3M to pay more than $6.5M for violating certain provisions of the Foreign Corrupt Practices Act

Minnesota-based 3M has agreed to pay more than $6.5 million to resolve charges that it violated the books and records and internal controls provisions of the Foreign Corrupt Practices Act, the Securities and Exchange Commission said late last week.

The SEC order found that employees of a 3M subsidiary based in China arranged for Chinese government officials employed by state-owned health care facilities to attend overseas conferences, educational events, and health care facility visits, presumably as part of the Chinese subsidiary’s marketing efforts. However, the arrangements were often a pretext to provide the officials with overseas travel to induce them to purchase 3M products.

According to the order, from at least 2014 to 2017 3M’s Chinese subsidiary provided Chinese government officials with overseas travel that included guided tours, shopping visits, day trips to nearby sights, and other leisure activities.

In several instances, the tourism activities were scheduled at the same time as the events the officials were supposedly attending, and at times the Chinese officials missed whole days of the events or simply never attended at all. The events were in English and certain trips included Chinese government officials who neither understood English nor had adequate translation services. The order finds that 3M’s Chinese subsidiary paid nearly $1 million to fund at least 24 trips for Chinese government officials that included tourism activities.

The order also found that between February 2016 and September 2018, employees of the 3M subsidiary arranged for 3M to transfer $254,000 directly to a Chinese travel agency to help pay for some of the allegedly improper tourism activities.

The SEC said that without admitting or denying the findings, 3M has agreed to cease and desist from committing or causing any future violations of the provisions.