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Apparel Company Fined $1.6 Million for Customs Bribery in Argentina

Tuesday, April 23, 2013
By Shawn McCausland
Sandler, Travis & Rosenberg Trade Report

A New York-based apparel company will pay a total of $1.6 million to settle charges that it violated the Foreign Corrupt Practices Act, the Department of Justice and the Securities and Exchange Commission announced April 22. This amount includes an $882,000 penalty paid to the DOJ and $734,846 in disgorgement and prejudgment interest paid to the SEC.

According to a DOJ press release, the company was charged with bribing government officials in Argentina to improperly obtain paperwork necessary for goods to clear customs, permit clearance of items without the necessary paperwork and/or the clearance of prohibited items, and on occasion to avoid inspection entirely. An employee of the company disguised the payments by funneling them through a customs clearance agency, which created fake invoices to justify the payments. The DOJ adds that during the five years in which these activities were taking place the company did not provide any anti-corruption training or oversight with respect to its subsidiary in Argentina.

Both the DOJ and the SEC entered non-prosecution agreements with the company, including the SEC’s first-ever NPA involving FCPA misconduct. These NPAs will require the company to report periodically concerning its compliance efforts and continue to implement an enhanced compliance program and internal controls designed to prevent and detect FCPA violations. Both agencies state that the agreements acknowledge the company’s extensive, thorough and timely cooperation, including prompt self-disclosure of the misconduct, voluntary document disclosures, conducting a worldwide risk assessment, and making multiple presentations on the status and findings of its internal investigation and risk assessment. The company has also engaged in extensive remediation, including conducting FCPA training for employees worldwide, implementing an enhanced gift policy and other enhanced compliance, control and anti-corruption policies and procedures, enhancing its due diligence protocol for third-party agents, terminating culpable employees and a third-party agent, instituting a whistleblower hotline, and hiring a designated corporate compliance attorney.     

The SEC states that the misconduct came to light as a result of the company adopting measures to improve its worldwide internal controls and compliance efforts, including implementation of an FCPA compliance training program in Argentina. “When they found a problem, [the company] did the right thing by immediately reporting it to the SEC and providing exceptional assistance in our investigation," said George S. Canellos, acting director of the SEC's Division of Enforcement. “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.”

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