Much of the coverage of the recent Foreign Corrupt Practices Act case against Ralph Lauren Corp. (RLC) focused on the fact that both the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) awarded it a Non-Prosecution Agreement (NPA) due to its prompt voluntary disclosure and subsequent cooperation. The facts of the case, however, point to the steady entrenchment of a more ominous prosecution theory: an approach that appears to approximate strict criminal and civil liability of parent corporations for their subsidiaries’ corrupt acts. Although this disregard of corporate structures has been hinted at in previous SEC matters—and the theoretical underpinnings discussed in last year’s DOJ/SEC Resource Guide—the RLC case puts both agencies firmly in the camp of this aggressive and unprecedented expansion of corporate liability.
Background -
On April 22, 2013, the DOJ and the SEC simultaneously announced that they had concluded their investigations of RLC and resolved the matters through NPAs. In the NPAs, the agencies alleged (and in the DOJ NPA, RLC admitted) that RLC’s Argentine subsidiary paid bribes to customs officials to clear goods through customs that either lacked the proper paperwork or were outright prohibited by Argentine law. Pursuant to the NPAs, RLC agreed to pay a criminal fine of $882,000 and disgorgement and pre-judgment interest of $734,846, toll the criminal and civil statutes of limitations, and submit periodic self-monitoring reports. According to the agencies’ pleadings, all of the bribes were authorized by RLC Argentina’s general manager and spanned a four-year period. Both agencies characterized the general manager as RLC’s ‘‘agent,’’ apparently based solely on his position as general manager of the subsidiary and the fact that RLC had appointed him to that position. Neither agency included any allegation of any authorization, direction, or control by RLC of its subsidiary’s corrupt conduct, or even its knowledge of such conduct.
Originally published in Securities Regulation & Law Report, 45 SRLR 835, 05/06/2013.
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