RALPH LAUREN CORPORATION AVOIDS PROSECUTION BY SEC FOR ALLEGED BRIBING OF FOREIGN OFFICIALS

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., April 22, 2013 — The Securities and Exchange Commission today announced a non-prosecution agreement (NPA) with Ralph Lauren Corporation in which the company will disgorge more than $700,000 in illicit profits and interest obtained in connection with bribes paid by a subsidiary to government officials in Argentina from 2005 to 2009. The misconduct was uncovered in an internal review undertaken by the company and promptly reported to the SEC.

The SEC has determined not to charge Ralph Lauren Corporation with violations of the Foreign Corrupt Practices Act (FCPA) due to the company's prompt reporting of the violations on its own initiative, the completeness of the information it provided, and its extensive, thorough, and real-time cooperation with the SEC's investigation. Ralph Lauren Corporation's cooperation saved the agency substantial time and resources ordinarily consumed in investigations of comparable conduct.

The NPA is the first that the SEC has entered involving FCPA misconduct. NPAs are part of the SEC Enforcement Division's Cooperation Initiative, which rewards cooperation in SEC investigations. In parallel criminal proceedings, the Justice Department entered into an NPA with Ralph Lauren Corporation in which the company will pay an $882,000 penalty.

"When they found a problem, Ralph Lauren Corporation did the right thing by immediately reporting it to the SEC and providing exceptional assistance in our investigation," said George S. Canellos, Acting Director of the SEC's Division of Enforcement. "The NPA in this matter makes clear that we will confer substantial and tangible benefits on companies that respond appropriately to violations and cooperate fully with the SEC."

Kara Brockmeyer, the SEC's FCPA Unit Chief, added, "This NPA shows the benefit of implementing an effective compliance program. Ralph Lauren Corporation discovered this problem after it put in place an enhanced compliance program and began training its employees. That level of self-policing along with its self-reporting and cooperation led to this resolution."

According to the NPA, Ralph Lauren Corporation's cooperation included:
Reporting preliminary findings of its internal investigation to the staff within two weeks of discovering the illegal payments and gifts.
Voluntarily and expeditiously producing documents.
Providing English language translations of documents to the staff.
Summarizing witness interviews that the company's investigators conducted overseas.
Making overseas witnesses available for staff interviews and bringing witnesses to the U.S.
According to the NPA, the bribes occurred during a period when Ralph Lauren Corporation lacked meaningful anti-corruption compliance and control mechanisms over its Argentine subsidiary. The misconduct came to light as a result of the company adopting measures to improve its worldwide internal controls and compliance efforts, including implementation of an FCPA compliance training program in Argentina.

As outlined in the NPA, Ralph Lauren Corporation's Argentine subsidiary paid bribes to government and customs officials to improperly secure the importation of Ralph Lauren Corporation's products in Argentina. The purpose of the bribes, paid through its customs broker, was to obtain entry of Ralph Lauren Corporation's products into the country without necessary paperwork, avoid inspection of prohibited products, and avoid inspection by customs officials. The bribe payments and gifts to Argentine officials totaled $593,000 during a four-year period.

Under the NPA, Ralph Lauren Corporation agreed to pay $593,000 in disgorgement and $141,845.79 in prejudgment interest.

The SEC took into account the significant remedial measures undertaken by Ralph Lauren Corporation, including a comprehensive new compliance program throughout its operations. Among Ralph Lauren Corporation's remedial measures have been new compliance training, termination of employment and business arrangements with all individuals involved in the wrongdoing, and strengthening its internal controls and its procedures for third party due diligence. Ralph Lauren Corporation also conducted a risk assessment of its major operations worldwide to identify any other compliance problems. Ralph Lauren Corporation has ceased operations in Argentina.

The SEC's investigation was conducted by Kristin A. Snyder and Tracy L. Davis in the San Francisco Regional Office. The SEC appreciates the assistance of the U.S. Department of Justice's Fraud Section, the U.S. Attorney's Office for the Eastern District of New York, and the Federal Bureau of Investigation in this matter.

FORMER EXECS AT FREDDIE MACK AND FANNIE CHARGED BY SEC WITH ALLEGED SECURITIES FRAUD

The following excerpt is from the Securities and Exchange Commission website:

“Washington, D.C., Dec. 16, 2011 — The Securities and Exchange Commission today charged six former top executives of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) with securities fraud, alleging they knew and approved of misleading statements claiming the companies had minimal holdings of higher-risk mortgage loans, including subprime loans.

Fannie Mae and Freddie Mac each entered into a Non-Prosecution Agreement with the Commission in which each company agreed to accept responsibility for its conduct and not dispute, contest, or contradict the contents of an agreed-upon Statement of Facts without admitting nor denying liability. Each also agreed to cooperate with the Commission's litigation against the former executives. In entering into these Agreements, the Commission considered the unique circumstances presented by the companies' current status, including the financial support provided to the companies by the U.S. Treasury, the role of the Federal Housing Finance Agency as conservator of each company, and the costs that may be imposed on U.S. taxpayers.

