In re PTC INC.

 UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 77145 / February 16, 2016 
 
ACCOUNTING AND AUDITING ENFORCEMENT  
Release No. 3743 / February 16, 2016 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-17118 
 
 
In the Matter of 
 
PTC INC.,  
 
Respondent. 
 
 
ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO 
SECTION 21C OF THE SECURITIES 
EXCHANGE ACT OF 1934, MAKING 
FINDINGS, AND IMPOSING A CEASE-
AND-DESIST ORDER 
  
I. 
 
 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities 
Exchange Act of 1934 (“Exchange Act”), against PTC Inc. (“PTC” or “Respondent”). 
 
II. 
  
 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
purpose of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, Respondent admits the Commission’s 
jurisdiction over Respondent and the subject matter of these proceedings, and consents to the entry 
of this Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities 
Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as set 
forth below.    
 
III. 
 
 On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that: 
                                                 
1
 The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding 
on any other person or entity in this or any other proceeding. 

 
 
2 
 
Summary 
 
1. This matter concerns violations of the anti-bribery, books and records and internal 
accounting controls provisions of the Foreign Corrupt Practices Act (“FCPA”) by PTC.  From at 
least 2006 into 2011, two wholly-owned PTC subsidiaries (collectively, “PTC-China”) provided 
improper payments totaling nearly $1.5 million to government officials (“Chinese government 
officials” or “officials”) who were employed by Chinese state owned entities (“SOEs”) that were 
PTC customers.  These payments were made to obtain or retain business from the SOEs.  
Specifically, PTC-China provided non-business travel, primarily sightseeing and tourist activities, 
as well as improper gifts and entertainment, to the Chinese government officials.  PTC earned 
approximately $11.85 million in profits from sales contracts with SOEs whose officials received 
the improper payments.    
 
2. PTC-China made these improper payments in two primary ways: 1) by providing at 
least $1,179,912 to third party agents, disguised as commission payments or sub-contracting fees, 
which were then used to pay for non-business related foreign travel for Chinese government 
officials; and 2) by allowing its sales staff to provide Chinese government officials with gifts and 
excessive entertainment of over $274,313.  The payments were recorded as legitimate 
commissions and business expenses in PTC-China’s books and records, when in fact they were 
improper payments designed to benefit the Chinese government officials.  PTC-China’s books and 
records were consolidated into PTC’s books and records, thereby causing PTC’s books and records 
to be inaccurate.  PTC failed to devise and maintain an adequate system of internal accounting 
controls sufficient to prevent and detect these improper payments that occurred over several years. 
 
Respondent 
 
3. PTC Inc. (formerly Parametric Technology Corporation) is a Massachusetts 
corporation with its headquarters in Needham, Massachusetts.  PTC designs, manufactures, and 
sells Product Lifecycle Management Systems software (i.e., software that manages a company’s 
products from design through manufacturing and distribution) and maintains operations in the 
Americas, Europe, and Asia Pacific, including China.  PTC manages its China operations through 
two wholly-owned subsidiaries, Parametric Technology (Shanghai) Software Company Limited 
and Parametric Technology (Hong Kong) Limited.  PTC’s common stock is registered with the 
Commission pursuant to Section 12(b) of the Exchange Act and is listed on the NASDAQ Global 
Select Market (ticker: PTC). 
 
Facts 
 
A. PTC Exercised Substantial Control Over PTC-China 
 
4. During the relevant period, although PTC-China was structured as two entities, it 
conducted business as a single unit.  Until July 2008, all China local employees were assigned to 
the Hong Kong subsidiary; in August 2008, they all became direct employees of the Shanghai 

 
 
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subsidiary.  And throughout this period, both the Hong Kong and Shanghai subsidiaries shared 
common directors, all of whom were senior members or officers of PTC’s legal and finance 
departments.  
 
5. PTC exercised substantial control over PTC-China.  The employees of PTC’s 
subsidiaries, including PTC-China, had global functional reporting lines to PTC, rather than an 
independent management structure.  The functional reporting lines provided PTC with control over 
PTC-China’s activities, including its sales process.  PTC-China’s senior sales staff reported to a 
Division Vice President of Sales, who was a PTC employee based in China.  For most of the 
relevant period, this Division Vice President either reported to the General Manager of the Asia 
Pacific Region, or directly to PTC’s Executive Vice President of Sales, who was based in 
Needham, Massachusetts.  For other functions, including sales operations and global services, 
various PTC-China employees reported up to PTC employees, both based in China and the United 
States.  Consistent with the functional reporting structure, PTC often moved its key employees to 
various subsidiaries throughout the world.   
 
6. For the sales, sales operations, and global services functions, the review of 
proposed transactions followed a hierarchical approach through PTC-China and, if needed, to 
employees at other PTC entities, including the parent company.  PTC employees approved pricing 
discounts above certain thresholds for PTC-China and reviewed certain PTC-China contract 
documents.  PTC, not PTC-China, was the counter party on most of the contracts with PTC-
China’s SOE customers. 
 
7. Further, PTC set the business and financial goals for its subsidiaries, including 
PTC-China.  Each PTC function (including sales, marketing and finance) received a worldwide 
budget from PTC to allocate among its various subsidiaries.  PTC also set regional sales targets 
(i.e., for the Pacific Rim, in which China was included) and had regional managers who allocated 
the sales targets among the countries and subsidiaries.   
 
B. PTC-China Used Business Partners to Pay Bribes to 
Chinese Government Officials ___________________ 
 
8. For sales to Chinese SOEs, PTC-China routinely hired third parties – called 
“business partners” – both to find deals, for which PTC-China paid a commission or “success fee,” 
as well as to provide information technology and other services, which PTC-China subcontracted 
to the business partner.  Business partners were generally Chinese companies, purportedly with 
specific knowledge of, and relationships with, PTC-China’s customers.   
 
9. PTC employees knew that many of PTC-China’s customers were SOEs whose 
employees were Chinese government officials.  Certain business partners had long standing 
relationships with these Chinese government officials.  Generally, the business partners provided 
PTC-China with lobbying or “influence services” (i.e., arranging seminars and meetings with 
officials of the SOEs) and information technology services.  Often the Chinese government 
officials chose the business partner with whom they wished to collaborate.   

 
 
4 
 
10. Despite the routine use of business partners in many deals, and the risk of 
corruption inherent in paying for influence services, PTC failed to conduct a sufficient review of 
the business capabilities or ethics programs of these business partners.  
 
11. Senior PTC-China sales staff had wide discretion in setting the fee arrangements 
with business partners.  PTC-China did not have a fixed success fee arrangement with its business 
partners, instead negotiating the fee for each particular deal.  When PTC-China initially engaged 
the business partner, its sales team generally agreed to a price range for the business partners’ 
commission – from as low as 15% to as high as 30% of the contract price – if the deal was 
successful.  PTC-China’s senior sales staff finalized the commission with the business partner at or 
about the time a deal closed.   PTC-China’s senior sales staff reported to a PTC employee who had 
authority over the commission approval process.   
 
