Earlier posts, here, here and here, discussed the announced intention of the Securities and Exchange Commission to newly employ prosecutorial-type devices in an effort to bring a greater number of enforcement actions. One such tool, the deferred prosecution agreement, or DPA, has long been used by U.S. Attorney’s Offices to bring corporate targets into compliance with law and emplace a system within the corporation to ensure continued compliance.
On May 17th, the SEC announced that it had executed its very first DPA, with Tenaris S.A. Tenaris, a manufacturer of piping used in the energy industry, had apparently paid off Uzbekistani officials in order to win multiple government contracts to supply oilfield equipment. Although the DPA was entered into as part of a no-admission settlement, in which Tenaris disgorged nearly $5 million in profits on the contracts obtained through bribery, the DPA contained a length factual statement by the SEC of the offense and the corrupted contract bidding process. In nearly thirty paragraphs, the DPA set forth in indictment-like terms the series of communications, secret arrangements, and illegal payments by which Tenaris obtained information about others’ supposedly secret bids and its own resulting lowest bids, enabling the company to secure a series of lucrative contracts.
Tenaris agreed in the DPA not to publicly dispute the accuracy of those facts; to cooperate with the SEC and encourage current and former officers and employees to also cooperate; and to enforce newly-strengthened internal codes of conduct. Interestingly, the SEC did not require -- as many prosecutors’ offices have required -- the corporation to have segments of its activities overseen by a third-party monitor. This omission may have been due to the relatively isolated nature of the misconduct within this global entity and the self-reporting of that activity by Tenaris to the SEC and Department of Justice.