Depending on how often you meet in glass-walled conference rooms, $125 might seem like a lot for a shirt. It pales in comparison, though, to the $1.6 million that Ralph Lauren Corp (NYSE:RL) just agreed to pay to the SEC and Justice Department. The penalty came in light of a revelation that the Polo manufacturer’s Argentine subsidiary had bribed Argentinian officials from 2005 to 2009 in order to avoid proper customs protocol.
But the most interesting piece of this story isn’t the bribe or the fine, but the way the whole thing played out. Ralph Lauren Corp (NYSE:RL) wasn’t accused of bribery — it discovered it on its own during an internal investigation. By telling the SEC about the malfeasance, the company was able to avoid a larger penalty and sign the first Non-Prosecution Agreement (link opens PDF file), or NPA, regarding a Foreign Corrupt Practices Act, or FCPA, violation with the SEC.
Seriously, don’t sue us
In announcing the outcome, the SEC said, “When they found a problem, Ralph Lauren Corp (NYSE:RL) Corporation did the right thing by immediately reporting it to the SEC and providing exceptional assistance in our investigation.” That led to the company being punished less than it would have been if the discovery had come from an external party, or if Ralph Lauren hadn’t participated fully.
In addition to its lighter fee, the SEC also agrees not to pursue any additional enforcement against Ralph Lauren Corp (NYSE:RL), regardless of what new information comes to light through the rest of the investigation. That gives the company a good reason to participate fully with investigators, as the digging goes on.
Compare the kid-glove treatment that Ralph Lauren Corp (NYSE:RL) is getting with the $15 million penalty — along with millions more in related penalties — that Pfizer Inc. (NYSE:PFE) agreed to pay in 2012 for its bribery issues. The company was found to have acted inappropriately in its international expansion, bribing doctors and government officials.
The odd part is that Pfizer Inc. (NYSE:PFE) also worked well with the SEC, according to the agency. It also discovered the issue during an internal audit, and it also volunteered information. But Pfizer Inc. (NYSE:PFE)’s FCPA violation didn’t result in a NPA being signed. The more recent move from the SEC may signal that the government is going to be more willing to work with companies in the future, if they agree to play nice.
The expansion of NPAs into the foreign space may be a useful tool for an understaffed SEC. It gets a result of some sort without requiring all the costs and hours associated with a drawn-out prosecution. Legal observers have said that this may be a precedent for more such cases in the future, and should signal that corporations are being encouraged to keep their own houses in order.
The shift that the SEC has made since its Pfizer ruling last year should indicate that this is not just a slightly different way of operating — it’s a new way of thinking about enforcement. While the result of that thinking may not be justice with a capital “j,” it’s certainly better than nothing. That seems like a step in the right direction.
The article The SEC Changes Its Course with Ralph Lauren originally appeared on Fool.com and is written by Andrew Marder.
Fool contributor Andrew Marder has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.