On July 28, Smith & Wesson Holding Corporation, one of the largest gun manufacturers in the United States, agreed to pay more than $2 million to settle Securities and Exchange Commission charges alleging that it had bribed foreign officials to sell firearms in other countries in violation of the Foreign Corrupt Practices Act (FCPA). In the settlement, Smith & Wesson neither admitted nor denied that SEC’s findings. According to the SEC, Smith & Wesson sought to expand into overseas markets beginning in 2007 and continuing into early 2010. The SEC alleged that the company’s sales staff attempted to attract new business by offering, authorizing or making illegal payments, or by providing gifts meant for government officials in Pakistan and other countries.
In one such instance, Smith & Wesson used a third-party agent in Pakistan to help win a contract with a Pakistani police department. The SEC alleged that company officials authorized the agent to provide more than $11,000 worth of guns to Pakistani police officials as gifts and to make additional cash payments to them. Smith & Wesson ultimately won a contract to sell 548 pistols to a Pakistani police department. The SEC also cited similar incidents in Indonesia, Turkey, Nepal and Bangladesh.
According to the SEC, Smith & Wesson failed to implement adequate internal accounting control procedures or compliance programs, did not perform any anti-corruption risk assessment, and failed to perform due diligence on third-party agents, all of which allowed the bribes to continue undetected for years.
The SEC settlement noted that Smith & Wesson “took prompt remedial action to remediate its FCPA issues” and cooperated with the SEC staff during the investigation.
The company agreed to disgorge its profits of $107,852 on the Pakistani police department transaction (plus $21,040 in interest). Smith & Wesson also agreed to pay a civil monetary penalty of $1.9 million. Finally, the company agreed to report to the SEC on its compliance efforts for two years.
In the Matter of Smith & Wesson Holdings Corporation, Adm. Proc. File No. 3-15906 (July 28, 2014).