Earlier this week, LATAM / LAN airlines, a Chilean company, paid the U.S. government $22 million in an FCPA enforcement action related to an Argentine labor dispute.
The FCPA enforcement action against LATAM / LAN airlines was an extension of the February 2016 enforcement action against current LATAM CEO Ignacio Plaza.
The enforcement action is interesting for a few reasons:
The initial violation occurred 10 years ago on foreign soil.
There were no actual anti-bribery charges. Rather, the charges were for violations of the FCPA's books and records and internal controls provisions - provisions applicable to the Chilean company because it has shares traded on a U.S. exchange.
With those factors in mind, here are the key takeaways:
Foreign companies can be charged even in the absence of bribery. The U.S. government will not hesitate to bring an FCPA enforcement action against a foreign company, even in the absence of provable bribery, if the company misrecorded certain payments and the payments were made in a lax control environment.
The enforcement action involved a failure of third party due diligence. The DOJ and SEC took issue with the control environment at LAN - specifically as it related to its third party due diligence and other compliance (or lack thereof) practices.
In the words of the DOJ:
"LAN had deficient internal accounting controls that did not require, among other things, (a) due diligence for the retention of third party consultants; (b) a fully executed contract with a third party before payment could be made to it; (c) invoices issued to the LAN entity that in fact engaged the third party; (d) documentation or other proof that services had been rendered by a third party before payment could be made to it; (e) that payment to third parties retained by LAN or LAN entities be made to bank accounts held in the names of those third parties; or (f) oversight of the payment process to ensure that payments were made pursuant to appropriate controls, including those described above."
Read more about this enforcement action on the FCPA Professor Blog.
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