Back in January 2010, the SEC announced that it was launching several new "game-changing" initiatives aimed at encouraging greater cooperation from individuals and companies in the agency's investigations and enforcement actions. The new cooperation tools included Deferred Prosecution Agreements, a commonly used tactic in criminal prosecutions. As defined by the SEC, DPAs are "formal written agreements in which the Commission agrees to forego an enforcement action against a cooperator if the individual or company agrees, among other things, to cooperate fully and truthfully and to comply with express prohibitions and undertakings during a period of deferred prosecution."
It took almost a year and a half, but yesterday the SEC entered into its first-ever DPA with Tenaris S.A. as the result of the SEC's allegations that Tenaris, a manufacturer of steel pipe products, violated the FCPA by bribing Uzbekistan government officials. The SEC claims that the bribes helped Tenaris make almost $5 million in profits when it was subsequently awarded several contracts by the Uzbekistan government.
The SEC announced yesterday that under the terms of the DPA with Tenaris, the company will pay $5.4 million in disgorgement and prejudgment interest. Tenaris will separately pay a $3.5 million criminal penalty in a Non-Prosecution Agreement announced the same day by the DOJ. In addition, Tenaris conducted a review of its controls and compliance measures and "significantly enhanced its anti-corruption policies and practices."
The use of the DPA is novel because it means that, contrary to its typical practice, the SEC will not file a civil lawsuit against Tenaris with regard to its bribery allegations if Tenaris complies with certain undertakings, including:
- enhancing its policies, procedures, and controls to strengthen compliance with the FCPA and anti-corruption practices;
- implementing due diligence requirements related to the retention and payment of agents;
- providing detailed training on the FCPA and other anti-corruption laws;
- requiring certification of compliance with anti-corruption policies;
- and notifying the SEC of any complaints, charges, or convictions against Tenaris or its employees related to violations of any anti-bribery or securities laws.
Richard Cassin, who writes the FCPA Blog, believes that the Tenaris case is a "game-changer." He said it shows that "instead of being a somewhat passive or reactive regulator, the [SEC] now wants companies to come in as soon as they learn about securities law violations, including FCPA problems."
Mike Koehler, aka the "FCPA Professor," wrote today that the Tenaris DPA was "a troubling development on many fronts," as the "SEC's enforcement of the FCPA will now be even further removed from judicial scrutiny and resolutions will now more frequently be negotiated over private conference room tables."