12. For information technology and other subcontracted services, PTC-China relied on 
sign offs provided by the SOE’s officials as evidence that the agreed upon services had been 
performed.  Once the business partner and/or the Chinese government officials confirmed that the 
business partner had completed the services, PTC-China made the agreed-upon payments to the 
business partner.  PTC-China did not independently verify the extent to which, if at all, the 
business partners in fact performed the subcontracted services.   
 
13. Beginning in 2005, PTC-China recorded the commission and information 
technology subcontracting payments to business partners as “Complete Outsourced Deals” or 
“COD” expenses.  After 2008, PTC-China began paying commissions to business partners as it 
received customer payment on the deals.  PTC-China sales staff tracked the payments to business 
partners on spreadsheets that they kept on their computers, and which were separate from PTC-
China’s electronic accounting records. 
 
14. During contract negotiations with SOEs, Chinese government officials, in 
conjunction with a business partner, often requested that PTC-China provide them with overseas 
“training,” which involved primarily tourist and sightseeing visits.  The three parties would settle 
on a travel budget and the Chinese government officials would typically agree to “gross up” the 
SOE’s contract price by the amount of the anticipated travel costs.  PTC-China sales staff itemized 
the overseas travel costs in the initial contract documents for approval by senior PTC-China sales 
staff.  Once approved, however, PTC-China employees removed the line item for overseas travel 
from the final contract documents that were signed by PTC and the SOEs.  Instead, the funds 
budgeted for the overseas travel were disguised by PTC-China personnel as COD expenses related 
to success fees or subcontracting payments for business partners. 
 
15. Because PTC-China employees negotiated success fees with a business partner on a 
deal by deal basis, they were able to include the costs of the overseas travel as part of a business 
partner’s fees without raising suspicion.  In turn, the business partner used part of its success fee to 
pay for the overseas sightseeing trips.  Alternatively, PTC-China employees sometimes disguised 
the overseas travel payments as a payment purportedly for providing information technology or 

 
 
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other subcontracted services.  The business partner (or customer) then provided PTC-China with 
documents indicating that it had performed the subcontracted services, and used a part of the 
subcontract fee to pay for the Chinese government officials’ sightseeing trips.  For certain more 
expensive trips, PTC-China employees spread the overseas travel payments over several contracts, 
each with its own COD budget.  Because many deals with SOEs involved long term contracts that 
took several years to complete, the actual sightseeing trip sometimes occurred up to two to three 
years after the deal was negotiated.  
 
16. PTC-China sales staff tracked on spreadsheets kept separate from PTC-China’s 
regularly maintained books and records the overseas travel payments made by business partners to 
or for the benefit of PTC’s SOE customers.  Senior PTC-China sales staff used the spreadsheets to 
understand the composition of, and negotiate, the success and other fees with the business partners. 
 
C. PTC-China Improperly Funded Leisure Travel for Chinese  
Government Officials______________________________ 
 
17.   PTC-China employees and the business partners typically arranged the overseas 
sightseeing trips in conjunction with a visit to a PTC facility.  Most often, PTC-China sales staff 
arranged for Chinese government officials to visit PTC’s corporate headquarters in Massachusetts, 
for PTC to market and demonstrate the company’s products and services.  The trips typically 
consisted of one day of business activities at PTC’s facility, followed or preceded by additional 
days of sightseeing visits that lacked any business purpose, all of which were paid for by the 
business partners using funds from their grossed up success fees and subcontracting payments.  
Some PTC employees in the United States generally understood that SOE officials were spending 
additional days in the country, including for tourist activities.  And certain PTC employees based 
in China were aware that PTC-China employees were accompanying Chinese government officials 
to tourist destinations.   
 
18. Typical travel destinations in the United States included New York, Las Vegas, San 
Diego, Los Angeles, and Honolulu, and involved guided tours, golfing, and other leisure activities.  
PTC-China sales staff usually accompanied the Chinese government officials on these trips.  The 
Chinese government officials who went on the trips in turn were often signatories on the purchase 
agreements with PTC.    
 
19. Examples of these overseas trips are described below: 
 
 In April 2008, six officials of an SOE (“SOE Customer A”) and a senior PTC-
China salesperson visited PTC’s Massachusetts office for a one-day meeting.  The 
PTC-China salesperson further arranged for a business partner to pay $51,495 for 
sightseeing visits to New York, Boston, Los Angeles and Honolulu for the Chinese 
government officials (and himself).  The ten day trip included lodging at five star 
hotels; tours of Rockefeller Center, the Statue of Liberty, the United Nations, and 
the Empire State Building, along with tickets to a professional basketball game 
while in New York; tours of MIT, Harvard, and Faneuil Hall while in Boston; a 

 
 
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tour of the Grand Canyon while in Las Vegas; a city tour while in Los Angeles; and 
a city tour, a tour of Pearl Harbor, a visit to the Polynesian Cultural Center, golfing, 
and a sunset dinner cruise while in Honolulu.  As a result, during 2008, PTC and 
PTC-China received an improper benefit of at least three contracts, signed by PTC, 
worth $1.2 million, from SOE Customer A.     
 
 In December 2007, during contract negotiations with an SOE (“SOE Customer B”), 
a PTC-China employee agreed to provide its officials with over $84,000 for future 
overseas travel expenses.  The PTC-China employee emailed his supervisor at 
PTC-China the terms of a deal with SOE Customer B that included $84,429 for the 
overseas travel, which he initially recorded as “overseas training.”  Later, the PTC-
China employee disguised “overseas training” as COD costs, stating: “I replace the 
‘oversea training’ in the sheet to the ‘COD1’ ....  As you know, the customers just 
want sightseeing instead of oversea training.”  Subsequently, the PTC-China 
employee disguised the overseas travel costs as COD expenses in three deals, 
signed by PTC, worth nearly $1.7 million, with SOE Customer B. 
 
 PTC-China provided SOE Customer B with the agreed-upon overseas travel in 
2010, when it arranged for nine of its officials to visit PTC’s Massachusetts office 
for a one-day meeting.  PTC-China employees concurrently had a business partner 
provide these Chinese government officials with sightseeing visits to New York, 
Washington, D.C., Los Angeles, and Honolulu, including among the activities, 
tours of West Point Academy, Rockefeller Center, and the Statue of Liberty while 
in New York; Universal Studios while in Los Angeles; and Pearl Harbor while in 
Honolulu.  
 
