Cisco Systems Discloses Possible Embezzlement Scheme at Its China Operations

By Dylan Tokar 

Cisco Systems Inc. is investigating an alleged embezzlement scheme by former employees in China that may have involved payments to Chinese state-owned firms, the company said.

The networking-equipment firm voluntarily disclosed the matter to the U.S. Department of Justice and U.S. Securities and Exchange Commission, Cisco said in a 10-Q filing to the SEC on Tuesday.

The San Jose, Calif.-based company said the investigation was focused on allegations of a "self-enrichment" scheme involving employees in China who have since left the company. Some of the employees are alleged to have made payments to various third parties, including employees of state-owned enterprises, Cisco said.

The U.S. Foreign Corrupt Practices Act, an antibribery law, prohibits U.S.-linked companies from making payments to foreign public officials to obtain any business advantage. Under the law, public officials can include employees of state-owned enterprises, which are prevalent in China.

In a statement Wednesday, a Cisco spokesman said the company takes such allegations seriously and expects employees to adhere to local and national laws and high ethical standards. He declined to comment further on the investigation, but said Cisco didn't expect it to have a material adverse effect on its consolidated financial position.

China's antitrust regulator this year approved a deal negotiated by Cisco to acquire Acacia Communications Inc., a Maynard, Mass.-based competitor. The regulator outlined several conditions to the deal, including ones that require Cisco to fulfill existing contracts with Chinese clients and keep commercial terms unchanged.

Write to Dylan Tokar at [e-mail]

(END) Dow Jones Newswires

February 17, 2021 12:35 ET (17:35 GMT)

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