Ralph Lauren Corp. (RL), the retailer of its namesake brand clothing, will pay about $1.6 million to resolve U.S. regulatory and criminal claims that a subsidiary paid bribes to officials in Argentina from 2005 to 2009.
The apparel company reported violations of the Foreign Corrupt Practices Act to regulators after discovering it in a 2010 internal review, the Securities and Exchange Commission said today in a statement. New York-based Ralph Lauren signed a non-prosecution agreement to settle the cases.
Ralph Lauren agreed to pay $593,000 in disgorgement and $141,845.79 in prejudgment interest, the SEC said. The company will pay an $882,000 penalty in parallel criminal proceedings by the U.S. Justice Department, the SEC said.
“When they found a problem, Ralph Lauren Corporation did the right thing by immediately reporting it to the SEC and providing exceptional assistance in our investigation,” George Canellos, the SEC’s acting enforcement director, said in the statement. The settlement “makes clear that we will confer substantial and tangible benefits on companies that respond appropriately to violations and cooperate fully,” he said.
Ralph Lauren’s subsidiary RLC Argentina used a so-called customs broker to funnel about about $568,000 in bribes to ensure the clearance of prohibited goods, avoid inspections and to import certain items without the necessary paperwork, the SEC said.
To disguise the illegal payments, the customs broker submitted invoices to RLC Argentina with phony claims for “Loading and Delivery Expenses” and “Stamp Tax/Label Tax,” according to the agreement. In addition to the bribes, RLC Argentina’s general manager directly provided or authorized improper gifts to government officials including perfume, dresses and handbags valued valued from $400 to $14,000 each.
Under the criminal accord, the Justice Department won’t bring charges as long as Ralph Lauren cooperates with an ongoing investigation, implements certain compliance measures and makes periodic reports.
The company discovered the violations after disseminating a new FCPA compliance policy in February 2010, the SEC said. Later that year, RLC Argentina employees reviewed the policy and raised concerns about the customs broker’s work. Within two weeks of uncovering the payments and gifts, RLC reported its preliminary findings to both the SEC and Justice Department.
“Ralph Lauren did all the right things in this situation: we investigated, reported, cooperated with authorities, conducted a worldwide assessment and implemented a series of remedial measures,” Tom Hanusik, the company’s attorney at Crowell & Moring LLP, said in an interview. “The unprecedented use of non-prosecution agreements by both agencies reflects that.”
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