 In December 2007, while negotiating a $3.4 million deal with an SOE (“SOE 
Customer C”), a PTC-China salesperson emailed his supervisors at PTC-China 
contract documents that included overseas travel expenses of $173,400.  In July 
2008, while negotiating a $1.2 million deal with SOE Customer C, another PTC-
China salesperson emailed the same supervisors contract documents that included 
overseas travel expenses of $104,000.  When completing both deals, PTC-China 
employees excluded the overseas travel expenses from the final contract documents 
that were signed by PTC and SOE Customer C.    
 
 PTC-China provided SOE Customer C with the agreed-upon overseas travel in May 
2010, when it arranged for five of its officials to visit PTC’s Massachusetts office 
for a one-day meeting.  PTC-China employees concurrently had a business partner 
provide these Chinese government officials with a sightseeing visit to New York, 
Las Vegas, and Los Angeles, including among other activities, tours of the United 
Nations, the Statue of Liberty, and West Point while in New York; the Grand 
Canyon while in Las Vegas; and Universal Studios while in Los Angeles.   
 

 
 
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 In May 2010, a PTC-China salesperson accompanied two officials of an SOE 
(“SOE Customer D”) on a visit to PTC’s Massachusetts office for a one-day 
meeting.  PTC-China sales staff concurrently had a PTC-China business partner 
provide these Chinese government officials with sightseeing visits to New York, 
Boston, Atlanta, Las Vegas, and Los Angeles, including among other activities, 
tours of the Grand Canyon while in Las Vegas; Universal Studios while in Los 
Angeles; and shopping excursions.  In July 2010, another PTC-China salesperson 
accompanied seven officials of SOE Customer D on a second visit to PTC’s U.S. 
offices.  Once again, PTC-China sales staff had one of its business partners provide 
these Chinese government officials with sightseeing visits to New York, Boston, 
New London, Connecticut, Washington, D.C., Las Vegas, San Diego and Los 
Angeles, including among other activities, tours of Niagara Falls, the Statue of 
Liberty, the Empire State Building, and the Intrepid Sea, Air & Space Museum 
Complex while in New York; the Submarine Force Library & Museum while in 
New London; the Grand Canyon while in Las Vegas; Universal Studios while in 
Los Angeles; and shopping excursions.  These trips influenced SOE Customer D to 
purchase over $9 million of products from PTC and PTC-China.   
 
20. Overall, from 2006 into 2011, PTC-China, through its business partners, paid at 
least $1,179,912 to fund at least 10 trips for Chinese government officials that included significant 
non-business travel.  The costs of these trips were improperly recorded in PTC’s books and records 
as COD or business partner related commissions or subcontracting payments, without any 
indication that they were primarily for sightseeing and other non-business related activities.  PTC 
improperly profited by at least $11,858,000 from contracts obtained from the SOEs whose 
government officials participated on these trips. 
 
D. PTC-China Improperly Provided Officials of SOEs 
with Gifts and Excessive Entertainment____________  
 
21. From 2009 through 2011, PTC-China sales staff corruptly provided at least 
$274,313 in improper gifts and entertainment directly to Chinese government officials.  The value 
of the gifts and entertainment generally ranged from $50 to $600, and often included small 
electronics (e.g., cell phones, iPods, and GPS systems), gift cards, wine, and clothing.  PTC-China 
sales staff’s long standing practice of providing the gifts to Chinese government officials was done 
at least in part to obtain or retain SOE business. 
 
22.  By providing these gifts, PTC-China violated PTC’s corporate governance and 
internal controls policies.  These policies included: $50 monetary limits on the provision of gifts 
and business entertainment to government officials; requiring PTC-China sales staff to obtain pre-
approvals for business expenses over $500; and requiring that PTC-China sales staff document the 
date, place, attendees, and purpose of business entertainment and the recipient.  These gifts were 
improperly recorded as legitimate business expenses. 
 
 

 
 
8 
E. PTC-China Failed to Devise and Maintain a System  
of Internal Accounting Controls ________________ 
 
23. From at least 2006 through 2011, PTC failed to devise and maintain an adequate 
internal accounting controls system to address the potential FCPA problems posed by its 
ownership of, and control over, PTC-China.  Notably, during 2006, 2008, and 2010, PTC 
investigated compliance issues at PTC-China, including possible corruption involving its business 
partners.  However, PTC failed to identify and stop the ongoing and systemic illicit payments to 
Chinese government officials by PTC-China personnel as described above and did not undertake 
effective remedial actions. 
 
24. Despite these compliance issues, PTC failed to undertake periodic comprehensive 
risk assessments for PTC-China and to ensure that its internal accounting controls procedures were 
suited to PTC-China’s particular circumstances (in particular, its ongoing dealings with Chinese 
government officials).  PTC’s Code of Ethics and Anti-Bribery policies for the provision of 
business entertainment were vague (i.e., stating that employees should use “good taste” and 
consider the “customary business standards in the community” when providing business 
entertainment) and not risk-based to China.  And PTC did not have independent compliance staff 
or an internal audit function that had authority to review and test its internal accounting controls 
processes or intervene into management decisions and, if appropriate, take remedial actions. 
 
25. As a result, PTC failed to identify and correct corporate governance and compliance 
breakdowns at PTC-China.  Notably, PTC failed to: properly vet PTC-China’s business partners, 
which played a significant role for PTC-China as described above; police for corrupt payments by 
its business partners; monitor and supervise PTC-China’s senior sales staff to ensure that they 
enforced anti-corruption policies and kept accurate records concerning gifts to Chinese government 
officials; properly scrutinize travel related expenses to prevent reimbursement for employees’ 
airfare, lodging, and other expenses that were either personal in nature or gifts for customers; limit 
the number or total value of gifts PTC-China’s sales staff could provide to any single individual or 
entity; and provide sufficient FCPA training for its employees.   
 
Legal Standards and Violations 
 
26. Under Section 21C(a) of the Exchange Act, the Commission may impose a cease-
and-desist order upon any person who is violating, has violated, or is about to violate any provision 
of the Exchange Act or any regulation thereunder, and upon any other person that is, was, or would 
be a cause of the violation, due to an act or omission the person knew or should have known would 
contribute to such violation. 
 
Violations of the Anti-Bribery Provisions of the FCPA 
 
27. Under Section 30A of the Exchange Act it is unlawful for any issuer, officer, 
director, employee, or agent of such issuer or any stockholder thereof acting on behalf of the issuer 
to make use of the mails or any means or instrumentality of interstate commerce corruptly in 

 
 
9 
furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or 
offer, gift, promise to give, or authorization of the giving of anything of value to any foreign 
official or any person, while knowing that all or a portion of such money or thing of value will be 
offered, given, or promised, directly or indirectly, to any foreign official for the purposes of (i) 
influencing any act or decision of such foreign official in his official capacity, (ii) inducing such 
foreign official to do or omit to do any act in violation of the lawful duty of such official, or (iii) 
securing any improper advantage in order to assist such issuer in obtaining or retaining business for 
or with, or directing business to, any person.  [15 U.S.C. § 78dd-1]. 
 
