A global steel pipe manufacturer agreed to pay the Securities and Exchange Commission (SEC) more than $78 million to settle charges that it broke the Foreign Corrupt Practices Act (FCPA) by paying more than $10 million in bribes to a Brazilian government official.
Tenaris, based in Luxembourg, is accused of paying an official at Brazil's state-owned entity Petrobras approximately $10.4 million through its Brazilian subsidiary Confab Industrial to gain a competitive advantage in a bidding process between 2008 and 2013, according to a press release issued by the SEC on Thursday.
The settlement marked the company's second violation of the FCPA. Tenaris settled charges related to bribes paid to government officials in Uzbekistan by entering into a nonprosecution agreement with the Department of Justice and a landmark deferred prosecution agreement (DPA) with the Securities and Exchange Commission in 2011.
Tenaris agreed to pay more than $78 million in disgorgement, prejudgment interest, and civil penalties on Thursday, without admitting or denying the SEC's findings. Tenaris also agreed to update the SEC every six months for the next two years on the status of its efforts to revamp and improve its anti-corruption policies and procedures.
"Tenaris failed for many years to implement sufficient internal accounting controls throughout its business operations despite known corruptions risks," said Charles Cain, chief of the SEC Enforcement Division's FCPA unit, in a press release. "This failure created the environment in which bribes were facilitated through a constellation of companies associated with its controlling shareholder."
The bribes were worth about 0.5 percent of Confab and Petrobras contracts, according to the SEC's order. Confab was the only local supplier after the government official used his clout to avoid an international tender process for certain pipes and tubes.
According to the SEC, the bribes were paid through a series of shell companies in Uruguay and Panama that were set up and funded by San Faustin, a Luxembourg-based limited liability company that controlled Techint Group, a conglomerate that owned over 60% of Tenaris' shares. San Faustin and Tenaris shared some officers and directors.
To hide the bribe payments, the Uruguayan and Panamanian companies signed fake contracts for purported past and future consultancy work, according to the SEC.
Tenaris "failed to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances to detect and prevent the payment of bribes and to adequately identify and disclose related party transactions," the SEC said in its order, despite known corruption risks in Brazil and Tenaris' previous DPA regarding bribes paid in Uzbekistan.
Tenaris "made and continues to make enhancements to its internal accounting controls; global compliance organization; and its policies and procedures regarding due diligence, use of third parties, and maintenance of adequate records," according to the settlement. According to the SEC, Tenaris established a code of conduct, an ethics code for senior financial officers, a business conduct policy and several related procedures, as well as regular anti-bribery and compliance training.
Tenaris also said it had terminated its commercial agents in Brazil and had drastically reduced its use of commercial agents globally.
Tenaris must track "the use of funds available to Tenaris’s officers, directors, employees, and/or agents as a result of their dual affiliation with Tenaris and San Faustin and related entities," according to the SEC. As part of the order, any additional "questionable or corrupt" payments discovered during that process must be immediately reported to the SEC.
The company stated that it voluntarily informed the SEC of the improper payments in 2016 and fully cooperated with the investigation. According to Tenaris, the Justice Department informed him that a parallel investigation into the matter had been closed without any action being taken.
In a statement, Tenaris said, "Tenaris and its affiliates are committed to transparency and integrity based on the highest ethical standards and strict compliance with the laws and regulations of all jurisdictions in which they operate."
By fLEXI tEAM