Deere & Company: A Factory Visit With No Factory

In the Deere FCPA Wirtgen Thailand case, Deere & Company agreed to pay $9,930,355 to settle Securities and Exchange Commission allegations of false accounting and failed controls over improper payments for equipment business. The agency described cash for purchasing employees, massage-parlor entertainment for officials and a factory visit that never reached a factory. For someone in sales or finance, the revealing detail is how those benefits became ordinary expenses on the books.

The September 10, 2024 order addressed the Foreign Corrupt Practices Act’s books-and-records and internal-accounting-controls provisions. It alleged that Wirtgen Thailand made improper payments from at least late 2017 through 2020 while Deere had not fully integrated the acquired business into its controls. Among FCPA cases and settlements, Deere shows how government tenders and private-customer sales can lead back to the same accounting failures.

What Deere Bought and What Wirtgen Thailand Sold

Deere acquired Wirtgen Group, a German road-equipment manufacturer, in December 2017. Wirtgen became wholly owned, and its accounts were consolidated into Deere’s accounts. The acquisition brought a local business into the reporting chain of a publicly traded machinery manufacturer.

Wirtgen Thailand’s business reached the Royal Thai Air Force, the Department of Highways and the Department of Rural Roads. The order also described sales through SKT, a dealer supplying the highways department, and to an unnamed private company handling construction, project management and infrastructure design.

The machinery also created demand after the initial sale. The private customer’s machines required spare parts to keep operating, and the agency alleged that benefits to purchasing employees helped Wirtgen obtain both machine sales and the parts business that followed. That continuing relationship matters to the person who sees the parts account long after the equipment order has closed.

Thai Tenders and the Expense Reports Behind Them

The Securities and Exchange Commission alleged that Wirtgen Thailand used massage-parlor entertainment to influence government purchasing decisions and obtain bidding information. Its account of procurement bribery connected the people being entertained to the decisions they could make. The order identified one Royal Thai Air Force attendee as a senior officer responsible for drafting and awarding tenders.

According to the order, Wirtgen entertained air force officials in exchange for information about the tender process and specific bidding requirements. The agency linked that entertainment to two tenders awarded in March and April 2020, worth approximately $665,000. We see the damage to honest competitors in that exchange: access to the people writing the bid requirements becomes something a supplier can buy.

The agency alleged that expense reports carried round amounts and vague descriptions, with some receipts listing Wirtgen employees who had not attended to make the spending appear more reasonable. It said the Thailand or Southeast Asia managing director routinely approved those reports. Across the air force and both road departments, the order described over $58,000 in massage-parlor spending improperly booked as legitimate business expenses.

The order’s account of road contracts went beyond access to information. It quoted the Thailand managing director saying he had tried to add a qualification to a highways tender, and later describing efforts to reverse a rural-roads tender result. The agency also alleged that two of the four signatories on an April 2020 rural-roads tender had received massage-parlor entertainment the previous December.

The Factory Visit That Never Reached a Factory

The SEC’s FCPA allegations against Deere covered Wirtgen Thailand’s gifts, travel and hospitality disguised as ordinary business spending. The order said Wirtgen Thailand paid for four Department of Highways officials and two spouses to take an October 2019 trip whose invoice described its purpose as “to visit factory.” According to the agency, the itinerary showed sightseeing in Switzerland, shopping, touring in the Alps and luxury hotels, with no factory visit. Quite a factory visit.

The order put the trip’s cost at approximately $47,500. It said Wirtgen submitted a bid during the trip and received that highways tender just afterward, followed by another the next month.

Deere already required a visit’s purpose, agenda, official attendees, gifts, entertainment, accommodations and cost to be supplied for approval. The agency alleged that Wirtgen Thailand neither provided the required information nor obtained prior authorization. According to the order, the regional managing director nevertheless approved the expenses because the company needed to “gain information and build rapport” with government customers.

We find that explanation more revealing than the invoice. In the agency’s account, the factory supplied the business label, while access to the customer supplied management’s justification. An employee who knew the actual itinerary could explain what the expense description concealed.

Five Envelopes and a Commission Account

The order described an April 2019 exchange in which the Thailand managing director promised the finance manager “candy money” for the highways department. It quoted his instructions connecting cash to a delivery:

According to the order, the finance manager then asked whether to put THB 20,000 in each envelope, and the managing director replied that he would do it himself. This is the sort of exchange that gives a cash withdrawal its purpose: the department, the envelopes and the delivery date appear together.

The Securities and Exchange Commission alleged that a consultant provided another payment channel, helping secure four machine tenders worth approximately $4.67 million. It described sham commission agreements authorizing approximately $285,129 in payments for no legitimate services. According to the order, the Thailand managing director signed those agreements, and the finance manager also signed the agreement connected to the rural-roads tender.

