Department of Justice Says It Will Not Charge Nortek in Bribery Scandal

SEC Forces Nortek to Forfeit Profits Resulting from the Bribe

Nortek LogoThe Department of Justice (D.O.J.) has notified Nortek, Inc. that it has closed its investigation into a corporate bribery scandal involving the company’s operations in China and will take no further actions, according to a report by Reuters. Nortek, parent company of Core Brands – a holding company of several custom integration brands – had revealed the existence an internal investigation into the matter by the company to investors several quarters ago. At the same time, Nortek reported the matter to the authorities, noting that they would fully cooperate with any government investigation.

Nortek “will not be charged because the U.S. [company] had turned themselves in,” Reuters noted. Nortek stock was up 5.19% in late afternoon trading on the news.

See more on why the D.O.J. decided to not charge Nortek…

The Foreign Corrupt Practices Act explicitly prohibits the bribing of foreign officials in order to win business. In the past, various government agencies – especially the D.O.J. – have sought significant penalties, both civil and criminal, against companies violating these laws.

In this case, along with another involving Akamai Technologies, Inc., the companies chose a path generally considered almost suicidal – self-reporting instances of the violation of the law by one of its own divisions. The general thinking among many in the corporate world, is that there is no benefit to turn yourself in – the penalties would be just as stiff as if law enforcement caught you in the act.

A New Leniency Program

“The perception was that there was no difference,” U.S. Assistant Attorney General Leslie Caldwell told Reuters. “So we wanted to create a delta that would be transparent and visible.”

But the D.O.J. had only recently began a pilot program in which it decided that it would show leniency to those companies who self-report violations. The program, which just began in April, is in a year-long test of the concept…fortuitous timing for Nortek and Akamai.

In fact, these are the first two companies to be released from prosecution under the program and the D.O.J. publicly acknowledged their decision on Tuesday in letters to the companies. “Their ‘prompt voluntary self-disclosure’ and cooperation won them decisions not to prosecute, the agency said in the so-called declination letters.”

REUTERS/Jonathan Ernst

REUTERS/Jonathan Ernst

Ill-Gotten Gains Forfeited

The U.S. Securities and Exchange Commission (SEC) also said in a statement on Tuesday that no charges would be forthcoming from their agency either, in the wake of Nortek’s and Akamai’s agreement to forgo the ill-gotten profits from the bribery schemes of their employees. As such, Akamai will pay the SEC $671,885 and Norek will surrender $322,058 to the agency.

According to information from the SEC, Akamai’s overseas subsidiary bribed certain Chinese officials with $40,000 in order to install a network with 100 times greater capacity than required into a state-owned enterprise. Nortek’s China subsidiary provided Chinese officials with gifts in the amount of $290,000 in order to receive special treatment from the country’s regulators, such as lower taxes.

Akamai told Reuters that the offending employees had been terminated. The company has also embarked on an “aggressive remediation program.” The report contained no word on any changes in processes at Nortek.

Learn more about Nortek at:

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