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In the Matter of Ignacio Cueto Plaza

 
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Ignacio Cueto Plaza
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SEC Civil
:
February 4, 2016
:
In the Matter of Ignacio Cueto Plaza
:
In the Matter of Ignacio Cueto Plaza, Admin. Pro. File No. 2-17100 (2016)
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The SEC did not allege that Cueto violated the FCPA’s anti-bribery provisions possibly because it did not believe it could establish that the Argentine union officials who allegedly received illicit payments were “foreign officials” according to the language of the FCPA.
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Transportation-Airline
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Argentina
:
2006; 2007
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Union officials in Argentina.
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Ignacio Cueto Plaza, a Chilean citizen, has been the CEO of LAN Airlines S.A. since 2012, and formerly was the President and COO of the company. Prior to 2012, Cueto served on LAN’s Board of Directors, later became President and COO of the company in 2005. LAN is an airline company based in Santiago, Chile with stock listed on the New York Stock Exchange.

In 2006, Argentine unions initiated a campaign for wage increases from LAN. According to the SEC, Cueto requested the services of a third party consultant with connections to the unions and approved $1.15 million payment to the consultant with the understanding that some portion of the funds would be passed to union officials. The SEC alleges that LAN performed no due diligence on the consultant as the company did not have any policy requiring such due diligence to be performed at the time.

The SEC claims that, after the union disputes were resolved, in October 2006, the consultant sent Cueto a draft consulting contract indicating that the consultant should be paid $1.15 million for services rendered—including a study of existing air routes in Argentina and the regional market. The agreement was never signed by the parties and, according to the SEC, Cueto was aware that the consultant would never conduct the study described in the contract. To further conceal the scheme, the SEC claims that the consultant’s company sent a backdated invoice for $300,000 to LAN in late October 2006. According to the SEC, Cueto approved of using an unrelated LAN subsidiary to make payments to a brokerage account owned by the consultant and his wife. The order states that additional payments for $300,000 were sent in November 2006 and January 2007. All the payments were allegedly recorded as payments to “other debtors” on the LAN subsidiary’s books.

On February 4, 2016, the SEC announced that the Commission had accepted Cueto’s offer of settlement in a cease-and-desist order. In July 2016, LATAM Airlines Group S.A. and LAN Airlines S.A. reached separate settlements with the DOJ and SEC, respectively, for violations of the FCPA's books-and-records and internal controls provisions.
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Books and records (Issuer), Internal controls (Issuer)
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Cease and Desist
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Civil monetary penalty of $75,000.
:
75,000
:
0
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Issuer
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Foreign
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Chile
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Other Business Advantage
:
Not stated.
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Sales Agent/Consultant
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1,150,000
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Argentina
:
No
:
No