LAN Airlines To Pay More Than $22 Mln To Settle Improper Payments Cases

(RTTNews) - The U.S. Securities and Exchange Commission announced that South American-based LAN Airlines has agreed to pay more than $22 million to settle parallel civil and criminal cases related to improper payments it authorized during a dispute between the airline and its union employees in Argentina.

An SEC investigation found that when LAN encountered problems negotiating labor agreements with the unions, it was contacted by a consultant from Argentina who offered to negotiate on the company's behalf. The consultant made clear that he would expect compensation for such negotiations, and that payments would be made to third parties who had influence over the unions. LAN's CEO approved $1.15 million in payments to the consultant through a sham contract for a purported study of existing air routes in Argentina. The CEO knew that no actual study would be performed and that it was possible the consultant would pass some portion of the money to union officials in Argentina to settle the wage disputes.

To settle the SEC's charges that it failed to keep accurate books and records and maintain adequate internal accounting controls, LAN agreed to pay $9.4 million in disgorgement and prejudgment interest. In a deferred prosecution agreement announced today by the U.S. Department of Justice, LAN agreed to pay a $12.75 million penalty.

Under the settlement, LAN must retain an independent compliance monitor for a period of not less than 27 months. In reaching the settlement, the SEC considered LAN's remedial acts and general cooperation with the investigation.