Bribery Charges Hurled Against Steel Manufacturer Over Uzbekistan Pipelines

Jack Humphrey, Regulatory journalist
May 17, 2011 /

A Luxembourg-based steel pipe manufacturer has settled today the allegations of bribery raised by the US Securities and Exchange Commission (SEC) over a bidding process in Uzbekistan for pipelines used in transporting oil and natural gas.

In what may be a case reflecting a report by accounting and consulting firm Ernst & Young that said the oil and gas industry will see the most drastic impact of the Bribery Act because this sector operates in different parts of the globe, Tenasis is accused of bribing Uzbekistan officials “to gain access to confidential bids by competitors.”

This non-public information was used by the company to revise its own bids, thereby winning the contracts.

The facilitation is the first in SEC’s Deferred Prosecution Agreement (DPA) program introduced in January 13, 2010 to “further strengthen its enforcement program by encouraging greater cooperation from individuals and companies in the agency’s investigations and enforcement actions.”

The SEC claimed that the steel pipe manufacturer, whose American Depositary Receipts (TS) are listed on the New York Stock Exchange, violated the Foreign Corrupt Practices Act (FCPA) when it committed bribery with some Uzbekistan government officials in connection to a bidding process to supply pipelines for transporting oil and natural gas.

Tenaris allegedly profited almost $5 million from the 2006 and 2007 contracts unfairly awarded by the Uzbekistan government. The SEC’s complaint seeks $5.4 million in disgorgement and prejudgment interest.

Tenaris will also pay a $3.5 million criminal penalty in a Non-Prosecution Agreement announced by the Justice Department.

The bribery was discovered when Tenaris carried out an internal investigation of its operations and controls, which it immediately referred to the SEC enforcement department.

Since Tenaris’s “immediate self-reporting, thorough internal investigation, full cooperation with SEC staff, enhanced anti-corruption procedures, and enhanced training” qualified the company for the DPA, the SEC will not prosecute the steel pipe manufacturer provided it complies with certain undertakings.

The company agreed to improve its procedures, policies, and internal controls to comply with the FCPA in the future. The company will also submit to requirements to retain and pay agents, train employees on FCPA compliance and provide details of it, secure certification of compliance with anti-corruption laws, and inform the SEC of any complaints related to bribery or securities fraud.

Both Robert Khuzami, Director of the SEC’s Division of Enforcement, and Cheryl Scarboro, Chief of the SEC Enforcement Division’s FCPA Unit, commended the company’s response to the bribery act committed by its personnel in Uzbekistan however “unacceptable and unlawful” it was.

Tenaris will cooperate with the SEC, Justice Department, and any other law enforcement agency in the furtherance of the bribery case.

 

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