John Deere to Pay $10 Million to Settle FCPA Violations by Thai Subsidiary

John Deere, an Illinois-based manufacturer, has agreed to pay approximately $10 million in penalties and disgorgement to the U.S. Securities and Exchange Commission (SEC) to settle charges related to violations of the Foreign Corrupt Practices Act (FCPA).

The violations stem from bribes paid by its subsidiary, Wirtgen Thailand, between 2017 and 2020.

According to the SEC, Wirtgen Thailand paid bribes to both government officials and a private company in Thailand to secure contracts. As part of the settlement, John Deere will pay a $4.5 million fine along with $5.4 million in disgorgement and prejudgment interest, as announced by the SEC in a press release on Tuesday.

The SEC’s order detailed that the misconduct included payments for services such as massage parlor sessions, sightseeing trips disguised as factory visits, and cash payments made through a third party. These improper expenses were falsely recorded as legitimate business commissions and expenses by Wirtgen Thailand employees.

In response to the violations, John Deere took action to correct the issues. The company “remediated the misconduct by making significant improvements to its internal audit and compliance programs,” the SEC said. John Deere also increased employee training and initiated a review of its compliance program to prevent future violations.

In an emailed statement, a spokesperson for John Deere condemned the actions, saying, “These allegations represent a clear violation of our company policies and ethical standards.

Furthermore, they are in direct conflict with our core values–particularly our commitment to integrity–and we strongly condemn such practices. The individuals involved in this matter are no longer with the company.”

The SEC identified that a key issue for John Deere was its failure to fully integrate Wirtgen Thailand into its internal accounting controls system following its 2017 acquisition of the Wirtgen Group, a Germany-based company. Many of the FCPA violations took place at Wirtgen Thailand after the acquisition was completed.

This case highlights common problems in mergers and acquisitions, specifically the failure to identify violations during due diligence and the inability to fully incorporate a newly acquired entity into the company’s policies and procedures. John Deere is not the only company to face such challenges.

Last month, RTX Corp., the parent company of Raytheon, agreed to pay $200 million in penalties to the U.S. State Department for export control violations that included the disclosure of military secrets. Many of the violations were linked to Rockwell Collins, a subsidiary acquired by RTX in 2020, and continued until 2023.

Similarly, in 2023, Lifecore Biomedical settled FCPA charges with the Department of Justice.

Lifecore’s former subsidiary, Yucatan Foods, was found to have paid bribes to Mexican government officials both before and after its 2018 acquisition by Lifecore. Though Lifecore did not pay a fine, it agreed to pay $406,000 in disgorgement.

John Deere’s case underscores the importance of thorough due diligence and the need to fully integrate acquired companies into a parent company’s internal controls and compliance systems. 

By fLEXI tEAM