by T. GormanPosted on Posted in SECActions

Ralph Lauren Corporation settled FCPA charges with the first double non-prosecution agreement. The company resolved possible charges with the DOJ and the SEC under non-prosecution agreements. The Department of Justice frequently resolved anti-corruption actions on this basis. For the SEC, however, the settlement represents its first non-prosecution agreement under an initiative that stems from the historic reorganization of its Enforcement Division. Enforcement officials credited the cooperation of the company in the settlement process.

The underlying case stems from actions taken by Ralph Lauren’s indirect, wholly-owned, subsidiary in Argentina. Over a five year period beginning in 2003the subsidiary retained a customs broker to assist with clearing its merchandise. During that period the General Manager of the subsidiary approved the payment of bribes to permit clearance of items without the necessary paper work, of prohibited goods and to avoid inspections.

The bribes were paid by falsifying the books and records. Specifically, the customs agent submitted invoices to the General Manager, or those reporting to him, for approval. Those invoices also included payments for “Loading and Delivery” and “Stamp Tax/Label Tax” to disguise the bribes. Gifts ranging in value from $400 to $14,000 each were also furnished to officials beginning in 2005.

The company leaned about the conduct in 2010 when implementing a new FCPA policy under the direction of the Ralph Lauren board of directors. After employees reviewed the new policy they informed company officials. The company the terminated its custom broker and took a series of steps which included: 1) amending its anticorruption policy; 2) enhancing due diligence procedures for third parties; 3) enhancing its commission policy; 4) amending its gift policy; 5) conducting in-person anticorruption training for certain employees; and 6) eventually terminating its retail operations in Argentina.

Ralph Lauren also cooperated with enforcement officials. The company self-reported, produced all documents, voluntarily furnished translations of documents, made witnesses available for interview, and conducted a world- wide risk assessment.

Under the terms of the DOJ non-prosecution agreement Ralph Lauren agreed to pay a penalty of $882,000. Under the terms of the SEC agreement the company agreed to pay disgorgement of $593,000 and prejudgment interest.

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by T. GormanPosted on Posted in SECActions

Market professionals continue to be a key focus of securities enforcement actions. Insider trading, market manipulation, failure to obtain best execution, intimidation and other charges are at the center of what seems to be a never ending stream of civil, criminal and regulatory actions. The fact that those actions are against market professionals can only serve to further undermine public confidence in the securities markets, fostering the notion that they are unfair and an insiders game.

As last week drew to a close another in this stream of actions moved toward resolution, U.S. v. Hampton, Case No. 13 Crim 301 (S.D.N.Y.). This case was brought against Thomas Hampton, the Managing Director of Hampton Capital. The fund invested in exchange traded funds or ETFs. Those instruments hold various types of liquid assets such as stocks, commodities or bonds and frequently attempt to track or replicate a benchmark index such as the S&P 500. Hampton Capital’s strategy was to use specially designed computer software to trade ETFs based on pricing inefficiencies. Mr. Hampton bought and sold various securities and futures contacts on behalf of the fund to implement the strategy.

When the fund began to suffer losses rather than tell investors the truth Mr. Hampton chose to deceive them. Specifically, as early as April 2011 rather than admit there were losses and risk withdrawals, Mr. Hampton began creating false statements which represented to investors that the fund had positive returns, not the losses that in fact were incurred. This encouraged investors to leave their capital in the fund and, in some instances, add to it. As the trading losses continued investors eventually lost millions of dollars.

On Friday Mr. Hampton pleaded guilty to one count of commodities fraud. The date for sentencing has not been set.

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