On Monday, the DoJ revealed the company, which is a subsidiary of Panasonic, will pay the fine to resolve charges levied under the Foreign Corrupt Practices Act (FCPA).
The US agency says that Lake Forest, Calif.-based Panasonic Avionics Corp. (PAC) operated a scheme to "retain consultants for improper purposes and conceal payments to third-party sales agents," in violation of accounting principles under FCPA.
In a statement, the DoJ said that PAC, which develops in-flight communication systems and products for airlines, caused Panasonic to falsify its accounts and book-keeping due to the retention of consultants which did "little or no actual consulting work."
These consultants may have been on the books, but instead, they were retained through a third-party provider and paid through a budget controlled by a single, senior PAC executive.
Without any true oversight from Panasonic at large, these consultants appear to have been "hired" purely for business connections.
In one case, a consultant was paid $875,000 by PAC over a six-year period as the company reaped over $92 million in profits "from portions of the contract over which the consultant had some involvement or influence" while employed by an airline linked to the contract.
While PAC knowingly noted these payments as "consultant payments," Panasonic then incorrectly designated these payments as "selling and general administrative expenses," on books, records, and accounts.
PAC also concealed the use of some sales agents who did not pass internal due diligence checks, hiding payments of over $7 million to these employees.
As a result, Panasonic's books were falsified due to PAC's antics. This not only was in breach of FCPA rules but also distorted financial information available to shareholders.
In addition to the fine, PAC has agreed to retain an independent corporate compliance monitor for at least two years.
The case was investigated by the FBI's International Corruption Squad in Los Angeles.
"Enforcement of the Foreign Corrupt Practices Act is critical in maintaining a fair and competitive international market to which all businesses are entitled," said Acting Assistant Director Christopher Hacker. "Along with our federal partners and the Department of Justice, the FBI will continue to aggressively investigate violations of the Foreign Corrupt Practices Act."
In a related proceeding, the US Securities and Exchange Commission (SEC) filed a cease and desist order against Panasonic. The company has agreed to pay roughly $143 million in fines. As a result, Panasonic and PAC must pay US regulators over $280 million.
"We are pleased to have resolved these investigations; we have taken extensive steps over the past few years to strengthen Panasonic Avionics' compliance programs and internal controls, and we welcome an independent compliance monitor to assess our progress. This is an ongoing effort and the company will continue to strengthen its compliance programs and internal controls."
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