In the Matter of Watts Water Technologies, Inc. and Leesen Chang (2011)

• Case Name
• In the Matter of Watts Water Technologies, Inc. and Leesen Chang (2011)

• Date Filed
• 10/13/2011

• Enforcement Agency
• SEC

• Countries
• China

• Foreign Official
• Employees of design institutes owned by the Chinese government.

• Date of Conduct
• 2006 to 2009

• Nature of Business
• Watts Water Technologies, Inc. (“Watts”) is a Delaware corporation that designs, manufactures, and sells water valves and related products.  Its common stock is registered pursuant to Section 12(b) of the Exchange Act and is traded on the New York Stock Exchange.  Leesen Chang, a U.S. citizen, was the vice president of sales at Watts’ Chinese subsidiary.

• Influence to be Obtained
• Between 2006 and 2009, Watts’s Chinese subsidiary, Watts Valve Changsha Co., Ltd. (“CWV”), produced and supplied large valve products for infrastructure projects in China.  Leesen Chang was vice president of sales at the Watts subsidiary that managed CWV.  In China, state‑owned design institutes are frequently retained by the government to assist in the design and construction of infrastructure projects.  Under Chang’s watch, CWV employees allegedly made improper payments to employees of certain design institutes to influence the institutes to recommend CWV valve products and create design specifications that favored CWV products.  The improper payments were facilitated by a sales incentive policy created by CWV’s Chinese predecessor, before it had been acquired by Watts.  The sales policy provided, among other things, that sales personnel could utilize their commissions to make payments to design institutes.  As a result, the payments to design institutes were improperly recorded in Watts’ books and records as sales commissions.

• Enforcement
• In 2009, Watts became aware of potential FCPA violations at CWV and retained outside counsel to conduct an internal investigation.  Watts publicly disclosed the internal investigation and on October 13, 2011, the SEC issued an administrative cease‑and‑desist order against Watts and Chang.  Under the order, Watts was ordered to pay disgorgement of $2,755,815, prejudgment interest of $820,791, and a civil money penalty of $200,000.  Chang was ordered to pay a civil money penalty of $25,000.

• Amount of the Value
• Unknown

• Amount of Business Related to Payment
• Approximately $2.7 million.

• Intermediary
• Local subsidiary.

• Citizenship of Parent Entity
• United States

• Total Sanction
• $ 3,576,606

• Compliance Monitor
• No

• Reporting Requirements
• No

• Case is Pending?
• No

• Total Combined Monetary Sanction
• $ 3,576,606

Watts Water Technologies, Inc. 

• Citation
• In the Matter of Watts Water Techs., Inc. & Leesen Chang, Admin. Pro. File No. 3-14585 (Oct. 13, 2011).

• Date Filed
• 10/13/2011

• Filed Under Seal
• No

• FCPA Statutory Provision
• • Books-and-Records
  • Internal Controls

• Other Statutory Provision
• Exchange Act Rule 13b2-1.

• Disposition
• Cease-and-Desist Order

• Defendant Jurisdictional Basis
• Issuer

• Defendant's Citizenship
• United States

Leesen Chang 

• Citation
• In the Matter of Watts Water Techs., Inc. & Leesen Chang, Admin. Pro. File No. 3-14585 (Oct. 13, 2011).

• Date Filed
• 10/13/2011

• Filed Under Seal
• No

• FCPA Statutory Provision
• • Internal Controls

• Other Statutory Provision
• Exchange Act Rule 13b2-1.

• Disposition
• Cease-and-Desist Order

• Defendant Jurisdictional Basis
• Issuer

• Defendant's Citizenship
• United States