GENERAL CABLE CORPORATION

INDUSTRY

Manufacturing

CORPORATE HEADQUARTERS

Kentucky, United States of America

SUMMARY OF ALLEGATIONS

Nationality of Foreign Officials: Angola

Summary of Allegations:

Between 2003 and 2015, subsidiaries of General Cable Corporation ("General Cable") allegedly made improper payments of approximately USD 19 million to foreign government officials in Angola, Thailand, China, Indonesia, Bangladesh, and Egypt, generating illicit profits over USD 51 million on sales to state-owned enterprises. The alleged payments were made directly to foreign government officials or indirectly through third party agents or distributors, in the form of sales commissions, rebates, discounts, and other fees.

The subsidiaries allegedly recorded these payments improperly as legitimate business expenses on their books and records and financial statements, which were consolidated into General Cable's financial statements filed with the SEC.

Angola

From 2003 to 2013, General Cable Celcat, Energia e Telecomunicações, S.A. ("Celcat"), General Cable's subsidiary in Portugal, and General Cable Condel, Cabos de Energia e Telecomunicações, S.A. ("Condel"), General Cable's subsidiary in Angola, allegedly made 81 improper payments through sales commissions totaling over USD 9 million either directly to employees of sate-owned enterprises in Angola, or indirectly through third party agents, resulting in more than USD 34 million in profits on Celcat or Condel's sales in Angola. The alleged indirect bribe payments were allegedly made with knowledge that it would be passed onto officials of the state-owned enterprises. For example, in August 2013, Condel allegedly directed a third party agent to purchase a sport-utility vehicle valued at USD 135,239 and register it in the name of an employee of an Angolan state-owned enterprise. The payments were allegedly approved by senior management at Celcat or Condel but concealed from General Cable's executive management.


Approximate Alleged Payments to Foreign Officials: USD 19 million

Business Advantage Allegedly Obtained: USD 51 million

Nationality of Foreign Officials: Bangladesh

Summary of Allegations:

Between 2003 and 2015, subsidiaries of General Cable Corporation ("General Cable") allegedly made improper payments of approximately USD 19 million to foreign government officials in Angola, Thailand, China, Indonesia, Bangladesh, and Egypt, generating illicit profits over USD 51 million on sales to state-owned enterprises. The alleged payments were made directly to foreign government officials or indirectly through third party agents or distributors, in the form of sales commissions, rebates, discounts, and other fees.

The subsidiaries allegedly recorded these payments improperly as legitimate business expenses on their books and records and financial statements, which were consolidated into General Cable's financial statements filed with the SEC.

Bangladesh

In September 2013, Phelps Dodge International (Thailand) Limited ("PDTL") allegedly made an improper commission payment of USD 43,700 to a third-party agent on a sale of products to Bangladesh state-owned enterprise that resulted in profits of USD 85,759. The agent allegedly requested a commission of 10% (USD 147,761) of the sale to be shared with the decisions makers at state-owned enterprise. Although the request was rejected initially, PDTL approved 5% commission to the agent without addressing whether the commission would be passed onto Bangladeshi government officials.


Approximate Alleged Payments to Foreign Officials: USD 43,700

Business Advantage Allegedly Obtained: profits of USD 85,759

Nationality of Foreign Officials: China

Summary of Allegations:

Between 2003 and 2015, subsidiaries of General Cable Corporation ("General Cable") allegedly made improper payments of approximately USD 19 million to foreign government officials in Angola, Thailand, China, Indonesia, Bangladesh, and Egypt, generating illicit profits over USD 51 million on sales to state-owned enterprises. The alleged payments were made directly to foreign government officials or indirectly through third party agents or distributors, in the form of sales commissions, rebates, discounts, and other fees.

The subsidiaries allegedly recorded these payments improperly as legitimate business expenses on their books and records and financial statements, which were consolidated into General Cable's financial statements filed with the SEC.

China

From December 2012 to September 2015, General Cable (Tianjin) Alloy Products Company Limited ("General Cable China") allegedly made improper payments of more than USD 50,000 to third-party distributors or agents, in the forms of special discounts, technical service fees, design institute fees, or rebates, in connection with sales to state-owned enterprise customers on nineteen projects, resulting in profits of USD 1.8 million. The alleged payments, and other things of value, passed onto Chinese government officials were allegedly authorized by General Cable's executives.


Approximate Alleged Payments to Foreign Officials: more than USD 50,000

Business Advantage Allegedly Obtained: profits of USD 1.8 million

Nationality of Foreign Officials: Egypt

Summary of Allegations:

Between 2003 and 2015, subsidiaries of General Cable Corporation ("General Cable") allegedly made improper payments of approximately USD 19 million to foreign government officials in Angola, Thailand, China, Indonesia, Bangladesh, and Egypt, generating illicit profits over USD 51 million on sales to state-owned enterprises. The alleged payments were made directly to foreign government officials or indirectly through third party agents or distributors, in the form of sales commissions, rebates, discounts, and other fees.

