SEC Precedent: Uses Deferred Prosecution Agreement to Settle Enforcement Action
On May 17, 2011, the Securities and Exchange Commission (SEC) announced that it had entered into a Deferred Prosecution Agreement (DPA) in an FCPA settlement with Tenaris S.A., a global manufacturer of steel pipe products and related services to the oil and gas industry. This represents the first instance of the SEC using a DPA to settle an enforcement action.
The SEC’s agreement with Tenaris relates to allegations that Tenaris bribed Uzbekistan government officials during a bidding process to supply pipelines for transporting oil and natural gas. Specifically, according to the DPA, it was alleged that Tenaris bid on a series of contracts in 2006 and 2007 and, through an agent, bribed employees of a subsidiary of an Uzbek state company (and therefore “foreign officials,” as alleged by the SEC) to gain access to confidential bids by competitors Tenaris then allegedly used the confidential information to revise its own bids, and, as a result, was awarded several contracts worth almost $5 million in profits by the subsidiary of an Uzbek state company. Under the terms of the DPA, Tenaris must pay $5.4 million in disgorgement and prejudgment interest.
The SEC release noted that, when Tenaris conducted a global internal review of its operations and controls, it discovered FCPA violations by personnel in Uzbekistan and informed the SEC. According to the SEC release, in response to its findings, Tenaris reviewed its controls and compliance measures and significantly enhanced its anti-corruption policies and practices. In a parallel enforcement action, Tenaris also agreed to pay a $3.5 million criminal penalty to the Department of Justice.
Regarding the settlement, Robert Khuzami, Director of the SEC’s Division of Enforcement, noted Tenaris’s “immediate self-reporting, thorough internal investigation, full cooperation with SEC staff, enhanced anti-corruption procedures, and enhanced training made it an appropriate candidate for the Enforcement Division’s first Deferred Prosecution Agreement.”
Under the terms of the DPA, the SEC will refrain from prosecuting Tenaris if, among other things, the company enhances its policies and controls related to anti-corruption compliance, implements due diligence requirements related to the retention and payment of agents, and provides detailed anti-corruption training.
Attachments: