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Technology Industry

The technology industry has a long history of transacting across international boundaries. Today, as manufacturing and distribution channels expand into a wider array of local markets worldwide, compliance risks have increased. Companies in the industry face greater risk when acting globally through their supply chain, distribution channels, resellers, and agents. In many cases, knowing exactly who resellers and agents are and whether they represent a risk to your company’s finances and/or reputation can be a daunting task. In addition, as foreign governments have become more vigilant about policing economic activity, the risks of falling out of compliance with local and international regulations have increased greatly.

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Case Study

Company: Comverse Technology Inc.
Charges: Bribing government officials
Penalty:

$2.8 million

Comverse Technology is a leading provider of communications systems and software that companies use to offer call answering, billing, voice and fax mail, communications surveillance, and other services. The company, based in New York City, has customers in more than 125 countries and provides services to over 450 communication service providers serving more than two billion subscribers.

On April 7, 2011, the SEC charged Comverse with violations of the books and records and internal controls provisions of the Foreign Corrupt Practices Act. Between 2003 and 2006, Comverse's Israeli subsidiary paid bribes of $536,000 to individuals connected to OTE, a telecommunications provider that is partially owned by the Greek government. The bribes enabled Comverse to win contracts worth $10 million, on which the company made a $1.2 million profit. Comverse used a third-party agent to make the illegal payments, which were recorded as "agent's commission."

The SEC said Comverse had no "process, formal or otherwise, for conducting due diligence of sales agents or for the independent review of agent contracts outside its sales departments."

Comverse paid a criminal penalty of $1.2 million, plus $1.6 million in disgorgement and pre-judgment interest to resolve the SEC's civil charges.

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