LATAM Airlines Group has agreed to pay the US Securities and Exchange Commission (SEC) more than USD22 million to settle parallel civil and criminal cases related to improper payments it authorized during a dispute between its pre-merger LAN Airlines (Santiago de Chile) unit and its union employees in Argentina.

The SEC said in a statement that an investigation found that at the time when LAN encountered problems negotiating labour 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," the SEC said. "LAN’s CEO approved USD1.15 million in payments to the consultant through a sham contract for a purported study of existing air routes in Argentina."

It added that LAN's CEO, Ignacio Cueto Plaza, 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.

Earlier this year, the SEC charged Cueto Plaza with Foreign Corrupt Practices Act (FCPA) violations. He has since settled the charges.

Though LATAM Airlines Group is a South America-based carrier group, its listing on a US securities exchange renders it bound to the FCPA. The law prohibits the payment of bribes to foreign government officials for the purpose of obtaining a commercial advantage and requires companies bound by such law to make and keep adequate accounting records, as well as to maintain an adequate system of internal controls.

While the DOJ and SEC concluded that there was no violation of the rules of the FCPA that prohibit the payment of bribes, they did, however, deem that LAN had incorrectly recorded the aforementioned payments in its accounting and, consequently, violated the part of the FCPA that requires companies to make and keep accurate accounting records. The two authorities also deemed that LAN´s internal checks and oversight mechanisms in place between 2006-2007 were deficient, and thus violated the rules of the FCPA that require maintaining an adequate system of internal controls.

As such, to settle the SEC’s charges that it failed to keep accurate books and records and maintain adequate internal accounting controls, LATAM agreed to pay USD9.4 million in disgorgement and prejudgment interest. In a non-prosecution agreement announced on Monday, July 25 by the US Department of Justice, LATAM agreed to pay a USD12.75 million penalty. LATAM must also retain an independent compliance monitor for a period of not less than twenty-seven months.