Tenaris Pays SEC $78 Million to Resolve FCPA Violations
The SEC announced another FCPA settlement in 2022. FCPA enforcement, in general, is picking up.
Tenaris, a global supplier of steel pipes and related services for the energy industry, agreed to pay the SEC $78 million to resolve FCPA violations. The US Department of Justice closed its investigation without bringing charges.
The resolution of Tenaris’ case is interesting because of Tenaris’ recidivist status. In 2011, Tenaris earned a non-prosecution agreement with DOJ and a deferred prosecution agreement with the SEC arising from bribes paid in Uzbekistan. Notwithstanding this prior enforcement case, Tenaris was able to dodge a DOJ enforcement action by stressing the remediation efforts it has made to its compliance program. The SEC’s resolution includes stringent reporting requirements over the next two years.
Between 2008 and 2013, Tenaris paid bribes in Brazil to Petrobras through a long-time agent of its Brazil subsidiary in exchange for Petrobras forgoing a tender process for certain contracts for steel pipes and tubes. Tenaris’ paid bribes to a high-ranking manager at Petrobras who was responsible for supply procurement and tender. The Petrobras official was charged in Brazil and plead guilty to corruption-related offenses.
The bribery arrangement permitted Tenaris’ Brazil subsidiary to remain the sole domestic supplier and allow direct negotiations between Petrobras and Tenaris. As the sole supplier, Tenaris earned additional revenue and profits. In total, Tenaris paid approximately $10.4 million in bribes.
To conceal the bribery payments, the Petrobras official recruited an associate to assist him in disguising the payments. The associate formed a company in Uruguay, which was a shell company, and opened a bank account in the company’s name. The bribery payments to the Petrobras official were coordinated through this bank account.
The payments were initially sourced through an offshore company, which itself was funded by payments from a Tenaris parent company in Luxembourg and Tenaris. The money then was transferred among various offshore and related companies which were controlled by Tenaris, including a related account in Panama.
The bribery payments were supported by fake contracts for consulting and advisory services between the Uruguayan and Panamanian companies. Additional bribery payments were made through similar multi-level and complex schemes.
The Petrobras official used the bribery proceeds for various purposes including the purchase of real estate and artwork.
Tenaris’ Brazil subsidiary failed to maintain adequate accounting controls to ensure accuracy of its books and records. The subsidiary’s books and records were consolidated into Tenaris’ books and records for purposes of SEC filings and reports.
Tenaris’ $78 million payment consists of disgorgement, prejudgment interest and civil penalties.
The SEC credited Tenaris’ cooperation and remedial efforts. Tenaris provided translated copies of various documents and relevant witness testimony and encouraged parties outside the SEC’s subpoena authority to cooperate.
Tenaris’ remedial efforts includes enhancement of its internal accounting controls, global compliance organization and its policies and procedures concerning due diligence, use of third parties and maintenance of adequate records.
Further, Tenaris terminated its commercial agents in Brazil and reduced its commercial agents worldwide. Tenaris implemented a Code of Conduct, a Code of Ethics for Senior Financial Officers , a Business Conduct Policy and conducts regular anti-bribery and compliance training.
As part of the settlement, Tenaris agreed to robust reporting obligations over a two-year period. At the end of its reporting obligations, Tenaris must submit a certification of compliance.