28. PTC-China used third party business partners to pay bribes in the form of travel, 
gifts and entertainment to Chinese government officials to obtain and retain business.  PTC 
exercised substantial control over PTC-China by, among other things, creating functional reporting 
lines, approving PTC-China’s key decisions, and setting PTC-China’s business and financial goals.  
PTC entered into contracts directly with the SOEs as a result of the bribes paid through PTC-
China’s business partners, and earned significant income from these contracts.  Under applicable 
agency principles, PTC-China and its employees acted as agents of PTC during the relevant time 
and were acting within the scope of their authority and for the benefit of PTC when participating in 
the bribery scheme.   
 
Violations of the Recordkeeping and Internal  
Accounting Controls Provisions of the FCPA 
 
29. Section 13(b)(2)(A) of the Exchange Act requires reporting companies to make and 
keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the 
transactions and disposition of the assets of the issuer.  15 U.S.C. § 78m(b)(2)(A). 
 
30. Section 13(b)(2)(B) of the Exchange Act requires reporting companies to devise 
and maintain a system of internal accounting controls sufficient to provide reasonable assurances 
that the transactions: (i) are executed in accordance with management’s general or specific 
authorization; and (ii) are recorded as necessary to permit preparation of financial statements in 
conformity with generally accepted accounting principles (“GAAP”) or any other criteria 
applicable to such statements, and to maintain accountability for assets.  15 U.S.C. § 78m(b)(2)(B). 
 
31. PTC-China made payments, directly and indirectly, to Chinese government 
officials that were improperly recorded on its books and records as legitimate commissions and 
business expenses.  The books and records of PTC-China were consolidated into PTC’s books and 
records.  As a result of the misconduct of its China subsidiaries, PTC failed to make and keep 
books and records which, in reasonable detail, accurately and fairly reflected its transactions and 
the disposition of its assets as required by Section 13(b)(2)(A) of the Exchange Act.   
 
32. The improper payments by PTC-China described above took place over several 
years.  During the relevant period, PTC failed to implement an adequate system of internal 
controls, including an appropriate FCPA compliance and training program at PTC-China, which 
was commensurate with the risks of doing business in China, and particularly the risks of 

 
 
10 
businesses that regularly sold products to SOEs.  Accordingly, in violation of Section 13(b)(2)(B) 
of the Exchange Act, PTC failed to devise and maintain a system of internal accounting controls 
sufficient to provide reasonable assurances that it maintained accountability for its assets, and that 
its transactions were executed in accordance with management’s authorization.   
 
PTC’s Self-Disclosure and Remedial Efforts 
 
33. PTC only discovered the improper payments to or for the benefit of Chinese 
government officials in 2011, while investigating complaints concerning a senior PTC-China 
salesperson.  Upon learning this information, PTC, with the oversight of the Audit Committee of 
the Board of Directors, engaged independent counsel and an independent forensic consulting firm 
to undertake an investigation.  PTC voluntarily self-reported the results of its internal investigation 
to the Commission and responded to information requests from the Commission staff.  PTC did 
not, however, uncover or disclose the full scope and extent of PTC-China’s FCPA issues until 
2014.     
 
34. As part of its internal review and investigation, PTC undertook significant remedial 
measures including terminating the senior staff at PTC-China implicated in the FCPA violations.  
PTC also revised its pre-existing compliance program, updated and enhanced its financial 
accounting controls and its compliance protocols and policies worldwide, and implemented 
additional specific enhancements in China.  These steps included:  (1) reviewing and enhancing its 
anti-bribery policy, code of ethics, and gifts and entertainment policies to correct previous 
deficiencies; (2) establishing a dedicated compliance team, including a chief compliance officer 
and a new compliance director in China; (3) expanding its other compliance resources in China, 
including hiring a new vice president of finance for Asia and adding additional legal staff in China; 
(4) hiring a new management team in China, including a new China President; (5) enhancing its 
FCPA training for employees; (6) severing its relationships with the business partners that were 
implicated in the FCPA violations and discontinuing the use of COD partners or business referral 
partners generally; (7) implementing a comprehensive due diligence program for all other business 
partners that includes a risk-scoring system operated by a third party vendor and that includes 
FCPA training as part of the onboarding process; (8) obtaining quarterly anti-corruption 
certifications from sales staff; and (9) undertaking periodic compliance audits.   
 
Non-Prosecution Agreement 
 
35. Respondent’s subsidiaries have entered into non-prosecution agreements that 
acknowledge responsibility for criminal conduct relating to the findings in the Order.  Specifically, 
Respondent’s subsidiaries acknowledge responsibility for violating Section 104A of the Foreign 
Corrupt Practices Act of 1977.  15 U.S.C. § 78dd-3.   
 
 
 
 
 

 
 
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Non-Imposition of a Civil Penalty 
 
36. Respondent acknowledges that the Commission is not imposing a civil penalty 
based upon its payment of a $14,540,000 criminal fine as part of Respondent’s subsidiaries’ 
settlement with the United States Department of Justice.  
 
IV. 
 
 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
agreed to in Respondent PTC’s Offer. 
 
 Accordingly, it is hereby ORDERED that: 
 
A. Pursuant to Section 21C of the Exchange Act, Respondent PTC cease and desist 
from committing or causing any violations and any future violations of Sections 30A, 13(b)(2)(A) 
and 13(b)(2)(B) of the Exchange Act.   
 
B. Respondent shall, within ten (10) days of the entry of this Order, pay disgorgement 
of $11,858,000, which represents profits gained as a result of the conduct described herein, and 
prejudgment interest of $1,764,000 to the Securities and Exchange Commission for transfer to the 
general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3).  If timely 
payment is not made, additional interest shall accrue pursuant to SEC Rule of Practice 600 and 31 
U.S.C. § 3717.  Payment must be made in one of the following ways:   
 
(1) Respondent may transmit payment electronically to the Commission, which will 
provide detailed ACH transfer/Fedwire instructions upon request;  
 
(2) Respondent may make direct payment from a bank account via Pay.gov through 
the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
 
(3)  Respondent may pay by certified check, bank cashier’s check, or United States 
postal money order, made payable to the Securities and Exchange Commission and hand-
delivered or mailed to:  
 
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
 
Payments by check or money order must be accompanied by a cover letter identifying PTC 
as a Respondent in these proceedings, and the file number of these proceedings; a copy of the  
 
 

 
 
12 
 
 
cover letter and check or money order must be sent to Paul G. Block, Assistant Director, Foreign 
Corrupt Practices Act Unit, Boston Regional Office, Securities and Exchange Commission, 33 
Arch Street, Suite 2300, Boston, Massachusetts 02110. 
 
 By the Commission. 
 
