Regulatory: SEC enters into its first NPA for FCPA violations

The NPA with Ralph Lauren provides valuable guidance

The Foreign Corrupt Practices Act (FCPA) has been a focus of federal regulation and enforcement. The Securities and Exchange Commission (SEC) recently entered into its first nonprosecution agreement (NPA) for FCPA violations. This NPA reinforces the importance of strong compliance programs and provides important guidance.

On April 22, the SEC announced it had entered into a NPA with Ralph Lauren Corp. in connection with certain unlawful payments made by a foreign subsidiary to government officials in Argentina from 2005 to 2009. According to the NPA, the corporation’s Argentine subsidiary paid “bribes” in violation of the FCPA to government and customs officials to improperly secure the importation of the corporation's products into Argentina. The unlawful payments were made through a “customs broker” and totaled $593,000.

The NPA provides several other takeaways. First, Ralph Lauren agreed to enter into the NPA “without admitting or denying liability.” The inclusion of this language seems to run counter to the policy the Enforcement Division announced in January 2012 to eliminate the use of “neither admit nor deny” language from settlement documents involving parallel criminal convictions, NPAs or DPAs. This may suggest that the language remains negotiable. 

Second, under the agreement, Ralph Lauren must seek the staff’s prior approval of any press release concerning the NPA. Third, the corporation has ceased retail operations in Argentina and is winding down all operations there, which may have been a significant factor in the SEC’s decision to use a NPA. Fourth, notably, the NPA does not require Ralph Lauren to retain an independent consultant to review its policies and procedures and to prepare a report to the staff regarding any findings. The financial burden of independent consultant reviews is often significant. The staff’s willingness to forego such an undertaking demonstrates the value of taking quick and full remedial action during an investigation. 

Contributing Author

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Mary P. Hansen

Mary Hansen is a partner on the Drinker Biddle's White Collar Criminal Defense & Corporate Investigations team, where she focuses her practice on defending clients...

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