Smith & Wesson (SWHC) on Monday agreed to pay a $2 million fine to settle charges that employees and company representatives paid foreign officials to win supplier contracts, according to the Securities and Exchange Commission.
The SEC said Smith & Wesson logged about $100,000 in profits from the one contract that was completed before the Foreign Corrupt Practices Act violations, which occurred between 2007 and 2010, were identified.
Under the settlement, the gun maker must report to the SEC on its compliance efforts for two years.
Smith & Wesson, which agreed to the settlement without admitting or denying the SEC’s findings, said the SEC inquiry stemmed from a Department of Justice investigation that was later dropped. The settlement expense was accrued in the fourth quarter ended April 30.
“We are pleased to have concluded this matter with the SEC and believe that the settlement we have agreed upon is in the best interests of Smith & Wesson and its shareholders,” Smith & Wesson chief executive James Debney said in a statement. “Today’s announcement brings to conclusion a legacy issue for our company that commenced more than four years ago, and we are pleased to now finally put this matter behind us.”
In 2008, the Springfield, Mass.-based company retained a third-party representative in Pakistan to help Smith & Wesson win a contract to sell firearms to a police department there, the SEC said.
The representative subsequently provided guns to police officials as gifts, in addition to cash payments. Smith & Wesson won the contract to sell 548 pistols, earning a profit of $107,852.
“This is a wake-up call for small and medium-size businesses that want to enter into high-risk markets and expand their international sales,” Kara Brockmeyer, chief of the SEC Enforcement Division’s FCPA unit, said in a statement. “When a company makes the strategic decision to sell its products overseas, it must ensure that the right internal controls are in place and operating.”
The SEC also alleged that third-party representatives for Smith & Wesson made improper payments to officials in Indonesia, Turkey, Nepal and Bangladesh. Smith & Wesson didn’t win contracts in those countries.
Smith & Wesson shares were up three cents at $13.69 in recent trading.