Tenaris, S.A., a publicly traded corporation headquartered in Luxembourg with operations in 12 countries through 17 subsidiaries, today entered into separate agreements with the SEC Division of Enforcement and the DOJ’s Criminal Division for alleged violations of the Foreign Corrupt Practices Act (FCPA) and the Securities Exchange Act of 1934.  Although it must have been a bitter pill to swallow (totaling $9.9 million in disgorgement and criminal penalties), the company has agreed to provide full cooperation to the U.S. government in exchange for no criminal or civil sanctions.  From the attorney’s perspective, this case highlights the enormous tool-kit available to federal prosecutors across agencies, and the challenges facing companies who must negotiate with each of them in order to achieve the finality of a global settlement.       

The accusations against Tenaris, a manufacturer and supplier of steel pipe products and related services to the oil and gas industry, arise out of transactions in which one of its subsidiaries made payments to an Agent who was hired to secure government contracts with Uzbekistan for pipelines.  The DOJ and SEC allege that Tenaris knew that part of the money it paid to the Agent was going to Uzbekistani officials in order to obtain the bids of competitors so that Tenaris could revise its bids and thereby secure contracts.  In 2009, Tenaris disclosed a customer’s allegations regarding this bribery and the results of the company’s internal investigation to the DOJ and SEC. 

As this case shows, violations of international bribery can be punished by multiple U.S. agencies, and even when attempting to coordinate a defense, civil and criminal sanctions can result.  On its face, this type of bribery is most directly covered under the FCPA, which prohibits issuers such as Tenaris from making payments to foreign government officials to assist in obtaining or retaining business.  15 USC § 78dd-1 et seq. However, the FCPA also amended the Securities Exchange Act of 1934, requiring companies that are listed in the United States to meet its accounting provisions.  These accounting provisions require corporations to 1) keep books and records that fairly reflect the transactions of the corporation and 2) devise and maintain an adequate system of internal accounting controls. 

In this case, it appears that both the SEC and the DOJ wanted a piece of the pie, and the agencies each announced a separate resolution and fines on the very same day.  For the SEC, this resulted in a Deferred Prosecution Agreement, requiring the company for two years to continue its assistance with the SEC investigation, step up compliance, and pay disgorgement in the amount of $5,428,338.  The SEC promises, in turn, to not bring any enforcement action arising from the investigation.  As the SEC noted in its press release, this deferred sentencing agreement was the first of its kind, the result of its attempt to encourage companies to voluntarily disclose violations. 

The DOJ, which historically has had a difficult time bringing enforcement actions under the FCPA, particularly when targets must be extradited, got a sizeable concession from Tenaris.  For its part, it executed a Non-Prosecution Agreement with Tenaris, requiring that the company continue to cooperate with the DOJ, step up compliance, and pay a “substantially reduced monetary penalty” of $3,500,000. 

The timing of these agreements was essential.  It’s not clear how it turned out that both the SEC and DOJ entered into agreements with the company (whether the company insisted on it, or whether each agency wanted to take credit for the enforcement), but we do know that from the company’s perspective, it was absolutely necessary.  While it is difficult to resolve a case with two agencies at once, it is important that all parties are in accord, so that the penalties can be minimized and obligations streamlined.