July 28, 2014 / 4:35 PM / 6 years ago

UPDATE 2-Smith & Wesson settles SEC bribery case over firearms sales

(Adds company statement, related sting operation, updates share price)

By Jonathan Stempel

July 28 (Reuters) - Smith & Wesson Holding Corp has agreed to pay $2.03 million to settle U.S. Securities and Exchange Commission charges its employees and representatives bribed foreign officials to supply firearms to military and law enforcement departments overseas.

The SEC said on Monday that sales staff at the Springfield, Massachusetts-based company engaged in a “pervasive” effort to win contracts from 2007 to 2010 by authorizing or making illegal payments or providing gifts to government officials in Pakistan, Indonesia, Turkey, Nepal and Bangladesh.

In one instance, Smith & Wesson approved a sale of 548 pistols to Pakistani police after its agent, who was hired in 2008, notified the company he would give cash and more than $11,000 worth of guns to police officials to complete the deal, the SEC said.

The settlement resolved civil charges that Smith & Wesson violated the federal Foreign Corrupt Practices Act (FCPA). The company will pay a $1.91 million penalty, give up $107,852 in profits from selling the pistols, and pay $21,040 in interest.

Smith & Wesson did not admit or deny the SEC findings, but halted pending international sales, terminated its international sales staff and bolstered its internal controls after the conduct came to light, according to the SEC. The company agreed to report on its FCPA compliance efforts for two years.

“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,” said Kara Brockmeyer, chief of the FCPA unit of the SEC enforcement division.

Smith & Wesson Chief Executive Officer James Debney said in a statement the company was pleased to settle the case. It set aside reserves for the accord in the quarter ended April 30, the company said.

The SEC case was related to a federal undercover sting operation in January 2010 that led to criminal charges against 22 defendants, including a former Smith & Wesson vice president, related to bribing foreign officials.

Three defendants pleaded guilty, three were acquitted, and the U.S. Department of Justice in February 2012 dropped charges against the other 16, including the vice president. Smith & Wesson was not criminally charged.

In afternoon trading, Smith & Wesson shares were up 0.2 percent at $13.69 on the Nasdaq. (Reporting by Jonathan Stempel in New York; Editing by Jeffrey Benkoe)

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