 
 
 
       Brent J. Fields 
       Secretary 

UNITED STATES OF AMERICA 

 Before the 

 SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 77145 / February 16, 2016 

 
ACCOUNTING AND AUDITING ENFORCEMENT  

Release No. 3743 / February 16, 2016 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-17118 

 

 

In the Matter of 

 

PTC INC.,  

 

Respondent. 

 

 

ORDER INSTITUTING CEASE-AND-

DESIST PROCEEDINGS PURSUANT TO 

SECTION 21C OF THE SECURITIES 

EXCHANGE ACT OF 1934, MAKING 

FINDINGS, AND IMPOSING A CEASE-

AND-DESIST ORDER 

  

I. 

 

 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-

and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities 

Exchange Act of 1934 (“Exchange Act”), against PTC Inc. (“PTC” or “Respondent”). 

 

II. 

  

 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 

purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, Respondent admits the Commission’s 

jurisdiction over Respondent and the subject matter of these proceedings, and consents to the entry 

of this Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities 

Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as set 

forth below.    

 

III. 

 

 On the basis of this Order and Respondent’s Offer, the Commission finds1 that: 

                                                 
1 The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding 

on any other person or entity in this or any other proceeding. 



 

 2 

 

Summary 

 

1. This matter concerns violations of the anti-bribery, books and records and internal 

accounting controls provisions of the Foreign Corrupt Practices Act (“FCPA”) by PTC.  From at 

least 2006 into 2011, two wholly-owned PTC subsidiaries (collectively, “PTC-China”) provided 

improper payments totaling nearly $1.5 million to government officials (“Chinese government 

officials” or “officials”) who were employed by Chinese state owned entities (“SOEs”) that were 

PTC customers.  These payments were made to obtain or retain business from the SOEs.  

Specifically, PTC-China provided non-business travel, primarily sightseeing and tourist activities, 

as well as improper gifts and entertainment, to the Chinese government officials.  PTC earned 

approximately $11.85 million in profits from sales contracts with SOEs whose officials received 

the improper payments.    

 

2. PTC-China made these improper payments in two primary ways: 1) by providing at 

least $1,179,912 to third party agents, disguised as commission payments or sub-contracting fees, 

which were then used to pay for non-business related foreign travel for Chinese government 

officials; and 2) by allowing its sales staff to provide Chinese government officials with gifts and 

excessive entertainment of over $274,313.  The payments were recorded as legitimate 

commissions and business expenses in PTC-China’s books and records, when in fact they were 

improper payments designed to benefit the Chinese government officials.  PTC-China’s books and 

records were consolidated into PTC’s books and records, thereby causing PTC’s books and records 

to be inaccurate.  PTC failed to devise and maintain an adequate system of internal accounting 

controls sufficient to prevent and detect these improper payments that occurred over several years. 

 

Respondent 

 

3. PTC Inc. (formerly Parametric Technology Corporation) is a Massachusetts 

corporation with its headquarters in Needham, Massachusetts.  PTC designs, manufactures, and 

sells Product Lifecycle Management Systems software (i.e., software that manages a company’s 

products from design through manufacturing and distribution) and maintains operations in the 

Americas, Europe, and Asia Pacific, including China.  PTC manages its China operations through 

two wholly-owned subsidiaries, Parametric Technology (Shanghai) Software Company Limited 

and Parametric Technology (Hong Kong) Limited.  PTC’s common stock is registered with the 

Commission pursuant to Section 12(b) of the Exchange Act and is listed on the NASDAQ Global 

Select Market (ticker: PTC). 

 

Facts 

 

A. PTC Exercised Substantial Control Over PTC-China 

 

4. During the relevant period, although PTC-China was structured as two entities, it 

conducted business as a single unit.  Until July 2008, all China local employees were assigned to 

the Hong Kong subsidiary; in August 2008, they all became direct employees of the Shanghai 



 

 3 

subsidiary.  And throughout this period, both the Hong Kong and Shanghai subsidiaries shared 

common directors, all of whom were senior members or officers of PTC’s legal and finance 

departments.  

 

5. PTC exercised substantial control over PTC-China.  The employees of PTC’s 

subsidiaries, including PTC-China, had global functional reporting lines to PTC, rather than an 

independent management structure.  The functional reporting lines provided PTC with control over 

PTC-China’s activities, including its sales process.  PTC-China’s senior sales staff reported to a 

Division Vice President of Sales, who was a PTC employee based in China.  For most of the 

relevant period, this Division Vice President either reported to the General Manager of the Asia 

Pacific Region, or directly to PTC’s Executive Vice President of Sales, who was based in 

Needham, Massachusetts.  For other functions, including sales operations and global services, 

various PTC-China employees reported up to PTC employees, both based in China and the United 

States.  Consistent with the functional reporting structure, PTC often moved its key employees to 

various subsidiaries throughout the world.   

 

6. For the sales, sales operations, and global services functions, the review of 

proposed transactions followed a hierarchical approach through PTC-China and, if needed, to 

employees at other PTC entities, including the parent company.  PTC employees approved pricing 

discounts above certain thresholds for PTC-China and reviewed certain PTC-China contract 

documents.  PTC, not PTC-China, was the counter party on most of the contracts with PTC-

China’s SOE customers. 

 

7. Further, PTC set the business and financial goals for its subsidiaries, including 

PTC-China.  Each PTC function (including sales, marketing and finance) received a worldwide 

budget from PTC to allocate among its various subsidiaries.  PTC also set regional sales targets 

(i.e., for the Pacific Rim, in which China was included) and had regional managers who allocated 

the sales targets among the countries and subsidiaries.   

 

B. PTC-China Used Business Partners to Pay Bribes to 

Chinese Government Officials ___________________ 

 

8. For sales to Chinese SOEs, PTC-China routinely hired third parties – called 

“business partners” – both to find deals, for which PTC-China paid a commission or “success fee,” 

as well as to provide information technology and other services, which PTC-China subcontracted 

to the business partner.  Business partners were generally Chinese companies, purportedly with 

specific knowledge of, and relationships with, PTC-China’s customers.   

 

9. PTC employees knew that many of PTC-China’s customers were SOEs whose 

employees were Chinese government officials.  Certain business partners had long standing 

relationships with these Chinese government officials.  Generally, the business partners provided 

PTC-China with lobbying or “influence services” (i.e., arranging seminars and meetings with 

officials of the SOEs) and information technology services.  Often the Chinese government 

officials chose the business partner with whom they wished to collaborate.   



 

 4 

 

10. Despite the routine use of business partners in many deals, and the risk of 

corruption inherent in paying for influence services, PTC failed to conduct a sufficient review of 

the business capabilities or ethics programs of these business partners.  

 

11. Senior PTC-China sales staff had wide discretion in setting the fee arrangements 

with business partners.  PTC-China did not have a fixed success fee arrangement with its business 

partners, instead negotiating the fee for each particular deal.  When PTC-China initially engaged 

the business partner, its sales team generally agreed to a price range for the business partners’ 

commission – from as low as 15% to as high as 30% of the contract price – if the deal was 

successful.  PTC-China’s senior sales staff finalized the commission with the business partner at or 

about the time a deal closed.   PTC-China’s senior sales staff reported to a PTC employee who had 

authority over the commission approval process.   

