SEC charges South America airline exec with FCPA violations for union payoffs
Thursday, February 4, 2016 at 7:28PM
Richard L. Cassin in Argentina, Chile, Ignacio Cueto Plaza, Lam Airlines

The CEO of South America-based LAN Airlines agreed Thursday to settle SEC charges that he violated the Foreign Corrupt Practices Act when he authorized more than $1 million in improper payments to a sham consultant during a dispute between the airline and its unionized employees in Argentina.

Ignacio Cueto Plaza, who was serving as president and chief operating officer at the time, authorized LAN Airlines to wire $1.15 million in payments to the consultant’s Virginia-based brokerage account.

The SEC settled the enforcement action with an internal administrative order and didn't go to court.

Without admitting or denying the SEC's findings, Cueto, 51, a Chilean citizen, agreed to pay a $75,000 penalty.

He also agreed to "certify his compliance with his airline’s policies and procedures by attending anti-corruption training among other undertakings."

The SEC said Cuerto and the consultant used an unsigned agreement that falsely said the consultant would prepare a study of existing air routes in Argentina. 

"Cueto knew no such study would be performed and the consultant instead agreed to help settle the labor dispute, and Cueto also understood it was possible that the consultant would pass a portion of the payments along to union officials in Argentina," the SEC said.

The purpose of the payments was to get the unions to abandon their threats to enforce the single-function rule and accept a wage increase lower than the amount asked for in negotiations.  

The SEC’s order found that Cueto violated the FCPA's internal accounting controls, books and records, and false records provisions.

LAN Airlines S.A. was a publicly traded company headquartered in Santiago, Chile, that provided passenger and cargo airline services throughout Latin America. LAN merged with TAM, S.A. in 2012. 

Before the merger with TAM, LAN’s common stock traded on the NYSE under the symbol LFL.

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The SEC's Securities Exchange Act of 1934 Release No. 77057, Accounting and Auditing Enforcement Release No 3738, and Administrative Proceeding File No. 3-17100 (all dated February 4, 2016) In the Matter of
Ignacio Cueto Plaza
, are here (pdf).


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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