During the time that Ralph Lauren Corporation was paying bribes in Argentina, it “did not have an anti-corruption program and did not provide any anti-corruption training or oversight with respect to” its Argentine subsidiary.
That’s according to a statement of facts embedded in one of two non prosecution agreements the company cut last month with the federal government — one with the Justice Department and the other with the Securities and Exchange Commission.
And at the Corporate Crime Reporter conference last week, on a panel on corporate monitors, the question was raised — how is it that a company with no anti-corruption program gets to settle the case without having a monitor appointed?
Participating on the panel were Dan Newcomb of Shearman & Sterling, George Stamboulidis of Baker Hostetler, Gil Soffer of Katten Muchin, Joseph Warin of Gibson Dunn, and John Buretta, chief of staff of the Criminal Division at the Department.
The panel was moderated by Shirah Neiman of SN Compliance.
“I want to ask the panel — Ralph Lauren just came up,” Newcomb said. “FCPA prosecution for customs violations in Argentina. As I read the papers, a non prosecution agreement from a voluntary disclosure. Not a lot of money. But no compliance program at all. And no monitor.”
“They didn’t have a compliance program?” asked Neiman.
“As I read the papers, they didn’t have a compliance program. and they don’t get a monitor,” Newcomb said. “I’m not that good. I don’t know how they –”
“One of our prior panelists, Tom Hanusik (partner at Crowell & Moring and the attorney who represented Ralph Lauren in the case) apparently was that good,” said Stamboulidis. “I don’t know that it’s so that they had no compliance program. But some of the reporting indicates it was woefully inadequate.”
“I’ll take the amendment,” Newcomb said. “But how do you get away — this is the punching bag question. How do you get away with that? I have a bunch of clients who would like to get that result.”
“Without getting into the specific details of Ralph Lauren, I’ll give you a couple of what I think are helpful observations,” Buretta said.
“One question is — if there are compliance issues, are they isolated to a specific country or even a business unit operating in that country, as opposed to how the controls operate worldwide, particularly when you have a global company?”
“Secondly, insofar as there were fundamental issues with a particular company with a unit, or more broadly, what did the company do to remediate before we got to the point of having to decide what is the appropriate resolution here?”
“When you look at cases of the magnitude, or lack of magnitude in terms of the scope of the misconduct, the level of bribery that may have been engaged in or attempted, and what benefits were obtained or not, as a result of that, both in terms of tangible and sometimes intangible financial benefit to the company, there are just a host of factors that can go into deciding whether, even in a situation where there is a lack of internal controls, perhaps in an isolated business unit, that perhaps is small and didn’t have what one would, in the grand scheme of Foreign Corrupt Practices Act (FCPA) enforcement cases, consider as a really significant issue in the grand scheme, then you could start to think about how, in some of those situations, it might be the case, given remediation and other important factors, you might end up concluding that we don’t here need a monitor, given that the Morford Memo always reminds us to think about the cost of the monitor and the impact on the corporation, especially if they have fixed the problem fundamentally by the time you are having those discussions.”
“I do remember that Lauren left Argentina lock stock and barrel,” Neiman said.
“That’s one way to solve the monitor problem — nothing left to monitor,” Newcomb added.
“It’s actually striking,” Buretta said. “When you go back and read the Morford Memo, it talks about things, including this precise issue. It may be a really important factor that they closed shop. It’s spelled out specifically in the memo.”