One agreement contained the contradiction in its payment instructions. According to the order, the account designated to receive the commission belonged to a senior Department of Highways official. The agency also described management communications about cash for highway officials and golf clubs for the deputy director of rural roads. Calling the payment a commission did little to explain why an official’s account was designated to receive it.

The alleged payment channel also reached dealer sales. The order said Wirtgen used the same consultant to facilitate the sale of ten pneumatic tire rollers through SKT outside the tender process.

The Private Customer and the Spare-Parts Business

The Securities and Exchange Commission said Wirtgen paid approximately $35,000 in cash to the unnamed private customer’s employees in 2018 and 2019, recording the payments as 3% brokerage payments and sales commissions. It identified the head of procurement among the recipients and said regional management approved the payments as thanks for support on machine purchases.

The order also described a cash recipient traveling with three family members on a trip that included sightseeing in France and Germany. In another payment described in the order, the finance manager deposited THB 70,000 into a customer employee’s bank account at the managing director’s instruction. The stated purpose was a “touring cost” for an upcoming trip.

The spare-parts connection gives those benefits a commercial purpose beyond the first order. According to the agency, Wirtgen had an unwritten practice of rewarding officials and commercial-customer employees whose spare-parts purchases reached certain benchmarks with trips containing substantial sightseeing. The person managing a parts account could therefore know why a particular customer employee kept appearing on the travel list.

The order attributed approximately $1.5 million in profits on $5.3 million in gross machine and spare-parts sales to the private-customer scheme from 2018 through 2023. Those later parts purchases explain why the alleged benefit continued after the original machine sales. A review confined to the equipment invoice would miss the continuing business the agency described.

What Conduct Can Violate the FCPA?

False books and inadequate internal accounting controls were the violations the Securities and Exchange Commission alleged in Deere’s settlement. The Foreign Corrupt Practices Act’s accounting provisions require accurate records and controls over company transactions. Here, the agency alleged that improper payments appeared as legitimate commissions and business expenses, with insufficient detail and support for payments to agents.

The agency also alleged that Deere had not fully integrated Wirtgen Thailand into its existing controls over employee reimbursements, third-party payments, gifts, travel and entertainment. Its account shows why a manager’s approval could offer little protection when that same manager allegedly arranged or justified the spending.

A similar gap between a form and the business relationship appeared in BHP Billiton’s settled SEC hospitality case. The Securities and Exchange Commission alleged that applications labeled some state-enterprise employees as customers without identifying their government roles, and that forms failed to reflect pending business dealings. It also alleged that employees did not update a hospitality application when mining-permit negotiations began with the invited minister. Both cases give an insider a concrete question: what did the reviewer know about the person receiving the benefit and the decision that person could influence?

What the Securities and Exchange Commission Order Required

The order imposed a $4,500,000 civil penalty against what the agency described as approximately $4.3 million in improper benefit. It also required Deere to return $4,343,401 in gains, with payment directed through the agency to the Treasury. We find the bargain striking: Deere agreed to return the gains and pay a penalty while admitting none of the alleged conduct.

The Records That Showed What the Expenses Bought

The useful records in this case were expense receipts, itineraries, commission agreements, payment instructions and messages connecting the spending to a customer’s decision. A finance or accounting insider may know who supplied the description, who approved it and who received the money. A sales or parts employee may know which purchase the benefit was meant to secure.

We build the account of who paid whom around those connections. The employee who can explain a false attendee list or a commission paid to a procurement employee adds something the ledger cannot say for itself. The value is in understanding the transaction behind the entry.

A March 2019 working paper available through MIT Sloan, Do Corporate Whistleblower Laws Deter Accounting Fraud?, examined companies exposed to state whistleblower laws through state pension-fund ownership. Using financial-statement measures of fraud risk, it estimated that exposure reduced the likelihood of accounting fraud by 5% to 9%. The study suggests that the prospect of an insider speaking up can discourage false accounting before it reaches an investigator.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. For information about foreign payments and company accounting, we assess the separate SEC whistleblower award route with you and the foreign bribery whistleblower lawyers suited to your facts. That program provides eligible whistleblowers an aggregate 10% to 30% of collected qualifying sanctions when the covered action’s sanctions exceed $1 million.

You Know What the Expense Bought

If the travel schedule, commission account or parts orders tell a different story from the books, bring that story to our whistleblower experts. We work beside you through the case, connect the payments to the decisions you witnessed, and bring in FCPA whistleblower lawyers who understand subsidiary accounts and equipment sales. Speak to one of our Whistleblower Experts about what the trip and the commissions really bought.