Panasonic Corp.’s avionics business agreed to pay a $137.4 million criminal penalty to settle corruption claims related to consulting positions that it offered to employees of airline customers to boost sales.
Lake Forest, Calif.-based Panasonic Avionics, which designs and sells in-flight entertainment systems and communications services for airlines and planemakers, retained two people who did little consulting work but either steered business to the company or provided confidential information on competitors, the Justice Department said in a statement.
One of the workers, a contracting manager with a state-owned Middle Eastern Airline, was paid about $875,000 over six years, prosecutors said. The other was a consultant to a U.S. airline who once passed information to Panasonic in an email that included the preface, “The followng information did not come from me,” to which an employee replied, “You always have info which makes me shake my head.”
The business also attempted to conceal its employment of sales agents in Asia after they had been formally terminated for failing to pass anti-bribery certifications, prosecutors said. The agents were rehired as contractors of another firm that passed Panasonic Avionics’ checks, a process that hid more than $7 million in payments to 13 people, prosecutors said
The actions violated the Foreign Corrupt Practices Act, since they led to parent company Panasonic reporting incorrect information to investors for about six years starting in 2007, when its shares were traded in the U.S., the Justice Department said. The Japanese electronics maker removed its shares from the New York Stock Exchange in 2013.
“The criminal division will take all appropriate action to ensure that the investing public is able to trust the accuracy of the financial statements of companies that avail themselves of American securities exchanges,” acting Assistant Attorney General John Cronan said in a statement.
In related proceedings with the Securities and Exchange Commission, Panasonic agreed to pay $143 million to resolve an investigation of the Middle Eastern air-carrier arrangement as well as the backdating of a contract that allowed the company to prematurely report revenue of $82 million in mid-2012.
The company also agreed to an independent compliance monitor for two years, after which it will provide updates for another year. The avionics division already has installed four new executives including a chief compliance officer and strengthened financial oversight, according to a statement.
“We welcome an independent compliance monitor to assess our progress,” Hideo Nakano, head of Panasonic Avionics, said in the statement. “This is an ongoing effort, and the company will continue to strengthen its compliance programs and internal controls.”
