Panasonic Charged With FCPA and Accounting Fraud Violations

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FCPA and Global Reach

The Securities and Exchange Commission announces that Japan-based Panasonic Corporation shall pay in excess of $143 million to resolve charges. Specifically, the charges pertain to Panasonic’s global avionics business; accounting fraud and Foreign Corrupt Practices Act (FCPA) violations.

According to the SEC’s order, Panasonic’s U.S. subsidiary, Panasonic Avionics Corp. (PAC), is complicit in the criminal act. For context, PAC is a provider of in-flight entertainment and communication systems for use in the aviation industry. With regard to PAC’s transgression, it involves offering a lucrative consulting position to a government official at a state-owned airline. The purpose of the consulting position is to induce the government official to assist PAC in obtaining and retaining business from the airline. During the bribery scheme, PAC happens to be negotiating two agreements with the airline, for more than $700 million. In the end, PAC retains the government official and pays around $875,000 for a position requiring little to no work. More damning is that PAC utilizes an unrelated third-party vendor to conceal the transaction.

Accounting Discrepancies and FCPA

Over the course of the investigation, the SEC also discovers that Panasonic fraudulently overstates pre-tax and net income. Specifically, Panasonic prematurely recognizes more than $82 million in revenue. The flagrant accounting misdeed is possible via the PAC agreement, wherein misleading information is provided to PAC’s auditor. In their findings, the SEC further details that Panasonic lacks sufficient internal accounting controls.