Avianca Statement: “We May Have Violated The US Foreign Corrupt Practices Act”

Stormy skies are not clearing anytime soon for Avianca, it seems. Avianca Holdings S.A. (NYSE: AVH) (BVC:PFAVH) announced in a new filing with the US Securities and Exchange Commission (SEC) that it may have violated the US Foreign Corrupt Practices Act, or FCPA.  Apparently, the problem was discovered as far back as 2017 but is just now disclosed, after a change in management. Avianca now has a substantially new board of directors, chairman, and CEO Vanko An Der Werff. The company’s board of directors and some employees gave free tickets, discounts and upgrades to bureaucrats of certain countries, which could constitute bribery under some circumstances. As Avianca operates in the US and is listed on the New York Stock Exchange, it falls under us jurisdiction for such matters.

Avianca’s statement follows:

We are undertaking an internal investigation to determine whether we may have violated the U.S. Foreign Corrupt Practices Act (“FCPA”) and other laws and, if we are found to be in violation of such laws, we could be subject to criminal and civil remedies, including sanctions and monetary penalties, which could, among other things, harm our reputation and materially and adversely affect our business, financial condition and results of operations and ability to service the Secured Notes.

Through our internal processes, in 2017 we discovered a business practice whereby company employees, including members of senior management, as well as certain members of the board of directors, provided “things of value,” which based on our current understanding we believe to have been limited to free and discounted airline tickets and upgrades, to government employees in certain countries. We commenced an internal investigation and retained outside counsel and a forensic investigatory firm to determine whether this practice may have violated the FCPA or other potentially applicable U.S. and non-U.S. anti-corruption laws and received preliminary recommendations from counsel. In 2018, we implemented certain revisions to our policies designed to prevent such practice from occurring in the future, including limiting the number of persons at the Company who are authorized to issue free and discounted airline tickets and upgrades, and requiring additional internal approvals. We are continuing to investigate, supervised by our Audit Committee, and review if further controls or procedures should be implemented and are in the process of engaging outside counsel and a forensic investigatory firm to conduct such further investigation.

Based on our investigations to date, we have implemented additional controls that restrict the issuance of free or discounted tickets and upgrades, particularly by senior management and members of our board of directors, and we will maintain such restrictions in place until such time as outside counsel advises that our controls are effective to comply with applicable law in each relevant jurisdiction. On August 13, 2019, we voluntarily disclosed this investigation to both the U.S. Department of Justice and the SEC, and we are cooperating with both agencies. We will also disclose this investigation to the Colombian Financial Superintendence. Our internal investigation is not complete and we cannot predict the outcome of this internal investigation or what potential actions may be taken by the U.S. Department of Justice, the SEC or local regulators or officials. If it is found that the business practice violated the FCPA or other similar laws applicable to us, we could be subject to criminal and civil remedies, including sanctions, monetary penalties and regulatory actions, which could, among other things, harm our reputation and materially and adversely affect our business, financial condition and results of operations, including, without limitation, our ability to service the Secured Notes.