3M Probes Potential FCPA Violations in China -- 2nd Update

By Austen Hufford and Dylan Tokar

3M Co. said it was conducting an internal investigation into possible violations of U.S. anticorruption laws after discovering suspect travel and record-keeping related to marketing its products in China.

The maker of Post-it Notes and industrial adhesives said in a financial filing on Friday that it had retained outside counsel and a forensic accounting firm to help conduct the investigation. 3M said it disclosed the investigation to the Justice Department and the Securities and Exchange Commission on July 23.

The Justice Department didn't respond to a request for comment. 3M and the SEC declined to comment.

Shares in 3M fell 3% in afternoon trading.

3M said the possible violations of the Foreign Corrupt Practices Act were made by business groups based in China.

The FCPA prohibits bribes to foreign government officials by companies listed on a U.S. stock exchange or with other ties to the U.S.

It isn't 3M's first brush with the U.S. anticorruption law. In 2009, the company contacted the Justice Department and SEC to disclose a prior internal probe into reports of bid-rigging and bribery by a subsidiary in Turkey.

The government investigations remained open for over three years, until U.S. authorities in 2013 said they were closing their probes without taking an enforcement action.

The Justice Department cited 3M's voluntary disclosure of the issue, cooperation and steps it had taken to enhance its anticorruption compliance program, according to a securities filing at the time.

The Justice Department and the SEC have traditionally been more lenient with companies that self-disclose potential legal issues and cooperate with prosecutors. In 2016, the department launched a program that gives companies that disclose FCPA violations up to a 50% discount off a fine, or a pass on prosecution, under certain circumstances.

3M's public disclosure came one day after the company reported a second-straight quarter of declining sales in China. The company made 11% of its sales in China last year.

3M has operated in China since 1984 and says it was the first foreign-owned company to operate outside a special development zone for foreign firms. The St. Paul, Minn.-based company sells an array of its products in China from coatings for cars to face masks that people wear to protect themselves from air pollution.

Stephen Nakrosis contributed to this article.

Write to Austen Hufford at austen.hufford@wsj.com and Dylan Tokar at dylan.tokar@wsj.com

(END) Dow Jones Newswires

July 26, 2019 16:10 ET (20:10 GMT)

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