- SEC and DOJ Resolve Parallel FCPA Investigations through Dual Non-Prosecution Agreements
- April 25, 2013 | Authors: Kit Addleman; Emily Westridge Black; Ronald W. Breaux
- Law Firm: Haynes and Boone, LLP - Dallas Office
This week, the Ralph Lauren Corporation became the first company to obtain a non-prosecution agreement from the Securities and Exchange Commission in connection with a Foreign Corrupt Practices Act (“FCPA”) investigation. Ralph Lauren also obtained a non-prosecution agreement from the Department of Justice in connection with its investigation of the same FCPA violations. Pursuant to the non-prosecution agreements, the Ralph Lauren Corporation agreed to pay the DOJ a criminal fine of $882,000 and pay the SEC nearly $735,000 in disgorgement and prejudgment interest. This case is a significant development in the SEC’s cooperation initiative and in its FCPA enforcement program. Moreover, this case has more general significance because it is only the second time that the DOJ and the SEC have used pre-trial agreements to resolve parallel actions of any kind.
According to the SEC’s press release, the Ralph Lauren Corporation, a New York based clothing company, implemented an “enhanced [FCPA] compliance program” in 2010 and began training its employees on FCPA compliance. During the course of its training, the company discovered that its Argentinian subsidiary paid $593,000 in bribes over four years to government and customs officials to secure the importation of its products into Argentina (often without required inspections or paperwork). The company promptly undertook an investigation of the improper payments and gifts, and reported its preliminary findings to the SEC and the DOJ within two weeks of discovering the misconduct.
The SEC’s decision to resolve the matter through a non-prosecution agreement was based upon “the company’s prompt reporting of the violations on its own initiative, the completeness of the information it provided, and its extensive, thorough, and real-time cooperation with the SEC’s investigation.” The cooperation included voluntarily and promptly producing documents (including English translations), providing summaries of interviews of foreign witnesses, and bringing foreign witnesses to the United States for staff interviews. The SEC also considered the Ralph Lauren Corporation’s extensive remedial efforts, which included conducting additional compliance training, creating a whistleblower hotline, terminating all individuals involved in the misconduct, strengthening internal controls, and improving third party due diligence. The DOJ stated that these same considerations underpinned its non-prosecution agreement.
The SEC announced that it would begin using deferred prosecution and non-prosecution agreements in 2010 as part of its Cooperation Initiative. However, as described above, this is the first time that the SEC has used a non-prosecution agreement to resolve an FCPA matter. In fact, it is only the fourth time that the SEC has resolved a matter of any kind with a non-prosecution agreement. Prior to 2010, pre-trial agreements were commonly used by the DOJ, but not the SEC. The Acting Director of the SEC’s Division of Enforcement, George S. Canellos, noted that the use of the non-prosecution agreement in this matter “makes clear that [the SEC] will confer substantial and tangible benefits on companies that respond appropriately to violations and cooperate fully with the SEC.”