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3M to pay $6.5 million to settle charges over Chinese official trips

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3M has agreed to pay out more than $6 million to settle charges over alleged corruption involving Chinese officials.

The company has neither admitted or denied the SEC charges, but has agreed to pay out to settle.

The SEC brought charges against a subsidiary in China of 3M related to violations of the Foreign Corrupt Practices Act (FCPA).

The SEC says 3M had arranged for government officials to attend events overseas as part of its marketing strategy.

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The SEC claimed the events were a pretext to offer the officials overseas travel.

This included including tourism and the SEC asserted the trips were arranged to persuade them to buy 3M's products.

Guided tours, shopping trips and other activities

The order detailed that from 2014 to 2017, the subsidiary provided travel.

This included including guided tours, shopping trips, and other leisure activities.

In some cases, these tourism activities clashed with the events the officials were supposed to attend.

The SEC claims the subsidiary spent nearly $1 million on at least 24 trips that included such activities.

The order also found employees of the subsidiary created alternate travel itineraries that consisted of tourism activities.

These employees instructed the trip participants to keep these alternate itineraries hidden and even falsified internal compliance documents.

Additionally, between February 2016 and September 2018, the subsidiary arranged for 3M to transfer $254,000 directly to a Chinese travel agency to fund some of these tourism activities.

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Charles Cain, Chief of the SEC's FCPA Unit, said: “This matter highlights the dangers to companies with global operations posed by inadequate internal accounting controls.

“Those dangers were exacerbated here by complicit third-party vendors.”

The SEC's order concluded that 3M violated certain provisions of the Securities Exchange Act of 1934.

Without admitting or denying these findings, 3M has agreed to cease and desist from any future violations of these provisions.

The company will also pay a total of $4,581,618 in disgorgement and prejudgment interest and a $2 million civil penalty.

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