 

12. For information technology and other subcontracted services, PTC-China relied on 

sign offs provided by the SOE’s officials as evidence that the agreed upon services had been 

performed.  Once the business partner and/or the Chinese government officials confirmed that the 

business partner had completed the services, PTC-China made the agreed-upon payments to the 

business partner.  PTC-China did not independently verify the extent to which, if at all, the 

business partners in fact performed the subcontracted services.   

 

13. Beginning in 2005, PTC-China recorded the commission and information 

technology subcontracting payments to business partners as “Complete Outsourced Deals” or 

“COD” expenses.  After 2008, PTC-China began paying commissions to business partners as it 

received customer payment on the deals.  PTC-China sales staff tracked the payments to business 

partners on spreadsheets that they kept on their computers, and which were separate from PTC-

China’s electronic accounting records. 

 

14. During contract negotiations with SOEs, Chinese government officials, in 

conjunction with a business partner, often requested that PTC-China provide them with overseas 

“training,” which involved primarily tourist and sightseeing visits.  The three parties would settle 

on a travel budget and the Chinese government officials would typically agree to “gross up” the 

SOE’s contract price by the amount of the anticipated travel costs.  PTC-China sales staff itemized 

the overseas travel costs in the initial contract documents for approval by senior PTC-China sales 

staff.  Once approved, however, PTC-China employees removed the line item for overseas travel 

from the final contract documents that were signed by PTC and the SOEs.  Instead, the funds 

budgeted for the overseas travel were disguised by PTC-China personnel as COD expenses related 

to success fees or subcontracting payments for business partners. 

 

15. Because PTC-China employees negotiated success fees with a business partner on a 

deal by deal basis, they were able to include the costs of the overseas travel as part of a business 

partner’s fees without raising suspicion.  In turn, the business partner used part of its success fee to 

pay for the overseas sightseeing trips.  Alternatively, PTC-China employees sometimes disguised 

the overseas travel payments as a payment purportedly for providing information technology or 



 

 5 

other subcontracted services.  The business partner (or customer) then provided PTC-China with 

documents indicating that it had performed the subcontracted services, and used a part of the 

subcontract fee to pay for the Chinese government officials’ sightseeing trips.  For certain more 

expensive trips, PTC-China employees spread the overseas travel payments over several contracts, 

each with its own COD budget.  Because many deals with SOEs involved long term contracts that 

took several years to complete, the actual sightseeing trip sometimes occurred up to two to three 

years after the deal was negotiated.  

 

16. PTC-China sales staff tracked on spreadsheets kept separate from PTC-China’s 

regularly maintained books and records the overseas travel payments made by business partners to 

or for the benefit of PTC’s SOE customers.  Senior PTC-China sales staff used the spreadsheets to 

understand the composition of, and negotiate, the success and other fees with the business partners. 

 

C. PTC-China Improperly Funded Leisure Travel for Chinese  

Government Officials______________________________ 

 

17.   PTC-China employees and the business partners typically arranged the overseas 

sightseeing trips in conjunction with a visit to a PTC facility.  Most often, PTC-China sales staff 

arranged for Chinese government officials to visit PTC’s corporate headquarters in Massachusetts, 

for PTC to market and demonstrate the company’s products and services.  The trips typically 

consisted of one day of business activities at PTC’s facility, followed or preceded by additional 

days of sightseeing visits that lacked any business purpose, all of which were paid for by the 

business partners using funds from their grossed up success fees and subcontracting payments.  

Some PTC employees in the United States generally understood that SOE officials were spending 

additional days in the country, including for tourist activities.  And certain PTC employees based 

in China were aware that PTC-China employees were accompanying Chinese government officials 

to tourist destinations.   

 

18. Typical travel destinations in the United States included New York, Las Vegas, San 

Diego, Los Angeles, and Honolulu, and involved guided tours, golfing, and other leisure activities.  

PTC-China sales staff usually accompanied the Chinese government officials on these trips.  The 

Chinese government officials who went on the trips in turn were often signatories on the purchase 

agreements with PTC.    

 

19. Examples of these overseas trips are described below: 

 

 In April 2008, six officials of an SOE (“SOE Customer A”) and a senior PTC-

China salesperson visited PTC’s Massachusetts office for a one-day meeting.  The 

PTC-China salesperson further arranged for a business partner to pay $51,495 for 

sightseeing visits to New York, Boston, Los Angeles and Honolulu for the Chinese 

government officials (and himself).  The ten day trip included lodging at five star 

hotels; tours of Rockefeller Center, the Statue of Liberty, the United Nations, and 

the Empire State Building, along with tickets to a professional basketball game 

while in New York; tours of MIT, Harvard, and Faneuil Hall while in Boston; a 



 

 6 

tour of the Grand Canyon while in Las Vegas; a city tour while in Los Angeles; and 

a city tour, a tour of Pearl Harbor, a visit to the Polynesian Cultural Center, golfing, 

and a sunset dinner cruise while in Honolulu.  As a result, during 2008, PTC and 

PTC-China received an improper benefit of at least three contracts, signed by PTC, 

worth $1.2 million, from SOE Customer A.     

 

 In December 2007, during contract negotiations with an SOE (“SOE Customer B”), 

a PTC-China employee agreed to provide its officials with over $84,000 for future 

overseas travel expenses.  The PTC-China employee emailed his supervisor at 

PTC-China the terms of a deal with SOE Customer B that included $84,429 for the 

overseas travel, which he initially recorded as “overseas training.”  Later, the PTC-

China employee disguised “overseas training” as COD costs, stating: “I replace the 

‘oversea training’ in the sheet to the ‘COD1’ ….  As you know, the customers just 

want sightseeing instead of oversea training.”  Subsequently, the PTC-China 

employee disguised the overseas travel costs as COD expenses in three deals, 

signed by PTC, worth nearly $1.7 million, with SOE Customer B. 

 

 PTC-China provided SOE Customer B with the agreed-upon overseas travel in 

2010, when it arranged for nine of its officials to visit PTC’s Massachusetts office 

for a one-day meeting.  PTC-China employees concurrently had a business partner 

provide these Chinese government officials with sightseeing visits to New York, 

Washington, D.C., Los Angeles, and Honolulu, including among the activities, 

tours of West Point Academy, Rockefeller Center, and the Statue of Liberty while 

in New York; Universal Studios while in Los Angeles; and Pearl Harbor while in 

Honolulu.  