The subsidiaries allegedly recorded these payments improperly as legitimate business expenses on their books and records and financial statements, which were consolidated into General Cable's financial statements filed with the SEC.

Egypt

From September 2010 to May 2015, employee of General Cable Egypt S.A.E. ("General Cable Egypt") allegedly gave or offered to give more than USD 80,000 in improper payments, including cash, gifts such as laptop computers and televisions, tips, or "new year gifts" to employees of certain customers or suppliers, some of which were Egyptian state-owned enterprises, resulting in approximately USD 114,000 in profits. The allegedly payments were sometimes improperly recorded as "consulting fees."


Approximate Alleged Payments to Foreign Officials: more than USD 80,000

Business Advantage Allegedly Obtained: USD 114,000 in profits

Nationality of Foreign Officials: Indonesia

Summary of Allegations:

Between 2003 and 2015, subsidiaries of General Cable Corporation ("General Cable") allegedly made improper payments of approximately USD 19 million to foreign government officials in Angola, Thailand, China, Indonesia, Bangladesh, and Egypt, generating illicit profits over USD 51 million on sales to state-owned enterprises. The alleged payments were made directly to foreign government officials or indirectly through third party agents or distributors, in the form of sales commissions, rebates, discounts, and other fees.

The subsidiaries allegedly recorded these payments improperly as legitimate business expenses on their books and records and financial statements, which were consolidated into General Cable's financial statements filed with the SEC.

Indonesia

From May 2011 to January 2014, Phelps Dodge International (Thailand) Limited ("PDTL") allegedly made improper payments of USD 2.2 million to two freight forwarders on sales to an Indonesian state-owned enterprise that resulted in USD 2 million in profits. PDTL’s records allegedly lacked evidence of services provided by the freight forwarders, which had ties to Indonesian government officials. The fees to the freight forwarders ranged from 8.9 to 70.5% of the related sales to the Indonesian state-owned enterprises. PDTL's relationship with these freight forwarders was allegedly exclusively controlled by a PDTL manager who did not comply with PDTL's policy in selecting freight forwarders. The manager was terminated in February 2014 for "fraudulent" and "dishonest and corrupt actions" and refusing to cooperate with the internal investigation into the relationship.


Approximate Alleged Payments to Foreign Officials: USD 2.2 million

Business Advantage Allegedly Obtained: USD 2 million in profits

Nationality of Foreign Officials: Thailand

Summary of Allegations:

Between 2003 and 2015, subsidiaries of General Cable Corporation ("General Cable") allegedly made improper payments of approximately USD 19 million to foreign government officials in Angola, Thailand, China, Indonesia, Bangladesh, and Egypt, generating illicit profits over USD 51 million on sales to state-owned enterprises. The alleged payments were made directly to foreign government officials or indirectly through third party agents or distributors, in the form of sales commissions, rebates, discounts, and other fees.

The subsidiaries allegedly recorded these payments improperly as legitimate business expenses on their books and records and financial statements, which were consolidated into General Cable's financial statements filed with the SEC.

Thailand

From January 2008 to January 2013, Phelps Dodge International (Thailand) Limited ("PDTL"), General Cable's subsidiary in Thailand, allegedly paid more than USD 5.4 million in improper payments to a Thailand company resulting in profits of USD 13 million on PDTL's sales to state-owned enterprises. The allegedly payments were paid as "success fees" or "rebates" and improperly booked by PDTL as "cash discounts" and "discount-customer rebates." Furthermore, the payments were allegedly approved by PFTL's senior management and primarily managed by a Domestic Sales Director who allegedly was aware that the bribes to Thai state-owned enterprise employees were being paid from the success fees paid by PDTL. Although the PDTL executive allegedly met with a General Cable's regional executive officer and allegedly expressed concerns of the bribe scheme, the payments allegedly did not stop and no investigations took place.


Approximate Alleged Payments to Foreign Officials: more than USD 5.4 million

Business Advantage Allegedly Obtained: profits of USD 13 million

ENFORCEMENT RESULTS

Agencies: Internal Investigation
Results:
Year Resolved: 2016
Compliance Monitor:
Ongoing: No
Details:

On 25 February 2015, General Cable announced in its amended Form 8-K filed with the SEC that the company was estimating that it was reasonably likely to have to disgorge USD 24 million in profits related to the allegedly improper payments made to Angolan officials.

