Deere’s FCPA Case: Lessons on Gifts, Travel and Entertainment | Thomas Fox – Compliance Evangelist

We recently had a Foreign Corrupt Practices Act (FCPA) enforcement action that reminded me that when it comes to anti-corruption compliance, everything old is new again. The Securities and Exchange Commission’s (SEC) FCPA enforcement action involving Deere involves bribery schemes that literally date back to the first decade of the 21st century, as they involved gifts, travel and entertainment. In other words, it was a low-hanging fruit that any compliance officer would see. Yesterday I laid out the outlines of Deere’s enforcement action. Today I want to take a multi-part look at the case and see what lessons the enforcement action may provide for the compliance professional of 2024.

Between 2017 and 2020, Wirtgen Thailand was involved in a series of corrupt practices aimed at obtaining government tenders from key agencies, including the Royal Thai Air Force (RTAF), the Department of Highways (DOH) and the Department of Rural Roads ( DRR). . These practices, including bribery, inappropriate hospitality and falsification of corporate records, clearly violate the Wirtgen Group’s Code of Conduct. The total value of tenders awarded as a result of these corrupt practices exceeded $6 million. Below is a detailed account of the amounts paid and the benefits derived from these illegal activities.

Massage parlors

Any reimbursement claim submitted that references a “massage parlor” would immediately trigger a red flag and be put on hold for further investigation. (And you would be right.) But as part of Deere’s enforcement action, we have had several trips for foreign government officials sent to massage parlors.

From late 2017 to 2020, Wirtgen Thailand regularly hosted government representatives from RTAF, DOH and DRR at various massage parlors in Thailand. These expenses were falsely documented as legitimate business costs and were often rounded to appear less suspicious. The Wirtgen Managing Director for Southeast Asia and the Managing Director of Wirtgen Thailand approved these expenses despite company policies that expressly prohibit bribery or undue influence.

1. RTAF. In November 2019 and March 2020, Wirtgen Thailand incurred costs at massage parlors to entertain senior RTAF officials involved in tender processes. A senior RTAF officer responsible for preparing and awarding tenders was hosted on multiple occasions, resulting in Wirtgen Thailand winning two tenders worth approximately US$665,000 in March and April 2020.
2. DOH. Wirtgen Thailand also engaged in similar activities to influence DOH officials. For example, in March 2017, $15,000 in expenses were recorded for entertaining 15 members of a DOH tender committee at a massage parlor. Subsequent entertainment expenses, including those in July 2018 and December 2018, continued this pattern. As a result, Wirtgen Thailand secured several tenders, including a US$2,303,294 tender in December 2018, a US$498,567 tender in October 2019 and a US$1,451,432 tender in November 2019.
3. In December 2019, Wirtgen Thailand hosted DRR officers at massage parlors, at a cost of approximately $10,000. These efforts paid off when DRR awarded a tender worth US$1,283,905 to Wirtgen Thailand in April 2020. It is noteworthy that two of the four DRR signatories to this tender had received entertainment offers from Wirtgen Thailand during the December 2019 visit.

In total, Wirtgen Thailand spent over $58,000 on improper massage parlor entertainment for government officials. These expenses were incorrectly recorded in the company’s books and records, often in round numbers with vague descriptions such as “entertainment.” This widespread bribery directly influenced the outcome of several tenders and led to the awarding of contracts worth millions of dollars.

Bribery through a tour disguised as a “factory tour.”

In another scheme, Wirtgen Thailand financed an elaborate eight-day sightseeing trip for four DOH officials and two of their spouses under the guise of a “factory tour” of its facilities in Germany. However, the itinerary consisted of luxury sightseeing in Switzerland with visits to Interlaken, Zermatt and Lake Lucerne, shopping excursions and stays in luxury hotels. The total cost of this trip was approximately $47,500.

During this period, Wirtgen Thailand submitted a bid for a DOH tender. After completing the trip, Wirtgen Thailand was awarded a bid worth $498,567 on October 16, 2019. A month later, on November 20, 2019, Wirtgen secured another tender worth $1,451,432. The trip and subsequent awards were organized without following Deere’s internal compliance procedures, which required detailed documentation and prior approval of such visits. The managing director for Southeast Asia consciously agreed to these expenses, citing the need to “gather information and build a relationship with government customers.”

What was wrong with these trips? Basically everything. What makes this all even more egregious is the fact that the rules governing gifts, travel, and entertainment for customers have been known since at least 2007, when the Department of Justice (DOJ) issued Opinions 07-01 and 07-02 detailing the DOJ’s expectations to the future GTE.

The key elements are:

1. The purpose of the visit is to familiarize delegates with the nature and scope of the applicant’s activities and capabilities and to help establish the applicant’s business credibility.
2. The visit lasts four days and is limited to domestic economy class travel to only one U.S. operating location.
3. The applicant also intends to pay for the accommodation, transport and meals of the six officers within the country.
4. The foreign government plans to cover the cost of international airfare.
5. The company did not select the delegates who would attend the visit.
6. The company pays all costs directly to the providers; No funds will be paid directly to the foreign government or delegates.
7. The company does not cover expenses for spouses, family members or guests of other officials.
8. Any souvenirs provided by the applicant to delegates must bear the applicant’s name and/or logo and be of minimal value.
9. The company does not finance, organize or host any entertainment or leisure activities for the officers, nor does it provide any scholarships or pocket money to the officers.

Forgery of documents

Expenses related to the massage parlor entertainment and sightseeing tour were incorrectly recorded in Wirtgen Thailand’s books as legitimate business expenses. None of these activities complied with the Company’s policies and procedures regarding interactions with government officials. Management routinely approved these expenses without proper review, circumventing the company’s compliance framework.

As noted above in Opinion Release 07-01: “All costs and expenses incurred by the applicant in connection with the visit will be properly and accurately recorded in the applicant’s books and records.” This means that companies are not only required to do so not only to accurately record their legitimate travel expenses in their books and records, but also that failure to do so constitutes a separate violation. Deere has not met this standard.

The total value of corrupt payments and benefits granted to RTAF, DOH and DRR officials under these schemes was over US$105,500, while the total value of tenders awarded to Wirtgen Thailand as a result of these illegal practices was US$6 million -dollar exceeded.

Wirtgen Thailand’s actions illustrate a significant breakdown in compliance oversight and internal controls. The intentional falsification of records and use of bribery to secure government contracts violated the Company’s code of conduct and exposed the Company to significant legal and reputational risks. These events serve as a stark reminder to compliance professionals of the critical importance of robust compliance monitoring and the need for strict enforcement of anti-corruption policies.

To prevent such violations, companies must ensure that their compliance programs are well designed and actively enforced, as well as ongoing monitoring to identify and remediate potential violations. This case highlights the need for a proactive compliance approach that prioritizes ethics and integrity at all levels of the organization.

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