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UTC slapped with $14M 'corrupt practices' penalty

BY Gregory Seay

9/12/2018
HBJ File Photo
HBJ File Photo
The Farmington parent of Pratt Whitney Co. and Otis Elevator must pay $13.9 million to settle U.S. claims it breached rules against corrupt overseas business practices in making illicit payments in its jet-engine and elevator businesses, authorities say.

The U.S. Securities and Exchange Commission (SEC) announced Wednesday its action against United Technologies Corp. for breaching the Foreign Corrupt Practices Act (FCPA).

While UTC agreed to disgorge $10 million in illicit revenue, plus interest, and to pay a $4 million fine, it did not admit or deny guilt, the SEC said.

In a statement Wednesday, UTC again neither admitted nor denied guilt, but noted the settlement stems from incidents that UTC discovered, investigated and flagged to federal authorities.

"We are pleased to have reached a final civil administrative resolution with the SEC regarding these matters,' the statement said. "Following our voluntary disclosure in 2013 and our own internal investigations, we took immediate steps to reinforce that UTC is committed to doing business the right way. This included disciplinary action including employee terminations, enhancement of our internal controls, policies and compliance resources, and more robust training programs."

According to the SEC's order, Otis made illegal payments to Azerbaijani officials to sell lifts for public housing in Baku and as part of a kickback scheme to sell elevators in China.

The order also found that UTC, through its joint venture, made payments to a Chinese sales agent in a bid to obtain confidential information from a Chinese official that would help the company win engine sales to a Chinese state-owned airline.

The SEC's order also found that UTC improperly provided trips and gifts to various foreign officials in China, Kuwait, South Korea, Pakistan, Thailand, and Indonesia through its Pratt & Whitney division and Otis subsidiary in order to obtain business.

"U.S. companies with global operations must implement policies and procedures that prevent bribery and motivate employees to perform ethically," said Tracy L. Price, a deputy chief in the SEC's Enforcement Division. "Issuers with weak internal accounting controls open the door to corruption and other financial misconduct."