Juniper Networks settles FCPA enforcement

Sep 05, 2019
Company accused of violations via units in Russia and China

Sunnyvale, California-based Juniper Networks has agreed to pay almost $12 million to settle allegations that it violated the FCPA through subsidiaries operating in Russia and China.

The settlement last week came just days after Deutsche Bank agreed to pay more than $16 million to resolve claims it too had violated the anti-corruption law, in the bank’s case through alleged recruitment practices outside the US. Both Juniper and Deutsche Bank settled the separate actions without admitting or denying wrongdoing.

The SEC’s administrative proceeding relating to Juniper is based on the company’s alleged violations of the FCPA’s internal accounting controls and record-keeping provisions. Juniper designs, manufactures and sells networking equipment products and services. At the time in question, JNN Development Corp was a wholly owned subsidiary of the company that operated a representative office in Moscow. Juniper also had wholly owned subsidiaries in Hong Kong and Shanghai.

The SEC says that from 2008 until 2013 certain sales employees at the Russian representative office of JNN secretly agreed with third-party channel partners to increase the incremental discount on sales made to customers through those channel partners without passing those increased discounts on to customers.

Instead, the commission alleges, the channel partners diverted the additional discounts into a fund they held for travel and marketing expenses. These off-book funds were referred to as ‘common funds’ and were directed in part by JNN sales representatives, according to the commission.

The funds were used in part to pay for customer trips, including trips for government officials, some of which were leisure-focused and had little to no educational or business purpose, the SEC alleges. These included instances of foreign officials traveling to locations where there were no Juniper facilities or industry conferences related to its business, the agency adds.

In late 2009, a then member of senior management learned that JNN employees in Russia had created off-book accounts that were funded in part by improperly obtaining incremental discounts, both violations of Juniper policies, the SEC says. Although Juniper instructed JNN employees to stop these practices, Juniper’s overall remedial efforts were ineffective and JNN employees continued these practices until 2013, according to the commission.

At times, these JNN employees used personal communication devices instead of corporate email, in one instance cautioning each other to ‘not write about additional discounts in exchange for something else via email,’ the agency states.

In addition, the SEC alleges that certain sales employees at Juniper’s Chinese subsidiaries between 2009 and 2013 falsified trip and meeting agendas for customer events that understated the true amount of entertainment involved on the trips. The sales employees submitted these falsified and misleading trip agendas to Juniper’s legal department for approval and, contrary to the company’s travel policies, the legal department approved many trips after the event had taken place and without adequate reviews, according to the SEC.

In view of these allegations, Juniper failed to accurately record the incremental discounts and travel and marketing expenses in its books and records, and failed to devise and maintain a system of internal accounting controls sufficient to prevent and detect off-book accounts, unauthorized customer trips, falsified travel agendas and after-the-fact travel approvals, the agency says.

According to the SEC, Juniper’s co-operation in the matter included disclosing, on a timely basis, facts learned during an internal investigation the company launched after learning of the SEC’s own probe. ‘The company voluntarily produced and translated documents and provided the staff presentations regarding its investigation,’ the agency states. 

Juniper’s remedial actions include revising its compliance policies and enhancing its compliance group, according to the agency. The SEC says changes made by the company also include:

  • Realigning its compliance function into an integrated unit, all reporting into a newly created and empowered chief compliance officer role
  • Creating an independent and expert investigations function
  • Implementing a mandatory escalation policy to ensure the company’s board of directors is informed of serious issues
  • Instituting mandatory due diligence and prior approval processes by the compliance department of channel partners and other vendors
  • Conducting additional employee training on anti-corruption issues and improving its processes for conducting internal investigations of potential violations of anti-corruption laws.

The total settlement payment of $11,745,018 comprises $4 million in disgorgement, $1,245,018 in pre-judgment interest and a civil penalty of $6.5 million.

A Juniper spokesperson says in a statement: ‘Operating with the highest ethical standards is of the utmost importance for Juniper Networks and we are committed to ensuring that we act with honesty and integrity consistently in everything we do. Juniper previously disclosed that the [US] Department of Justice had closed its investigation in the matter without taking any action, and this settlement with the [SEC] ends all FCPA-related investigations or inquiries into Juniper by the SEC.

‘In connection with the settlement, the SEC highlighted Juniper’s extensive co-operation with its investigation and its strengthened integrity and compliance program.’

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