On Monday, Chile-based airline LAN Airlines SA (now operating at LATAM Airlines Group) entered into a $22 million agreement with the U.S. Securities and Exchange Commission (SEC) and the Department of Justice (DOJ), to settle allegations that it violated the Foreign Corrupt Practices Act (FCPA).  The alleged violations involved the facilitation of bribes to Argentinian government officials in connection with a labor dispute in 2006.  Under the settlement agreement, LAN will pay $9.4 million in disgorgement and interest to the SEC and a $12.75 million fine to the DOJ.

According to the SEC:

[W]hen LAN encountered problems negotiating labor agreements with the unions, it was contacted by a consultant from Argentina who offered to negotiate on the company’s behalf.  The consultant made clear that he would expect compensation for such negotiations, and that payments would be made to third parties who had influence over the unions.  LAN’s CEO approved $1.15 million in payments to the consultant through a sham contract for a purported study of existing air routes in Argentina.

Reportedly, LAN executives were aware that no study would be performed, and that payments would instead be passed on to the labor unions.  The bribe payments convinced the labor unions to abandon their positions and accept a lower wage increase, to LAN’s benefit.  LAN’s payments to the consultant under the sham agreement went through and to U.S. bank accounts.

The company’s settlement agreement follows the SEC’s individual enforcement action against LAN’s CEO, Ignacio Cueto Plaza, which he settled by agreeing to pay a $75,000 civil fine and attend anti-corruption training in February of this year.

According to DOJ, the airline did not voluntarily disclose the violations.  Instead, it only began cooperating after the Argentinian media reported on the conduct.  Because it did not come forward to disclose, LAN was ineligible for a discount off of the bottom of the sentencing guidelines range.  In addition to payment of the penalty and disgorgement, LAN also agreed to retain an independent compliance monitor.

The criminal case is USA v. Latam Airlines Group SA, case number 0:16-cr-60195, in the U.S. District Court for the Southern District of Florida.  The SEC resolved the FCPA violations through an internal administrative order: In the Matter of LAN Airlines SA, case number 3-17357.