Clear Channel Outdoor Holdings has agreed to pay over $26 million to settle charges that it bribed Chinese officials to get advertising contracts, the U.S. Securities and Exchange Commission (SEC) said on Thursday.
The U.S.-based company was accused of violating the U.S. Foreign Corrupt Practices Act (FCPA) through the actions of its agency, Clear Media Limited, which at the time was a majority-owned subsidiary in China.
The SEC said Clear Media allegedly bribed Chinese officials from 2012 through 2017 to obtain contracts for selling advertising services to companies for display on public bus shelters and other outdoor displays.
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Charles Cain, chief of the SEC Enforcement Division's FCPA unit, said that Clear Media bribed Chinese officials with expensive gifts and entertainment and used off-book consultants to obtain contracts from Chinese authorities.
The regulator also found that Clear Media used sham intermediaries and false invoices to generate cash for "off-book customer development consultants" who assisted the company in securing advertising business.
These payments were falsely labeled as valid expenses for entertainment, cleaning and maintenance, and "customer development" in Clear Channel's consolidated financial records, according to the SEC.
The SEC determined that from 2012 through 2019, Clear Channel failed to ensure sufficient internal accounting controls were in place at Clear Media.
"Despite repeated red flags raised by its internal auditors, Clear Channel failed to address the deficient internal accounting controls that allowed Clear Media to continue these improper payments for many years," Mr. Cain said in a statement.
Clear Channel neither admitted nor denied the SEC's findings. According to the SEC, the company agreed to pay disgorgement plus prejudgment interest totaling about $20.1 million and a $6 million civil penalty.
The company said it would pay the settlement in installments over the following year. The U.S. Department of Justice has declined to pursue any charges against Clear Channel in connection with the settlement.
"The SEC resolution pertains to the actions of Clear Media in China and to the company's oversight of that entity prior to the company's previously announced sale of its entire interest in Clear Media in April 2020,” it said in a press release.
Clear Channel said it cooperated with the SEC and has since sold its entire interest in Clear Media. The company has also taken measures to enhance its compliance policies, record-keeping, and internal controls.
"As of June 30, 2023, the company had recorded a liability for the full amount of the potential settlement in anticipation of such settlement," it added.
The company announced in March 2020 that it agreed to sell its 50.91 percent stake in Clear Media for $253 million in cash to Ever Harmonic Global Limited, which offered to acquire the Clear Media stake for HK$7.12 ($0.91) per share.
Clear Channel said it intends to use the anticipated net proceeds of approximately $220 million from this transaction to improve its liquidity position and increase financial flexibility, subject to any limitations set forth in its debt agreements.