A&O Shearman FCPA Digest | In re Tenaris, S.A. (2011)

Source Documents

Foreign Official
Officials at OJSC O’ztashqineftgaz (“OAO”), a subsidiary of Uzbekneftegaz, the state-owned holding company of Uzbekistan’s oil and gas industry.

Nature of Business
Tenaris, S.A. (“Tenaris”) is a corporation organized under the laws of Luxembourg. Tenaris is a global manufacturer and supplier of steel pipe products and related services to the oil and gas industry throughout the world. Tenaris’s operations include supplying steel pipe and related services in the Caspian Sea region, including Uzbekistan, through Tenaris’s offices in Azerbaijan and Kazakhstan.

Influence to be Obtained
During 2006 and 2007, Tenaris utilized the services of an agent to bid on a series of contracts with OJSC O’ztashqineftgaz (“OAO”). In or around February 2007, Tenaris entered into an agreement to pay the agent a commission of 3.5% for access to confidential bid information. Using the confidential bid information, Tenaris was awarded the contract and OAO agreed to pay Tenaris $2,719,720 for pipe used in oil and gas development in Uzbekistan. In or around April and May 2007, Tenaris entered into an agreement to pay the agent a commission of 3% for bid information related to three additional OAO contracts. By using confidential bid information Tenaris was awarded the three contracts. Tenaris’s then-regional sales personnel understood that a portion of the commissions paid to the agent would be used to pay OAO officials.

Tenaris’s then-regional sales personnel also agreed to make payments to the Uzbek government agency, Uzbekexpertiza JSC (“Uzbekexpertiza”), to encourage Uzbekexpertiza not to investigate the bidding process. However, evidence of such payment was not found. According to the SEC, in or around 2007, Tenaris also failed to accurately account for these transactions with the agent and payments to OAO officials on their books and records. Tenaris’s system of internal controls also allegedly failed to detect or prevent payments to OAO officials, including a failure to ensure that proper due diligence was conducted on the agent.

Enforcement
On May 17, 2011, the DOJ and Tenaris entered into a two-year non-prosecution agreement, under which Tenaris agreed to pay a monetary penalty in the amount of $3.5 million, implement rigorous compliance measures, toll the statute of limitations, adhere to enhanced reporting obligations, disclose required information, and cooperate fully with all law enforcement agencies. The non-prosecution agreement also required Tenaris to admit to the relevant facts.

On May 17, 2011, Tenaris also entered into a deferred prosecution agreement with the SEC, under which Tenaris agreed to pay disgorgement and prejudgment interest of $5.4 million, implement compliance measures, cooperate with the ongoing investigation, toll the statute of limitations, and observe and enhance reporting obligations. Tenaris is the first company to ever enter into a deferred prosecution agreement with the SEC