 

 In December 2007, while negotiating a $3.4 million deal with an SOE (“SOE 

Customer C”), a PTC-China salesperson emailed his supervisors at PTC-China 

contract documents that included overseas travel expenses of $173,400.  In July 

2008, while negotiating a $1.2 million deal with SOE Customer C, another PTC-

China salesperson emailed the same supervisors contract documents that included 

overseas travel expenses of $104,000.  When completing both deals, PTC-China 

employees excluded the overseas travel expenses from the final contract documents 

that were signed by PTC and SOE Customer C.    

 

 PTC-China provided SOE Customer C with the agreed-upon overseas travel in May 

2010, when it arranged for five of its officials to visit PTC’s Massachusetts office 

for a one-day meeting.  PTC-China employees concurrently had a business partner 

provide these Chinese government officials with a sightseeing visit to New York, 

Las Vegas, and Los Angeles, including among other activities, tours of the United 

Nations, the Statue of Liberty, and West Point while in New York; the Grand 

Canyon while in Las Vegas; and Universal Studios while in Los Angeles.   

 



 

 7 

 In May 2010, a PTC-China salesperson accompanied two officials of an SOE 

(“SOE Customer D”) on a visit to PTC’s Massachusetts office for a one-day 

meeting.  PTC-China sales staff concurrently had a PTC-China business partner 

provide these Chinese government officials with sightseeing visits to New York, 

Boston, Atlanta, Las Vegas, and Los Angeles, including among other activities, 

tours of the Grand Canyon while in Las Vegas; Universal Studios while in Los 

Angeles; and shopping excursions.  In July 2010, another PTC-China salesperson 

accompanied seven officials of SOE Customer D on a second visit to PTC’s U.S. 

offices.  Once again, PTC-China sales staff had one of its business partners provide 

these Chinese government officials with sightseeing visits to New York, Boston, 

New London, Connecticut, Washington, D.C., Las Vegas, San Diego and Los 

Angeles, including among other activities, tours of Niagara Falls, the Statue of 

Liberty, the Empire State Building, and the Intrepid Sea, Air & Space Museum 

Complex while in New York; the Submarine Force Library & Museum while in 

New London; the Grand Canyon while in Las Vegas; Universal Studios while in 

Los Angeles; and shopping excursions.  These trips influenced SOE Customer D to 

purchase over $9 million of products from PTC and PTC-China.   

 

20. Overall, from 2006 into 2011, PTC-China, through its business partners, paid at 

least $1,179,912 to fund at least 10 trips for Chinese government officials that included significant 

non-business travel.  The costs of these trips were improperly recorded in PTC’s books and records 

as COD or business partner related commissions or subcontracting payments, without any 

indication that they were primarily for sightseeing and other non-business related activities.  PTC 

improperly profited by at least $11,858,000 from contracts obtained from the SOEs whose 

government officials participated on these trips. 

 

D. PTC-China Improperly Provided Officials of SOEs 

with Gifts and Excessive Entertainment____________  

 

21. From 2009 through 2011, PTC-China sales staff corruptly provided at least 

$274,313 in improper gifts and entertainment directly to Chinese government officials.  The value 

of the gifts and entertainment generally ranged from $50 to $600, and often included small 

electronics (e.g., cell phones, iPods, and GPS systems), gift cards, wine, and clothing.  PTC-China 

sales staff’s long standing practice of providing the gifts to Chinese government officials was done 

at least in part to obtain or retain SOE business. 

 

22.  By providing these gifts, PTC-China violated PTC’s corporate governance and 

internal controls policies.  These policies included: $50 monetary limits on the provision of gifts 

and business entertainment to government officials; requiring PTC-China sales staff to obtain pre-

approvals for business expenses over $500; and requiring that PTC-China sales staff document the 

date, place, attendees, and purpose of business entertainment and the recipient.  These gifts were 

improperly recorded as legitimate business expenses. 

 

 



 

 8 

E. PTC-China Failed to Devise and Maintain a System  

of Internal Accounting Controls ________________ 

 

23. From at least 2006 through 2011, PTC failed to devise and maintain an adequate 

internal accounting controls system to address the potential FCPA problems posed by its 

ownership of, and control over, PTC-China.  Notably, during 2006, 2008, and 2010, PTC 

investigated compliance issues at PTC-China, including possible corruption involving its business 

partners.  However, PTC failed to identify and stop the ongoing and systemic illicit payments to 

Chinese government officials by PTC-China personnel as described above and did not undertake 

effective remedial actions. 

 

24. Despite these compliance issues, PTC failed to undertake periodic comprehensive 

risk assessments for PTC-China and to ensure that its internal accounting controls procedures were 

suited to PTC-China’s particular circumstances (in particular, its ongoing dealings with Chinese 

government officials).  PTC’s Code of Ethics and Anti-Bribery policies for the provision of 

business entertainment were vague (i.e., stating that employees should use “good taste” and 

consider the “customary business standards in the community” when providing business 

entertainment) and not risk-based to China.  And PTC did not have independent compliance staff 

or an internal audit function that had authority to review and test its internal accounting controls 

processes or intervene into management decisions and, if appropriate, take remedial actions. 

 

25. As a result, PTC failed to identify and correct corporate governance and compliance 

breakdowns at PTC-China.  Notably, PTC failed to: properly vet PTC-China’s business partners, 

which played a significant role for PTC-China as described above; police for corrupt payments by 

its business partners; monitor and supervise PTC-China’s senior sales staff to ensure that they 

enforced anti-corruption policies and kept accurate records concerning gifts to Chinese government 

officials; properly scrutinize travel related expenses to prevent reimbursement for employees’ 

airfare, lodging, and other expenses that were either personal in nature or gifts for customers; limit 

the number or total value of gifts PTC-China’s sales staff could provide to any single individual or 

entity; and provide sufficient FCPA training for its employees.   

 

Legal Standards and Violations 

 

26. Under Section 21C(a) of the Exchange Act, the Commission may impose a cease-

and-desist order upon any person who is violating, has violated, or is about to violate any provision 

of the Exchange Act or any regulation thereunder, and upon any other person that is, was, or would 

be a cause of the violation, due to an act or omission the person knew or should have known would 

contribute to such violation. 

 

Violations of the Anti-Bribery Provisions of the FCPA 

 

27. Under Section 30A of the Exchange Act it is unlawful for any issuer, officer, 

director, employee, or agent of such issuer or any stockholder thereof acting on behalf of the issuer 

to make use of the mails or any means or instrumentality of interstate commerce corruptly in 



 

 9 

furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or 

offer, gift, promise to give, or authorization of the giving of anything of value to any foreign 

official or any person, while knowing that all or a portion of such money or thing of value will be 

offered, given, or promised, directly or indirectly, to any foreign official for the purposes of (i) 

influencing any act or decision of such foreign official in his official capacity, (ii) inducing such 

foreign official to do or omit to do any act in violation of the lawful duty of such official, or (iii) 

securing any improper advantage in order to assist such issuer in obtaining or retaining business for 

or with, or directing business to, any person.  [15 U.S.C. § 78dd-1]. 

