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SEC Enters into First Deferred Prosecution Agreement: What It Means for Corporations Facing FCPA Charges

On May 17, 2011, the Securities and Exchange Commission (''SEC'' or ''Commission'') entered into its first ever Deferred Prosecution Agreement (DPA) with Tenaris S.A., a Luxembourgish manufacturer and supplier of steel pipes for the oil and gas, energy, and mechanical industries. The SEC alleged that Tenaris violated the Foreign Corrupt Practices Act (FCPA) by paying bribes to Uzbekistani government officials during a bidding process to supply pipelines for transporting oil and natural gas. The DPA provided that any action against Tenaris would be deferred for a twoyear period conditional on Tenaris undertaking certain remedial measures. In a parallel settlement, the company entered into a nonprosecution agreement (NPA) with the Department of Justice (DOJ). The SEC announced last year that it would begin using DPAs and NPAs in an effort to foster greater cooperation by defendants.

The SEC may find the new agreements particularly useful in FCPA enforcement actions since the Commission typically requires that corporate defendants undertake significant remedial measures. Specifically, unlike a simple administrative order such as a cease and desist order, the new agreements allow the SEC to defer prosecution for a severalyear period during which the SEC may monitor a companys remedial efforts. While the SEC may find the new agreements useful as an enforcement tool, it remains to be seen whether they provide additional incentives to corporate defendants to cooperate. Specifically, given the joint nature of FCPA investigations involving both the DOJ and SEC, it may not be immediately clear what additional advantage a company may find to cooperate with the SEC given existing incentives for cooperation in such joint investigations.


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