requiring the company to pay a $65,000 civil penalty.
In a related action, without admitting or denying the SEC's allegations, Natco consented to the entry of an administrative cease and desist order permanently enjoning the company from violating the FCPA's books and records, and internal controls provisions.
