LATAM Airlines pays fine for FCPA violation

The U.S. Justice Department said executives at LATAM’s predecessor, LAN Airlines, set up a fictitious $1.15 million consulting agreement in October 2006 with an advisor to Argentina’s Ministry of Transportation secretary.    Chilean carrier LATAM Airlines Group has agreed to pay a $12.75 million criminal penalty in relation to a scheme to pay bribes to Argentine union officials via a false consulting contract with a third-party intermediary in violation of the accounting provisions of the U.S. Foreign Corrupt Practices Act (FCPA).
   The U.S. Justice Department said executives at LATAM’s predecessor, LAN Airlines, set up a fictitious $1.15 million consulting agreement in October 2006 with an advisor to Argentina’s Ministry of Transportation secretary.
   “Although the agreement purportedly required the consultant to undertake a study of Argentine airline routes, the consultant never provided any such services,” the Justice Department explained. “Instead, the purported consultant funneled the monies 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.”
   It’s estimated that LAN profited by more than $6.7 million as a result of the bribes paid to the union officials, department officials noted.
   LATAM entered into a three-year deferred prosecution agreement (DPA) to resolve the case. As part of the agreement, LATAM agreed to pay a $12.75 million criminal penalty, continue to cooperate with the Justice Department’s investigation, enhance its compliance program and retain an independent corporate compliance monitor for a term of at least 27 months.
   In a related matter, LATAM also reached a settlement with the U.S. Securities and Exchange Commission to pay $6.74 million in disgorgement and $2.7 million in prejudgment interest.
   The approximate $22.2 million in combined penalty, disgorgement and prejudgment interest “far exceeds the $6.7 million in savings the company had received from its improper payments,” the Justice Department said.