Saturday, October 31, 2020

Latin American Airline Group, Avianca Holdings Notifies U.S. Authorities of Foreign Bribery Investigation

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Latin American airline group Avianca Holdings SA is investigating whether it violated U.S. foreign bribery law by giving free tickets and upgrades to government officials.

Avianca Holdings, which is based in Panama, said Thursday in a securities filing that it notified the U.S. Justice Department and the Securities and Exchange Commission about the probe and was cooperating with the agencies. It also notified Colombia’s financial superintendent through the country’s securities exchange, where the airline group also is listed.

The group said the travel benefits were given to officials by employees that may have included senior management, as well as certain members of its board.

A spokeswoman for Avianca Holdings said the company had implemented additional controls to avoid similar conduct in the future, including by strengthening its internal approval processes.

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The probe could raise a somewhat novel issue under the U.S. Foreign Corrupt Practices Act, which prohibits companies with ties to the U.S.—including those such as Avianca Holdings that are listed on a U.S. stock exchange—from bribing foreign government officials to gain a business advantage.

Related: Anti-Corruption Watchdog: Most Countries Ignore Anti-Foreign Bribery Laws

The Justice Department and SEC have reached settlements in the past with companies that provided free travel to foreign officials. The agencies also have settled with a foreign airlinethat bribed union officials to secure a favorable labor contract.

But the investigation into Avianca Holdings could be the first public instance of a company considering whether free and discounted tickets and upgrades offered by an airline could qualify as a bribe under U.S. foreign bribery law.

In its filing, Avianca Holdings said it believed that the benefits provided to government officials were limited to travel perks, but it left open the possibility that other things of value were also given. The airline group said discovered the practice in 2017 and hired an outside law firm to investigate the matter.

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Brazilian conglomerate Synergy Group Corp. owns a 51.76% stake in Avianca Holdings, according to S&P Capital IQ.

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