 

28. PTC-China used third party business partners to pay bribes in the form of travel, 

gifts and entertainment to Chinese government officials to obtain and retain business.  PTC 

exercised substantial control over PTC-China by, among other things, creating functional reporting 

lines, approving PTC-China’s key decisions, and setting PTC-China’s business and financial goals.  

PTC entered into contracts directly with the SOEs as a result of the bribes paid through PTC-

China’s business partners, and earned significant income from these contracts.  Under applicable 

agency principles, PTC-China and its employees acted as agents of PTC during the relevant time 

and were acting within the scope of their authority and for the benefit of PTC when participating in 

the bribery scheme.   

 

Violations of the Recordkeeping and Internal  

Accounting Controls Provisions of the FCPA 

 

29. Section 13(b)(2)(A) of the Exchange Act requires reporting companies to make and 

keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the 

transactions and disposition of the assets of the issuer.  15 U.S.C. § 78m(b)(2)(A). 

 

30. Section 13(b)(2)(B) of the Exchange Act requires reporting companies to devise 

and maintain a system of internal accounting controls sufficient to provide reasonable assurances 

that the transactions: (i) are executed in accordance with management’s general or specific 

authorization; and (ii) are recorded as necessary to permit preparation of financial statements in 

conformity with generally accepted accounting principles (“GAAP”) or any other criteria 

applicable to such statements, and to maintain accountability for assets.  15 U.S.C. § 78m(b)(2)(B). 

 

31. PTC-China made payments, directly and indirectly, to Chinese government 

officials that were improperly recorded on its books and records as legitimate commissions and 

business expenses.  The books and records of PTC-China were consolidated into PTC’s books and 

records.  As a result of the misconduct of its China subsidiaries, PTC failed to make and keep 

books and records which, in reasonable detail, accurately and fairly reflected its transactions and 

the disposition of its assets as required by Section 13(b)(2)(A) of the Exchange Act.   

 

32. The improper payments by PTC-China described above took place over several 

years.  During the relevant period, PTC failed to implement an adequate system of internal 

controls, including an appropriate FCPA compliance and training program at PTC-China, which 

was commensurate with the risks of doing business in China, and particularly the risks of 



 

 10 

businesses that regularly sold products to SOEs.  Accordingly, in violation of Section 13(b)(2)(B) 

of the Exchange Act, PTC failed to devise and maintain a system of internal accounting controls 

sufficient to provide reasonable assurances that it maintained accountability for its assets, and that 

its transactions were executed in accordance with management’s authorization.   

 

PTC’s Self-Disclosure and Remedial Efforts 

 

33. PTC only discovered the improper payments to or for the benefit of Chinese 

government officials in 2011, while investigating complaints concerning a senior PTC-China 

salesperson.  Upon learning this information, PTC, with the oversight of the Audit Committee of 

the Board of Directors, engaged independent counsel and an independent forensic consulting firm 

to undertake an investigation.  PTC voluntarily self-reported the results of its internal investigation 

to the Commission and responded to information requests from the Commission staff.  PTC did 

not, however, uncover or disclose the full scope and extent of PTC-China’s FCPA issues until 

2014.     

 

34. As part of its internal review and investigation, PTC undertook significant remedial 

measures including terminating the senior staff at PTC-China implicated in the FCPA violations.  

PTC also revised its pre-existing compliance program, updated and enhanced its financial 

accounting controls and its compliance protocols and policies worldwide, and implemented 

additional specific enhancements in China.  These steps included:  (1) reviewing and enhancing its 

anti-bribery policy, code of ethics, and gifts and entertainment policies to correct previous 

deficiencies; (2) establishing a dedicated compliance team, including a chief compliance officer 

and a new compliance director in China; (3) expanding its other compliance resources in China, 

including hiring a new vice president of finance for Asia and adding additional legal staff in China; 

(4) hiring a new management team in China, including a new China President; (5) enhancing its 

FCPA training for employees; (6) severing its relationships with the business partners that were 

implicated in the FCPA violations and discontinuing the use of COD partners or business referral 

partners generally; (7) implementing a comprehensive due diligence program for all other business 

partners that includes a risk-scoring system operated by a third party vendor and that includes 

FCPA training as part of the onboarding process; (8) obtaining quarterly anti-corruption 

certifications from sales staff; and (9) undertaking periodic compliance audits.   

 

Non-Prosecution Agreement 

 

35. Respondent’s subsidiaries have entered into non-prosecution agreements that 

acknowledge responsibility for criminal conduct relating to the findings in the Order.  Specifically, 

Respondent’s subsidiaries acknowledge responsibility for violating Section 104A of the Foreign 

Corrupt Practices Act of 1977.  15 U.S.C. § 78dd-3.   

 

 

 

 

 



 

 11 

Non-Imposition of a Civil Penalty 

 

36. Respondent acknowledges that the Commission is not imposing a civil penalty 

based upon its payment of a $14,540,000 criminal fine as part of Respondent’s subsidiaries’ 

settlement with the United States Department of Justice.  

 

IV. 

 

 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 

agreed to in Respondent PTC’s Offer. 

 

 Accordingly, it is hereby ORDERED that: 

 

A. Pursuant to Section 21C of the Exchange Act, Respondent PTC cease and desist 

from committing or causing any violations and any future violations of Sections 30A, 13(b)(2)(A) 

and 13(b)(2)(B) of the Exchange Act.   

 

B. Respondent shall, within ten (10) days of the entry of this Order, pay disgorgement 

of $11,858,000, which represents profits gained as a result of the conduct described herein, and 

prejudgment interest of $1,764,000 to the Securities and Exchange Commission for transfer to the 

general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3).  If timely 

payment is not made, additional interest shall accrue pursuant to SEC Rule of Practice 600 and 31 

U.S.C. § 3717.  Payment must be made in one of the following ways:   

 

(1) Respondent may transmit payment electronically to the Commission, which will 

provide detailed ACH transfer/Fedwire instructions upon request;  

 

(2) Respondent may make direct payment from a bank account via Pay.gov through 

the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  

 

(3)  Respondent may pay by certified check, bank cashier’s check, or United States 

postal money order, made payable to the Securities and Exchange Commission and hand-

delivered or mailed to:  

 

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

 

Payments by check or money order must be accompanied by a cover letter identifying PTC 

as a Respondent in these proceedings, and the file number of these proceedings; a copy of the  

 

 



 

 12 

 

 

cover letter and check or money order must be sent to Paul G. Block, Assistant Director, Foreign 

Corrupt Practices Act Unit, Boston Regional Office, Securities and Exchange Commission, 33 

Arch Street, Suite 2300, Boston, Massachusetts 02110. 

 

 By the Commission. 

 

 

 

 

       Brent J. Fields 

       Secretary