On 10 February 2016, General Cable announced the substantial completion of its internal review into the allegations in Angola, Thailand, India, China and Egypt. Based on its findings, subsequently, General Cable has increased its outstanding FCPA-related accrual of USD 24 million to USD 33 million. The increased amount of USD 9 million over its previous accrual represents the estimated profit of USD 4 million derived from transactions related to the allegations in Angola, Thailand, India, China and Egypt and remaining amount from other transactions General Cable identified that may raise concerns under the FCPA. The amount accrued reflects profits that may be disgorged based on the company's internal investigation and does not include the amount of any possible fines and penalties.

On 2 November 2016, General Cable disclosed that based on discussions with the SEC and the DOJ during the previous year, the company increased the range of potential resolution for disgorgement of profit and pre-judgment interest to between USD 33 million and USD 59 million. 

On 2 November 2016, General Cable disclosed that base on recent discussions with the DOJ, the company is now able to estimate a range of reasonably possible resolution, including disgorgement of profits, pre-judgment interest, and any potential DOJ penalty, as between USD 33 million and USD 120 million.



Agencies: United States: Department of Justice, United States: Securities and Exchange Commission
Results: Cease-and-Desist Order, Civil Penalty, Criminal Fine, Deferred Prosecution Agreement, Disgorgement, Non-Prosecution Agreement
Year Resolved: 2016
Compliance Monitor: N/A
Ongoing: No
Details:

Investigation/Enforcement: General Cable Corporation

In January 2014, after it retained outside counsel to conduct an internal investigation, General Cable self-reported the potential FCPA violations to the SEC. 

On 2 November 2016, General Cable disclosed that based on discussions with the SEC and the DOJ during the previous year, the company increased the range of potential resolution for disgorgement of profit and pre-judgment interest to between USD 33 million and USD 59 million. 

On 2 November 2016, General Cable disclosed that base on recent discussions with the DOJ, the company is now able to estimate a range of reasonably possible resolution, including disgorgement of profits, pre-judgment interest, and any potential DOJ penalty, as between USD 33 million and USD 120 million.

On 29 December 2016, General Cable agreed to pay approximately USD 75.75 million to resolve parallel SEC and DOJ investigations related to its violations of the FCPA. In addition, the company agreed to pay an additional USD 6.5 million penalty to the SEC to settle a separate accounting-related violations.

General Cable agreed to enter into a cease and desist order with the SEC to settle the charges that it violated the anti-bribery, books and records and internal accounting controls provisions of the FCPA. General Cable agreed to pay USD 51,174,237 in disgorgement and USD 4,107,660 interest to settle the FCPA violations and additional USD 6.5 million penalty to settle the accounting violations. General Cable neither admitted nor denying the SEC's findings in the accounting violations. The SEC noted its consideration of General Cable's self-reporting, substantial cooperation, and remedial efforts in coming to the resolution. The SEC also noted that it is not imposing a civil penalty in acknowledgement of the criminal fine the company is paying to the DOJ.

In addition, General Cable entered into a non-prosecution agreement with the DOJ to resolve the investigation into improper payments to government officials in Angola, Bangladesh, China, Indonesia and Thailand to corruptly gain business in violation of the FCPA. General Cable agreed to pay USD 20,469,694.80 criminal penalty, reflecting a 50 percent reduction off the bottom of the U.S. Sentencing Guidelines fine range, and self-report its FCPA compliance efforts for the next three years.



Agencies: United States: Securities and Exchange Commission
Results: Cease-and-Desist Order, Civil Penalty, Prosecution of Individuals
Year Resolved: 2016
Compliance Monitor: N/A
Ongoing: No
Details:

Investigation/Enforcement: Individuals

On 29 December 2016, Karl J. Zimmer, without admitting or denying the SEC's findings, entered into a cease-and-desist order with the SEC to settle the charges that Zimmer caused General Cable's violations of the books and records and internal accounting controls provisions of the FCPA and knowingly circumventing a number of General Cable's internal accounting controls. As part of the settlement, Zimmer was ordered to pay a civil penalty in the amount of USD 20,000 to the SEC. 

On the same day, 29 December 2016, the SEC announced that its investigation found no personal misconduct by General Cable's former CEO Gregory B. Kenny and former CFO Brian J. Robinson. The SEC noted that both Kenny and Robinson returned USD 3.7 million and USD 2.1 million in compensation received from General Cable during the period the accounting violated took place and thus it was not necessary for the SEC to pursue a clawback action.



ENTITIES/INDIVIDUALS INVOLVED

DETAILS OF HOW CONDUCT WAS DISCOVERED

Discovery Method: Voluntary Disclosure
Details:

Upon discovering the misstatements through its internal audit department, General Cable voluntarily disclosed the matter to the SEC and DOJ in January 2014.


Country:

KEY TAKEAWAYS

TBD.

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