The $5 billion Ralph Lauren (NYSE:RL) chain will pay more than $1.6 million to settle claims that a subsidiary bribed customs inspectors in Argentina from 2005 through 2009, Bloomberg reported on Monday (April 22).
The retailer reported the violations of the Foreign Corrupt Practices Act to regulators in 2010, and will pay about $753,000 in disgorgement and interest to the Securities and Exchange Commission (SEC), plus an $882,000 penalty to the U.S. Justice Department. The chain has also shut down its retail operations in Argentina.
According to the SEC settlement, the Ralph Lauren subsidiary in Argentina hired a customs broker who paid $568,000 in bribes to customs officials to keep products moving into the country. The subsidiary's general manager also provided Ralph Lauren products to three government officials, including "perfume, dresses and handbags valued at between $400 and $14,000 each."
The chain discovered and reported the bribes in 2010 after instituting new anti-bribery policies and investigating irregularities. Both the SEC and the Justice Department agreed not to prosecute because of the chain's cooperation in the investigation. The retailer was also cleared of concerns about possible bribery in Italy, Hong Kong and Japan, the SEC said.
Just over $2 million in fines and bribes may not sound like a tough penalty, but the chain also shut down all its stores in Argentina, so there's a very real hit to Ralph Lauren's income.
Unfortunately, the most obvious potential benefit for any other foreign retail chain operating in Argentina isn't likely to materialize. The SEC declined to name the three government officials or the customs officials who accepted the bribes—or even the customs broker who paid them.