LAN Airlines S.A. (“LAN”) was, until 2012, a Chilean airline company that provided passenger and cargo transportation throughout Latin America, as well as to the United States, Europe, and Australia. Until 2012, LAN's shares were registered with the SEC and traded on the New York Stock Exchange ("NYSE"). ln June 2012, LAN merged with Brazilian ariline TAM S.A., and the merged company became LATAM Airlines Group S.A., incorporated and headquartered in Chile. After the merger, LATAM's shares were registered with the SEC and traded on the NYSE.
In September and October of 2006, executives at LAN, including Ignacio Cueto Plaza, executed a fictitious $1.15 million consulting agreement with an advisor to the Secretary of Argentina’s Ministry of Transportation. Although the agreement purportedly required the consultant to undertake a study of Argentine airline routes, the consultant never provided any such services. Instead, the consultant funneled the money he received pursuant to the contract to Argentine labor union officials in exchange for the union agreeing to accept lower wages and to not enforce what would have been a costly labor rule. In total, LAN profited by more than $6.7 million as a result of the bribes paid to the union officials.
In an administrative proceeding on July 25, 2016, the SEC issued a settled cease and desist order against LAN alleging violations of the books & records and internal controls provisions of the FCPA. Under the terms of the order, the SEC ordered LAN to cease and desist from violations of the FCPA, to pay disgorgement of $6,743,932 plus prejudgment interest of $2,693,856, and to retain an indpendent corporate compliance monitor for a term of 27 months. The SEC opted not to impose a civil fine in light of the DOJ's imposition of a $12.75 million criminal fine in a related proceeding. In accepting the terms of the settled cease and desist order, the SEC noted LAN and LATAM's remedial measures, including the hiring of new compliance staff, the implementation of enhanced anti-corruption compliance policies and procedures, and mandatory annual training for employees on those compliance polices and procedures. The SEC noted, however, that many of these remedial measures were not implemented for several years following the misconduct, and responsible employees, including Plaza, had never been disciplined or terminated.
In a related proceeding, the DOJ entered into a Deferred Prosecution Agreement with LATAM, under which the company agreed to pay a criminal fine of $12.75 million and to retain an independent corporate compliance monitor.
