For the first time, the SEC has entered into a Non-Prosecution Agreement (NPA) with a company relating to misconduct under the Foreign Corrupt Practices Act (FCPA). The SEC decided not to prosecute Ralph Lauren Corporation (RLC) for violations of the FCPA as a result of the company’s cooperation with the SEC’s enforcement division during the investigation as part of the SEC’s Enforcement Cooperation Initiative. Announced in 2010, the initiative is designed to reward companies that come forward to report legal violations and cooperate with the SEC during the ensuing investigations.
While RLC was in the process of implementing a global compliance program, including FCPA compliance training, it discovered that company representatives had paid about $592,000 in bribes and gifts to government officials in Argentina over a four year period in order to ease regulatory requirements relating to the entry of RLC products into Argentina.
After discovering the violations, RLC reported them to the SEC and took steps to cooperate in the SEC investigation, including by:
- Reporting preliminary findings of its internal investigation to the SEC within two weeks of discovering the illegal payments and gifts
- Voluntarily and expeditiously producing documents
- Providing English translations of documents
- Summarizing overseas witness interviews that the company’s investigators conducted
- Making overseas witnesses available for interviews and bringing overseas witnesses to the U.S.
After the investigation, RLC took a number of remedial measures:
- New compliance training
- Termination of employment and business arrangements with all individuals involved in the wrongdoing
- Strengthening internal controls and procedures for third party due diligence
- Conducting a worldwide risk assessment to identify any other compliance problems
The SEC’s enforcement division is clearly using the NPA with RLC as an opportunity to do some cheerleading for the Enforcement Cooperation Initiative. An excerpt from the press release announcing the NPA:
“When they found a problem, Ralph Lauren Corporation did the right thing by immediately reporting it to the SEC and providing exceptional assistance in our investigation,” said George S. Canellos, Acting Director of the SEC’s Division of Enforcement. “The NPA in this matter makes clear that we will confer substantial and tangible benefits on companies that respond appropriately to violations and cooperate fully with the SEC.”
As a result of the NPA, RLC will pay $593,000 in disgorgement and $141,845.79 in prejudgment interest. Pursuant to a corresponding criminal NPA, RLC has agreed to pay a penalty of $882,000.
Check dodd-frank.com frequently for updated information on the Dodd-Frank Act, the JOBS Act, and other important securities law matters.