A&O Shearman FCPA Digest | In the Matter of Faro Technologies, Inc. (2008)

Source Documents

Nature of Business
Procurement of contracts for the sale of portable computerized measurement devices and software for the manufacturing sector.

Influence to be Obtained
Faro Technologies, Inc. (“Faro”), a U.S. corporation, develops and markets portable computerized measurement devices and software for the manufacturing sector. Faro began direct sales in China in 2003 through a subsidiary, Faro Shanghai Co., Ltd. (“Faro China”). In 2004 and 2005, the then Country Sales Manager of Faro China made corrupt payments, authorized by the then Director of Asia‑Pacific Sales of Faro, directly to employees of Chinese state‑owned or controlled entities on several occasions. The payments were referred to internally as “referral fees” and generated approximately $4,500,000 in sales, from which Faro received a net profit of $1,411,306.

In 2005, the then Director of Asia‑Pacific Sales of Faro and the Country Sales Manager of Faro China decided to route the corrupt payments through third‑party intermediaries or “distributors” to “avoid exposure,” according to internal e‑mails. Faro China funneled cash payments through these intermediaries from early 2005 until early 2006.

Faro falsely recorded corrupt payments as legitimate “selling expenses” in Faro’s books and records. During the period of improper payments, Faro also failed to devise and maintain a system of internal controls to ensure compliance with the FCPA.

Enforcement
A cease‑and‑desist order was entered in the matter on June 5, 2008 under which Faro agreed to pay disgorgement of $1,411,306 and prejudgment interest of $439,637.32 and to retain an independent consultant and compliance monitor for a period of two years to review and evaluate Faro’s internal controls, record keeping, and financial reporting and compliance.

Citation
In the Matter of Faro Techs., Inc., Admin. Proc. File No. 3-13059 (June 5, 2008).