3M Paid $6.5 Million to Resolve FCPA Violations Linked to China Subsidiary

Summary

In August 2023, the U.S. Securities and Exchange Commission announced that 3M Company agreed to pay more than $6.5 million to resolve charges that it violated the books-and-records and internal-accounting-controls provisions of the Foreign Corrupt Practices Act (FCPA). The SEC found that employees of 3M's China subsidiary arranged overseas trips for Chinese government officials employed by state-owned healthcare facilities. Although the trips were presented internally as conferences, educational events and healthcare visits, the SEC found that they often included tourism activities intended to encourage officials to purchase 3M products. From at least 2014 through 2017, the subsidiary spent nearly $1 million on at least 24 trips involving tourism activities. Employees also created alternate itineraries containing sightseeing and leisure activities and concealed them from compliance personnel. The SEC found that the costs were recorded as legitimate business expenses and that 3M benefited by at least $3.5 million in increased sales. 3M agreed to pay disgorgement, prejudgment interest and a $2 million civil penalty. The company settled without admitting or denying the SEC's findings. 3M's subsequent SEC filing states that it had discovered the issues internally, voluntarily disclosed the investigation to U.S. authorities and cooperated; the DOJ closed its investigation without taking action. Sources: SEC press release https://www.sec.gov/newsroom/press-releases/2023-160 SEC enforcement order https://www.sec.gov/litigation/admin/2023/34-98222.pdf 3M SEC filing https://investors.3m.com/financials/sec-filings/content/0000066740-23-000092/mmm-20230930.htm