The Foreign Corrupt Practices Act ('FCPA'): A Major Opportunity For SEC Whistleblowers

AN IMPORTANT ANNOUNCEMENT: The United States Government is currently offering millions of dollars to highly motivated individuals anywhere in the world for certain information available right within their own workplaces.

To learn more about this remarkable offer from the United States treasury do some quick Internet research on the FCPA, the "Foreign Corrupt Practices Act." This once but no longer obscure law, now in force for almost forty years, is justifiably feared in the C Suites of corporations worldwide. Through its increasingly aggressive use by the U.S. Department of Justice ("DOJ") and the Securities and Exchange Commission ("SEC"), the US government has recovered billions of dollars from a long list of corporations, many of them foreign entities over which US regulatory authorities might normally have little or no jurisdiction. The cases just keeping coming, and the facts (and legal theories) just get better for the government—and for whistleblowers who understand just how impressive a hand they may hold.

As long humans are fallible and there is corruption in this world, the FCPA statute should be studied by anyone, anywhere, who works or has worked for, a company that does any form of business with foreign governments and their employees and agents. Likewise if you think a competitor, vendor, or client is engaged in such business, one can report them as well. Even if your company is already under investigation you can still be a whistleblower, depending on the circumstances.

To put it very simply, the FCPA's anti-bribery provisions make it "illegal to corruptly offer or provide money or anything of value to officials of foreign governments, foreign political parties, or public international organizations with the intent to obtain or retain business."1 There are also accounting provisions, requiring the keeping of accurate books and records, and internal control provisions requiring the company to devise and maintain internal accounting controls to prevent and detect FCPA violations. We will address these very "whistleblower friendly" provisions below.

What matters is the intersection of the FCPA with the SEC's Dodd-Frank whistleblower program which offers awards of as much as 30% of the multi-million dollar penalties the SEC and DOJ routinely extract from companies who are found to have violated the FCPA. In any given year, a small but usually very wealthy group of corporations from around the world runs afoul of this law, leading to large settlements with the US Securities and Exchange Commission (SEC) and sometimes the US Department of Justice (for which the whistleblower will also get credit provided there is an SEC settlement in the package). In FY 2015 alone, the SEC filed fourteen actions for FCPA violations and obtained over $215 million in financial remedies. When you tie together the FCPA and the whistleblower law, you have a powerful combination.

In fact, there is $400 million presently available in a special fund for the SEC to pay qualifying whistleblowers that supply original (as defined in the law) information leading to SEC cases which result in penalties exceeding $1 million. The largest single whistleblower award to date has been $30 million. This and 21 other awards have been given out through FY 2015, totaling over $54 million. Providing tips about FCPA violations is only one way of obtaining awards (any securities law violation is eligible), but it is clearly one of the most lucrative.

A list of the larger recent FCPA settlements and the companies that paid them to the government just since 2013 reads like a page from an International Fortune 500:

Alstom (French conglomerate): $772 million (DOJ case, largest ever) Total S.A (French oil and gas co.): $398 million Alcoa (aluminum): $384 million Weatherford International (oil and natural gas services): $152.6 million Avon (healthcare): $135 million Hewlett-Packard (high tech): $108 million Diebold (ATMs, security systems): $48 million BHP Billiton (mining): $25 million Hitachi (Japanese high tech conglomerate): $19 million Goodyear (tire and rubber): $16 million BNY Mellon (US bank): $14.8 million Bristol-Myers Squibb (pharma): $14.7 million Stryker Corporation (medical devices): $13.2 million Mead Johnson (infant formula): $12 million FLIR Systems (sensing devices): $9.5 million Parker Drilling (oil field services): $4 million Koninklijke Philips Electronics (electronics, healthcare): $4.5 million

None of these cases were overly complicated. Most basically involved some form of bribery of foreign public officials or broadly defined " state actors" (example: doctors in countries where the government runs the health care system). Some cases were based on the bribes themselves; some cases just on violation of the broad accounting provisions. The bribes were paid all over the world: Middle East, Africa, Europe, and the Far East. The companies that violated the FCPA are both foreign and domestic. Two French companies paid a total of over $1 billion.

An observant employee, former employee, or vendor or customer of any one of these companies, or the employee of a competitor, might have given the tip that bribes were being paid to such parties to get or retain business. The bribes could even consist of such non-traditional payoffs as "world tours," gift cards, contributions to a political party, or hiring the unqualified children of public officials. Even commercial bribery (kickbacks to or from vendors, agents, etc., an offense that has been going on for centuries) not involving public officials may suffice. Whistleblowers in any of these cases, provided they satisfied the SEC rules, could become millionaires, courtesy of the US government.

The SEC does not announce which of its FCPA cases qualify for whistleblower awards. But it does provide year-by-year statistics on how many whistleblower tips it receives, and how many were FCPA related. Given the large amounts that may be available for awards, it may come as a surprise that, consistently over the 5.5 years of the program, less than 5% of whistleblower tips have concerned possible FCPA violations. For example, in FY 2015, of the total of almost 4,000 tips, only 186 related to the FCPA2. As Mike Koehler, the "FCPA Professor" recently observed: "I stand by my prediction-now 5.5 years old, that Dodd-Frank's whistleblower provisions will have a negligible impact on FCPA enforcement."3 He may be right (or not, since the SEC does not disclose this information). Recent statements by SEC officials suggest that the role of whistleblowers in FCPA cases may be considerably more than "negligible." At a recent FCPA panel discussion, the Chief of the SEC's FCPA unit indicated that the input of whistleblowers has become important to the FCPA enforcement program.4 Yet, if only 186 out of 4000 tips had anything to do with the FCPA, there appears to be an untapped opportunity for an astute whistleblower of any nationality potentially to receive a substantial sum of money from the U.S. government, provided he or she supplies original information leading to an SEC case involving a violation of the FCPA, and meets the various other criteria.

FCPA cases are often filed against large multinational corporations who can afford to, and do, always settle and pay large penalties, and pay on time (usually within two...