2010-12-13 08:13

WASHINGTON - US equipment maker RAE Systems Inc. has agreed to pay almost $3 million to settle criminal and civil allegations of bribing Chinese officials to win government contracts in China from 2004 to 2008, US authorities said Friday.

The Justice Department and the Securities and Exchange Commission announced separate agreements with RAE Systems, based in San Jose, California. The company is paying about $1.15 million in restitution plus $109,000 in interest to settle the SEC's civil charges and a $1.7 million criminal penalty in an agreement with the Justice Department.

Because the company voluntarily came forward and disclosed the misconduct to the Justice Department, made an internal investigation and took corrective action, it will avoid prosecution, the department said. It said RAE Systems accepts responsibility for violating provisions of the Foreign Corrupt Practices Act, which prohibits bribery of foreign government officials or company executives to secure or retain business.

The authorities said the company paid $400,000 in bribes that brought it contracts worth $3 million for gas and chemical detection equipment, and about $1.1 million in profits.

RAE Systems "was aware of improper commissions, kickbacks and 'under-table greasing to get deals"' by sales employees in China, the Justice Department said. Yet the company "chose to implement internal controls only 'halfway' so as not to 'choke the sales engine and cause a distraction for the sales guys,"' it said.

RAE Systems neither admitted nor denied the allegations under the SEC civil settlement. It agreed to avoid future violations of the Foreign Corrupt Practices Act and to strengthen its program of compliance with the anti-bribery law.

"The management is pleased to have resolved the lawsuit," said Kirsten Chapman, a spokeswoman for RAE Systems.

A number of US and foreign companies have been charged with violating the law in recent years.

Luxury gifts provided to Chinese government officials by sales employees are said to have included jade, fur coats, kitchen appliances, suits and expensive liquor.

Many of the joint ventures' customers were Chinese government departments and large state-run agencies, including regional fire departments, emergency response departments and environmental bureaus.

"Companies that fail to respond to red flags can be held liable for the acts of their joint-venture partners," Cheryl Scarboro, who heads the SEC's Foreign Corrupt Practices Act unit, said in a statement.