[This story previously appeared in Securities Regulation Daily.]
By Rodney F. Tonkovic, J.D.
The Goodyear Tire & Rubber Company will pay over $16 million to settle charges of FCPA violations arising from bribes paid by subsidiaries in Africa. According to the Commission, Goodyear subsidiaries in Kenya and Angola paid more than $3.2 million in bribes to both government entities and private companies to obtain tire sales. These payments were recorded as legitimate business expenses in the subsidiaries' books and records and then consolidated, without being detected, into Goodyear's books and records. In addition to paying disgorgement and prejudgment interest, Goodyear was ordered to cease and desist from its violations of the books and records provisions (In the Matter of The Goodyear Tire & Rubber Company, Release No. 34-74356, February 24, 2015).
Background. From 2007 through 2011, Goodyear subsidiaries in Angola and Kenya routinely paid bribes to employees of government-owned or affiliated entities, and private companies in return for their business. The bribes were falsely recorded in the subsidiaries books as legitimate business expenses. The Commission found that Goodyear failed to detect the bribes because it failed to implement adequate FCPA compliance training and controls at the subsidiaries.
"Public companies must keep accurate accounting records, and Goodyear’s lax compliance controls enabled a routine of corrupt payments by African subsidiaries that were hidden in their books," Scott W. Friestad, Associate Director of the SEC’s Enforcement Division said. He added: "This settlement ensures that Goodyear must forfeit all of the illicit profits from business obtained through bribes to foreign officials as well as employees at commercial companies in Angola and Kenya."
Sanctions. Goodyear was ordered to cease and desist from violations of Exchange Act Sections 13(b)(2)(A) and 13(b)(2)(B). The company will pay disgorgement of $14,122,525 and prejudgment interest of $2,105,540. The Commission took into account Goodyear's cooperation and remedial acts, including promptly halting the improper payments and reporting the matter to the Commission. Goodyear also divested itself of its Kenyan subsidiary and is in the process of divesting the Angolan subsidiary.
The release is No. 34-74356.