Global research and advisory firm Gartner Inc. has agreed to a settlement with the Securities and Exchange Commission (SEC) over charges alleging violations of the Foreign Corrupt Practices Act of 1977 (FCPA). The charges pertained to Gartner's business dealings with the South Africa Revenue Service (SARS), which allegedly involved corrupt practices to secure multi-million dollar contracts.
According to the SEC, a Gartner consulting manager, under the direction of SARS senior officials, authorized subcontracts with a South African IT consulting company, despite knowing or willingly ignoring the likelihood that some of the funds would be indirectly channeled to SARS officials. This was purportedly to convince them to award sole-source contracts to Gartner, in violation of their legal duties.
The SEC stated that Gartner attempted to justify these subcontracts by claiming it was necessary to meet the requirements of South Africa’s Broad-Based Black Economic Empowerment legislation (B-BBEE). However, the justification was found to be false, as Gartner, through its local sub-agents, did qualify under the B-BBEE.
Gartner's internal FCPA risk assessments, conducted during the period in question, identified possible "bribery red flags" related to the company's third-party relationships with public sector clients. However, Gartner's policies for hiring third-party consultants were criticized for not adequately addressing anti-corruption risks. The SEC pointed to Gartner's lack of risk-based screening procedures for third-party contractors, inadequate anti-corruption onboarding procedures for vendors, and insufficient monitoring procedures.
Gartner was awarded the Phase I and Phase II SARS contracts, and the SEC states that it received ill-gotten net profits of $675,974 from these contracts.
In settling the charges, Gartner agreed to disgorge the aforementioned ill-gotten profits, pay a prejudgment interest of $180,790, and a civil money penalty amounting to $1,600,000.
The SEC considered Gartner's self-disclosure after press reports emerged in South Africa, their cooperation during the investigations, and efforts taken to remediate the issues. Gartner cooperated extensively with the SEC, providing updates, sharing facts from their own internal investigation, and making foreign-based employees available for interviews. The firm's remedial efforts included revising and enhancing relevant policies and procedures, bolstering both financial and human resources for compliance, and improving due diligence procedures. [SEC Order]
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