Dow Chemical has agreed to pay $325,000 to settle civil charges that a foreign subsidiary made improper payments to Indian government officials.
The Securities and Exchange Commission alleged that Dow violated the books and records and internal controls provisions of the Foreign Corrupt Practices Act when its Mumbai subsidiary, DE-Nocil Crop Protection, made a total of roughly $200,000 in improper payments from 1996 through 2001.
According to the complaint, beginning in 1996, DE-Nocil paid about $39,700 to an official in India’s Central Insecticides Board to expedite the registration of three DE-Nocil products. Most of these payments were allegedly made through agreements with contractors which issued false invoices to DE-Nocil or added fictitious charges to genuine bills, according to the regulator. The contractors then disbursed these extra funds, at DE-Nocil’s direction, to the Insecticides Board official.
The SEC also alleged that from 1996 through 2001, DE-Nocil made $87,400 in improper payments to Indian state officials in order to distribute and sell its products.
Further, the commission charged, DE-Nocil made improper payments to Indian federal officials including an estimated $37,600 for gifts, travel, entertainment, and other items; $19,000 to government business officials; $11,800 to sales tax officials; $3,700 to excise tax officials; and $1,500 to customs officials.
None of these payments were accurately reflected in Dow’s books and records, and Dow’s system of internal accounting controls failed to prevent the payments, according to the SEC.
Dow consented to the $325,000 penalty without admitting or denying the SEC allegations.
In a related proceeding, the commission also issued a settled cease-and-desist order against Dow, finding that the company violated the books and records provisions and internal controls provisions of the Exchange Act in connection with the improper payments made by DE-Nocil. Dow consented to the entry of the order without admitting or denying the allegations.