Manufacturer of Steel Pipe Products Pays $5.4 Million in Fines for Alleged Violation of FCPA

Tenaris S.A., global manufacturer of steel pipe products in the oil and gas industry, entered into a Deferred Prosecution Agreement (DPA) with the Securities and Exchange Commission (SEC), whose terms include payment of $5.4 million in disgorgement and prejudgment interest for violations of the Foreign Corrupt Practice Act (FCPA). The SEC alleges that Tenaris’ employees located in Uzbekistan bribed Uzbekistan government officials during a bidding process in 2006 and 2007 to supply pipelines for transporting oil and natural gas. According to the DPA, the SEC alleges that the company used confidential information gained from the bribed officials to revise its own bids to ensure that Tenaris made the best bid, thereby guaranteeing that the Uzbekistan government awarded the contracts to Tenaris. According to the DPA, Tenaris earned close to $5 million in profits for these contracts.

Tenaris discovered the FCPA violations by Uzbekistan personnel during an in-house worldwide review of its operations and controls. The company immediately self-reported to SEC, permitting the company to participate in the first Deferred Prosecution Agreement. Robert Khuzami, Director of the SEC’s Enforcement Division stated:

The Tenaris foreign bribery scheme was unacceptable and unlawful, but the company’s response demonstrated high levels of corporate accountability and cooperation. . . . Effective enforcement of the securities laws includes acknowledging and providing credit to those who fully and completely support our investigation and who display an exemplary commitment to compliance, cooperation, and remediation.

Under the terms of the DPA, the SEC will not prosecute the company for FCPA violations provided that Tenaris enhances its FCPA and anti-corruption policies and procedures. Specifically, the company must:

• implement due diligence requirements when retaining and paying agents;
• train employees on FCPA and anti-corruption laws
• require certification of compliance; and
• report any complaints, charges or convictions against Tenaris or its employees for any anti-bribery or SEC violations.

Tenaris is incorporated in Luxembourg and its American Depositary Receipts (TS) are listed on the New York Stock Exchange. This is another example of how a non-U.S. company must ensure that it has procedures in place to comply with the U.S.’s FCPA.