July 28, 2014, 1:07 PM ET

Smith & Wesson Pays $2 Million to Resolve SEC Foreign Bribery Probe

Wall Street Journal

Smith & Wesson Holding Corp. agreed to pay $2 million to resolve a Securities and Exchange Commission investigation into allegations of foreign bribery by the gun-maker.

Associated Press

The SEC said in an administrative order that Smith & Wesson, from 2007 through 2010, tried breaking into international markets by engaging “in a pervasive practice” of making, authorizing and offering improper payments to foreign government officials to get or keep business, violating the Foreign Corrupt Practices Act.

In the order, the SEC cited incidents in Pakistan, Indonesia, Turkey, Nepal and Bangladesh in which Smith & Wesson used third parties who then paid bribes to foreign officials in a variety of schemes to score contracts. However, out of the examples cited in the order, the company only secured a contract with Pakistan, selling about 548 pistols to the Pakistani police for about $210,000, securing a profit of about $107,000.

“Despite making it a high priority to grow sales in new and high risk markets overseas, the company failed to design and implement a system of internal controls or an appropriate FCPA compliance program reasonably designed to address the increased risks of its new business model,” the order said.

The company agreed to a $1.9 million civil penalty, as well as about $100,000 in disgorgement and $20,000 in interest. It also agreed to file reports to the SEC on the remediation and implementation of compliance measures it undertook to ensure compliance with the FCPA and other anti-corruption laws, the order said.

“We are pleased to have concluded this matter with the SEC and believe that the settlement we have agreed upon is in the best interests of Smith & Wesson and its shareholders,” said Chief Executive James Debney in a statement.

Smith & Wesson said in June that the U.S. Justice Department dropped an FCPA investigation against it. The Justice Department in 2010 unsealed an indictment of a Smith & Wesson vice president of sales, who has since left the company, as a part of a foreign-bribery prosecution of nearly two dozen individuals that eventually collapsed. The Justice Department dropped the charges against the former executive.