3M, the multinational conglomerate, has recently reached a settlement of $6.5 million over charges of violating the books and records and internal controls provisions of the Foreign Corrupt Practices Act.
According to the Securities and Exchange Commission (SEC), employees of 3M’s Chinese subsidiary engaged in inappropriate practices. They arranged for Chinese government officials employed by state-owned enterprises to attend overseas conferences and events, disguising them as opportunities for the officials to receive overseas travel and tourism. These activities were meant to influence the officials’ decision to purchase 3M products.
The SEC revealed that between 2014 and 2017, 3M’s Chinese subsidiary provided government officials with overseas travel that involved shopping, tours, and other leisure activities. Interestingly, some of these tourism activities coincided with the official events the officials were supposed to attend. Additionally, some Chinese government officials participating in these events did not understand English or have proper translation services available.
During the period from February 2016 to September 2018, employees of 3M’s China-based subsidiary directly transferred $254,000 to a Chinese travel agency, helping fund some of these inappropriate tourism activities.
Charles Cain, chief of the SEC’s FCPA unit, cautioned companies with global operations about the risks posed by inadequate internal accounting controls. He emphasized the role played by complicit third-party vendors in exacerbating these dangers.
Representatives for 3M have not yet provided a comment on this matter.
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