Three former Fannie Mae executives - former Chief Executive Officer Daniel H. Mudd, former Chief Risk Officer Enrico Dallavecchia, and former Executive Vice President of Fannie Mae's Single Family Mortgage business, Thomas A. Lund - were named in the SEC's complaint filed in U.S. District Court for the Southern District of New York.
The SEC also charged three former Freddie Mac executives — former Chairman of the Board and CEO Richard F. Syron, former Executive Vice President and Chief Business Officer Patricia L. Cook, and former Executive Vice President for the Single Family Guarantee business Donald J. Bisenius — in a separate complaint filed in the same court.
"Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was," said Robert Khuzami, Director of the SEC's Enforcement Division. "These material misstatements occurred during a time of acute investor interest in financial institutions' exposure to subprime loans, and misled the market about the amount of risk on the company's books. All individuals, regardless of their rank or position, will be held accountable for perpetuating half-truths or misrepresentations about matters materially important to the interest of our country's investors."

The SEC is seeking financial penalties, disgorgement of ill-gotten gains with interest, permanent injunctive relief and officer and director bars against Mudd, Dallavecchia, Lund, Syron, Cook, and Bisenius. Both lawsuits allege that the former executives caused the federal mortgage firms to materially misstate their holdings of subprime mortgage loans in periodic and other filings with the Commission, public statements, investor calls, and media interviews. The suit involving the Fannie Mae executives also includes similar allegations regarding Alt-A mortgage loans. The suit against the former Fannie Mae executives alleges they made misleading statements — or aided and abetted others — between December 2006 and August 2008. The former Freddie Mac executives are alleged to have made misleading statements — or aided and abetted others - between March 2007 and August 2008.

The SEC's complaint against the former Fannie Mae executives alleges that, when Fannie Mae began reporting its exposure to subprime loans in 2007, it broadly described the loans as those "made to borrowers with weaker credit histories," and then reported — with the knowledge, support, and approval of Mudd, Dallavecchia, and Lund — less than one-tenth of its loans that met that description. Fannie Mae reported that its 2006 year-end Single Family exposure to subprime loans was just 0.2 percent, or approximately $4.8 billion, of its Single Family loan portfolio. Investors were not told that in calculating the Company's reported exposure to subprime loans, Fannie Mae did not include loan products specifically targeted by Fannie Mae towards borrowers with weaker credit histories, including more than $43 billion of Expanded Approval, or "EA" loans.
Fannie Mae's executives also knew and approved of the decision to underreport Fannie Mae's Alt-A loan exposure, the SEC alleged. Fannie Mae disclosed that its March 31, 2007 exposure to Alt-A loans was 11 percent of its portfolio of Single Family loans. In reality, Fannie Mae's Alt-A exposure at that time was approximately 18 percent of its Single Family loan holdings.

The misleading disclosures were made as Fannie Mae's executives were seeking to increase the Company's market share through increased purchases of subprime and Alt-A loans, and gave false comfort to investors about the extent of Fannie Mae's exposure to high-risk loans, the SEC alleged.

In the complaint against the former Freddie Mac executives, the SEC alleged that they and Freddie Mac led investors to believe that the firm used a broad definition of subprime loans and was disclosing all of its Single-Family subprime loan exposure. Syron and Cook reinforced the misleading perception when they each publicly proclaimed that the Single Family business had "basically no subprime exposure." Unbeknown to investors, as of December 31, 2006, Freddie Mac's Single Family business was exposed to approximately $141 billion of loans internally referred to as "subprime" or "subprime like," accounting for 10 percent of the portfolio, and grew to approximately $244 billion, or 14 percent of the portfolio, as of June 30, 2008.

The SEC's complaint alleges that Mudd violated Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rules 10b-5(b) and 13(a)14(a) thereunder, and Section 17(a)(2) of the Securities Act of 1933 (the "Securities Act"); and that Mudd aided and abetted Fannie Mae's violations of Sections 10(b) and 13(a) of the Exchange Act and Exchange Act Rules 10b-5(b), 12b-20, 13a-1, and 13a-13 thereunder. The SEC complaint also alleges that Dallavecchia violated Section 17(a)(2) of the Securities Act and aided and abetted Fannie Mae's violations of Sections 10(b) and 13(a) of the Exchange Act and Exchange Act Rules 10b-5(b), 12b-20, 13a-1, and 13a-13 thereunder. Finally, the SEC complaint alleges that Lund aided and abetted Fannie Mae's violations of Sections 10(b) and 13(a) of the Exchange Act and Exchange Act Rules 10b-5(b), 12b-20, 13a-1, and 13a-13 thereunder.
The SEC's complaint alleges that Syron and Cook violated Exchange Act Section 10(b) and Rule 10b-5(b) thereunder and Securities Act Section 17(a)(2); that Syron violated Exchange Act Rule 13a-14; and that Syron, Cook and Bisenius aided and abetted violations of Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5(b), 12b-20 and 13a-13 thereunder.
The SEC's investigation of Fannie Mae was conducted by Senior Attorneys Natasha S. Guinan, Christina M. Marshall, Liban Jama, Mona L. Benach, and Associate Chief Accountant, Peter Rosario, under the supervision of Assistant Director Charles E. Cain, and Associate Director Stephen L. Cohen. Sarah Levine and James Kidney will lead the SEC's litigation efforts.”