The Dun & Bradstreet Corporation ("D&B"), a global commercial data provider, agreed to pay over $9 million to settle SEC charges arising from unlawful payments that two of D&B's China-based subsidiaries allegedly made to government officials. According to the SEC, D&B was aware that its subsidiaries made improper payments in order to obtain non-public information about Chinese citizens and businesses, and falsely recorded the payments in its books and records as legitimate business expenses.
As described in the Order Instituting Proceedings, D&B entered into a joint venture with Huaxia, a credit consulting company. The joint venture, called "HDBC," was formed despite D&B having knowledge that Huaxia regularly used third-party agents in order to obtain private information about Chinese companies. The SEC said that HDBC mistakenly believed that using third-party agents would protect the company from liability arising from the bribes paid by third-party agents to government officials. In addition, the SEC found that HDBC allowed employees to purchase certain information directly from government officials or state-owned entities.
A second subsidiary, Roadway, was accused of making illegal payments to obtain personal information on Chinese citizens. Before acquiring Roadway, the SEC asserted, D&B failed to adequately conduct due diligence regarding indications that the company made improper payments to procure private information. After the acquisition, Roadway employees allegedly continued making payments to state-owned entities and government agencies. Roadway and the five individuals were convicted by the Shanghai District Prosecutor for the illegal practices, and Roadway was ordered to pay a fine.
The settlement consists of $6,077,820 in disgorgement, $1,143,664 in interest, and a $2 million civil penalty. D&B neither admitted nor denied liability in connection with the settlement.
The DOJ declined to pursue criminal charges against D&B. Despite finding that employees of the two subsidiaries committed FCPA violations, the DOJ chose not to prosecute due to, among other factors, D&B's self-disclosure of the violations, cooperation with the investigations, and remedial measures including (i) enhancing FCPA compliance policies and procedures, (ii) terminating parties responsible for the misconduct and (iii) agreeing to disgorge profits to the SEC.
Commentary / Jodi Avergun
This case is another example of the DOJ's FCPA Enforcement Policy at work. D&B got a declination with disgorgement – but with a twist. As opposed to many of the recent declinations with disgorgement, this case carries a civil penalty. Here, the disgorgement was paid to the SEC, which had a parallel case against D&B, but the SEC also required D&B to pay a civil penalty. Contrary to the transparent explanation of penalty amounts in recent DOJ settlement announcements, it is unclear how or why the exact terms of the settlement were reached. Nevertheless, this settlement makes clear that there are benefits that result from early disclosure and full cooperation. This settlement also reminds companies that the value of adequate M&A due diligence, coupled with careful integration of corporate culture and remediation where necessary, cannot be overestimated.
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