Foreign bribery and FCPA violations
Foreign Bribery and FCPA Violations
Under the Dodd-Frank Act’s SEC Whistleblower Program, whistleblowers may receive a reward for reporting a violation of the U.S. Foreign Corrupt Practices Act (“FCPA”) to the SEC. As detailed in the SEC’s Resource Guide, the FCPA prohibits the payment of bribes to foreign officials to assist in obtaining or retaining business. This anti-bribery provision broadly applies to:
U.S. persons; U.S. and foreign public companies that are listed on the stock exchanges in the United States or that are required to file periodic reports with the SEC; and certain foreign persons and companies that are acting while in U.S. territory. Courts have interpreted “foreign officials” broadly. For example, employees of State-owned or State-controlled entities are considered foreign officials under the FCPA. This may include a variety of company types, since the only requirement is that the entity is “controlled by the government of a foreign country that performs a function the controlling government treats as its own.” United States v. Esquenazi, 752 F.3d 912 (11th Cir. 2014), cert. denied, 135 S. Ct. 293 (2014).
The FCPA also requires issuers to maintain adequate internal controls. These controls must provide reasonable assurance that transactions are executed and that assets are accessed and accounted for in accordance with management’s authorization. By maintaining these controls, companies are able to provide more-accurate books and records. Common violations of the FCPA internal-control provision include:
falsifying documents to conceal bribery payments; fraudulently mischaracterizing bribes as normal business expenses; overbilling with an understanding that some of the payment is a bribe; and inappropriate hiring practices, such as hiring candidates solely based on referrals by client executives and government officials. There is no “materiality” consideration under the books-and-records provision of the FCPA—any failure is considered a statutory violation.
SEC Whistleblower Program Under the SEC Whistleblower Program, whistleblowers may be eligible for monetary awards if they voluntarily provide the SEC with original information about violations of federal securities laws, including FCPA violations, that leads to a successful enforcement action resulting in monetary sanctions in excess of $1 million. A whistleblower may receive an award of between 10% and 30% of the total monetary sanctions collected.
Since 2011, the SEC Whistleblower Office has issued more than $1 billion in awards to whistleblowers. The largest SEC whistleblower awards are $114 million and $110 million. In 2019, the total penalties for FCPA violations exceeded $2.5 billion. Whistleblowers disclosing FCPA violations can be eligible for significant awards.
SEC Whistleblower Awards for Disclosures of Foreign Bribery and FCPA Violations If a whistleblower’s information leads to a successful enforcement action in which the SEC collects monetary sanctions totaling more than $1 million, the whistleblower is eligible to receive between 10% and 30% of the monetary sanctions collected as a whistleblower award. In addition, the SEC will pay awards based on amounts in certain related actions, such as a successful enforcement action brought by the U.S Department of Justice (DOJ).
For example, on December 15, 2008, Siemens AG agreed to pay $350 million in disgorgement to settle the SEC’s charges of violating the FCPA, as well as a $450 million fine to the DOJ to settle criminal charges, totaling $800 million in monetary sanctions. If these two actions occurred today and were based on original information voluntarily provided to the SEC by an eligible whistleblower, the SEC would be required to pay an award to that whistleblower of between $80 million (10% award) and $240 million (30% award) for the two actions. See additional examples of FCPA enforcement actions below.
To learn more about the FCPA, see the DOJ’s FCPA Fact Sheet and FCPA Resources Guide.
Top Enforcement Actions for FCPA/Foreign Bribery Violations The table below identifies some of the top SEC and DOJ enforcement actions against companies for FCPA violations: