Watts Water Technologies Sues Sidley Austin LLP for Malpractice Arising out of Alleged Failure to Reveal Chinese Target Company’s Written “Kickback” Policy

In 2002, Watts Water Technologies, Inc. (Watts) retained global law firm Sidley Austin, LLP (Sidley) to advise it in connection with its operations in the People’s Republic of China (PRC).  From 2004 to 2005, Sidley conducted due diligence on a company Watts proposed to acquire in the PRC.  Sidley did not raise any red flags about FCPA compliance.  After the acquisition, Watts learned that the acquired company’s sales policies violated the FCPA.  Watts self-reported the problem to the DOJ and the SEC.  See “When and How Should Companies Self-Report FCPA Violations? (Part Two of Two),” above, in this issue of the Anti-Corruption Report.  It eventually consented to the entry of a cease-and-desist order by the SEC, whereby it disgorged $3.57 million in profit and paid a $200,000 fine.  Watts has now sued Sidley for malpractice, claiming that Sidley neglected to tell Watts of the target’s written “kickback” policy that Sidley had received during due diligence.  This article details the factual allegations and legal claims in Watts’ Complaint.

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