On April 22, 2013, the SEC announced that it had entered into a non-prosecution agreement (NPA) with Ralph Lauren Corporation (RLC), allowing RLC to avoid prosecution for violations of the Foreign Corrupt Practices Act (FCPA). This is the first NPA the SEC has entered involving FCPA violations.
From 2005 to 2009, RLC’s Argentine subsidiary paid bribes to Argentinian government officials, resulting in more than $700,000 in illicit profits and interest. The illicit activities were uncovered by RLC when the company undertook an internal review to improve its worldwide internal controls and compliance efforts, including implementing an FCPA compliance training program in Argentina.
As noted in its press release, the SEC considered the following in deciding not to charge RLC with violating the FCPA:
- Prompt reporting of the violations at the company’s own initiative;
- The completeness of information provided by the company; and
- The company’s extensive, thorough and real-time cooperation with the SEC’s investigation, which included voluntarily and expeditiously producing documents, providing English language translations of documents to the staff and making overseas witnesses available for staff interviews in the U.S.
The SEC also took into account significant remedial measures undertaken by RLC, including implementing new compliance programs and compliance training, terminating all individuals and businesses involved in the wrongdoing, and strengthening its procedure for third-party due diligence.
The NPA requires RLC to cooperate with the SEC during its investigation and subsequent proceedings, including utilizing its “best efforts” to secure full, truthful and continuing cooperation of current and former directors, officers, employees and agents. RLC also agreed to pay $593,000 in disgorgement and $141,845.79 in prejudgment interest. In a separate criminal proceeding, the Department of Justice also entered into an NPA with RLC under which RLC agreed to pay $882,000 in penalties.
This case provides a roadmap to pursuing NPAs with the SEC and a valuable lesson on proactively implementing a compliance program. Companies that commit the proper time and resources to creating a robust internal compliance policy and training program can quickly and efficiently detect and address allegations of corruption and will be better positioned to weigh their options, including whether to self-report potential FCPA violations.
While self-reporting is not guaranteed to lead to an NPA, George Canellos, acting director of the SEC’s Division of Enforcement, notes, “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.”