Many of the world’s natural resources are found in third world and developing countries. While the United States is blessed with oil, natural gas, uranium and other minerals, much of what comes out of the ground comes from other countries. U.S. companies and multinational companies with certain U.S. ties are obligated to follow American anti bribery laws when seeking to drill or mine in foreign countries. The primary U.S. anti-bribery law is the Foreign Corrupt Practices Act (FCPA), a law that prohibits offering or paying bribes to foreign officials.
Most countries have similar laws prohibiting bribery. Like the FCPA, those laws prohibit not only the offering or payment of bribes but also their acceptance or solicitation. If you are seeking a drilling permit, tax break or trying to avoid a sanction or penalty, you can’t pay off a foreign official. Any payment to an official seeking to gain a business advantage is illegal.
Greed and corruption is rampant in some parts of the world making compliance with the FCPA difficult. Everyone has his or her hand out. By making anti-bribery a global effort, however, it is much easier to secure compliance.
The U.S. law, called the Foreign Corrupt Practices Act, applies to transactions anywhere in the world. The U.S. claims jurisdiction over U.S. based companies, companies who shares of stock are available on a U.S. stock exchange and on any transaction if part of the illegal behavior occurred in the U.S.
One industry with a particularly poor compliance track record is natural resources. This includes energy (oil and gas) as well as mining. Obtaining drilling or mining rights can be particularly competitive since these resources are often very scarce.
Rio Tinto and Foreign Bribery
One of the biggest mining companies in the world is Rio Tinto PLC. Based in London, the company has 55,000 employees and operates around the world. Last month the company fired two senior executives amid an on-going internal investigation about payments made to a consultant helping the company obtain mining rights in Guinea.
Companies have long ago learned that payments directly to a foreign official are easy to trace. Write a $10 million check to person in charge of issuing mining permits and even the most inexperienced auditor will catch that. Now, companies that violate the law often use intermediaries including consultants. The internal investigation at Rio Tinto involves a $10.5 payment to a consultant helping the company obtain mining rights in Guinea’s Simandou iron ore deposit.
Did the consultant do $10.5 million in work or was the consultant merely a funnel to some corrupt official’s pocket?
The stakes are high in this case as Simandou is thought to have some of the best and largest iron ore deposits in the world. Mining costs are also much lower in Guinea than they are in the U.S.
As a result of the probe, Rio Tinto has fired its legal affairs executive Debra Valentine and its energy and minerals chief executive Alan Davies. The company says it also notified the SEC, U.S. Department of Justice and authorities in the U.K. (The British have a similar law to our FCPA.)
A Bloomberg press report says that the two were let go because Rio Tinto’s Board of Directors “concluded that the executives failed to maintain the standards expected of them under our global code of conduct.”
FCPA Whistleblower Awards
The Foreign Corrupt Practices Act is unique among the world’s many anti bribery laws. Under U.S. law, a whistleblower with inside information about foreign bribery can earn a substantial award from the SEC. FCPA cases are investigated by both the SEC and Justice Department. A provision in the SEC Whistleblower Program allows the agency to pay awards based on a percentage of the amount collected from the company or other wrongdoers.
We were pleased to see that Rio Tinto self-reported its possible misconduct. Many companies are beginning to take the FCPA quite seriously. Fines are much lower for companies that both self-report and take action than for those that simply wait and hope they don’t get caught.
If you have inside information about bribery or influence peddling involving foreign officials, you may be entitled to an award. You do not even have to be a U.S. citizen to collect. Our whistleblower lawyers have helped our clients collect over $100 million in awards in recent years. You could be next.
Awards are generally available for the first to file. Wait too long and someone else may get the award. As was demonstrated here, wait too long and the company could also elect to self report.
To learn more, visit our FCPA foreign bribery page or give us a call. All inquiries are protected by the attorney – client privilege and kept confidential. Have questions or ready to become a whistleblower? Contact attorney Brian Mahany at or by telephone at (414) 704-6731.
MahanyLaw – America’s FCPA Whistleblower Lawyers