In June 2008, Faro Technologies, Inc. (here) agreed to settle an FCPA enforcement action relating to conduct in China. The company paid a $1.1 criminal penalty via a DOJ non-prosecution agreement (see here and here). In a related SEC enforcement action, the company agreed to pay $1.85 million in disgorgement and prejudgment interest via an administrative order (here).
The June 2008 non-prosecution agreement (appendix c) stated that within 60 calendar days of the execution of the agreement, “Faro Technologies, Inc. and its subsidiaries and affiliates agree to engage an independent corporate monitor for a period of two years to monitor the company’s compliance with respect to the Foreign Corrupt Practices Act and other relevant anti-corruption laws.”
It took nearly two years for Faro and the DOJ to agree on a monitor.
Faro’s November 4th 10-Q filing (here), states as follows:
“During the second quarter of 2010, the Company, in conjunction with the SEC and the DOJ, completed the selection of the FCPA monitor. The Company is cooperating with the monitor as the monitor implements a work plan to assess the Company’s compliance with the requirements for the settlement agreements.”
How much has the monitor cost Faro thus far?
Approximately $1 million.
During a November 4th earnings conference call, Faro President and CEO Jay Freeland stated as follows:
“During the third quarter, we had the first review by the monitor that was assigned to us in connection with our settlement with the SEC and DOJ over the FCPA matter from 2006. The cost to FARO in the third quarter was approximately $1 million, which obviously had a substantial impact on the bottom line. The monitor and her team visited several of our remote offices as well as our regional and global headquarters, conducting interviews and reviewing, policies, procedures and adherence to them. Overall, we believe the review went well and look forward to reviewing the monitor’s report. The monitor will return one more time next year, probably in the third quarter again. We don’t expect that review to be as costly as the one we just finished. And, assuming things go well, that will complete the process.”