3M pays fine for sending Chinese officials on vacation
3M will pay more than $6.5 million to settle Securities and Exchange Commission allegations that it tried to hide payments to send Chinese government officials on overseas vacations and shopping sprees.
The SEC claimed that 3M’s China subsidiary spent $1 million to send officials from state-owned health-care facilities and their spouses to US and Australian cities. The company paid for about 24 trips — which were ostensibly to attend educational events — between 2014 and 2017, according to the order.
Employees of the Chinese unit sent “alternate itineraries” using private WeChat accounts or hand-delivered them to the officials, the SEC said Friday. They also asked the travelers “to keep the agenda hidden, and falsified internal compliance documents that affirmatively denied and/or omitted mention of the Tourism Activities that were planned as part of the overseas trip,” according to the complaint.
3M-China employees tracked whether the travel junkets benefited their bottom line, the SEC said. In one case, management at the subsidiary tracked “return on investment” for sending officials to an educational event by comparing sales figures to the state-owned health-care facility before and after the event, according to the order.
The falsified expenses allegedly violated the Foreign Corrupt Practices Act, which gives sweeping authority to the SEC to go after overseas bribery activities. 3M neither admitted nor denied the allegations.
In an emailed statement, 3M said it is “committed to ethics and compliance in every aspect of our operations.” The company said it had reported the activities itself soon after learning of the events, and fully cooperated with the SEC’s investigation.
“3M has also taken appropriate action to address this violation of company policy with those involved, and enhanced our internal controls to help prevent similar instances from occurring in the future,” the company said.
The SEC said it took 3M’s self-reporting and cooperation into account when calculating the fine.
The Chinese government officials often spoke no English or weren’t provided with adequate translation support, the SEC said. The tourism and other activities occurred at the same time as the educational events the officials were purportedly attending, even though the officials skipped the bulk of the events or never attended, according to the SEC. In one instance, Chinese officials traveling to Chicago didn’t show up to a dinner 3M had organized for them.