Public bribery is an every day event in much of the world. Read the New York Post or Chicago Sun Times and it looks like a pretty common event in certain U.S. cities too. American companies and certain other multi-national businesses that bribe foreign officials can be prosecuted here in the United States for violating the Foreign Corrupt Practices Act (FCPA). Those prosecutions can also pay large whistleblower awards.
The SEC has a fairly new and robust whistleblower program. While many people think the SEC’s whistleblower awards are limited to securities fraud, awards are also available for FCPA violations involving accounting improprieties and bribery. This post is only concerned with the anti-bribery provisions of the law, although any violation can lead to a generous award.
Overview of Foreign Corrupt Practices Act
The Foreign Corrupt Practices Act makes it illegal to promise, offer, or make a bribe to a foreign government official in order to obtain or retain business. Even paying a bribe to secure some sort of advantage over a competitor is illegal. A second part of the law requires American businesses and companies that trade their securities on American stock exchanges to have proper internal accounting practices and accurate books and records.
Anti – Bribery and the FCPA
Companies are responsible for bribes that they or their agents make. The law extends to “indirect payments” meaning a company could violate the FCPA if it uses an intermediary or agent to make a bribe.
Often bribes are paid through intermediaries. Paying a bribe can be a crime in both the United States and in most foreign countries. (Foreign prisons are normally not as hospitable as U.S. jails either.) In an effort to distance themselves from criminal activity, many companies will hire a local lawyer, agent or “consultant” to grease the skids with local officials.
Would be whistleblowers should always take a close look at these third party relationships. Are these consultants being employed in a country with low transparency and / or high corruption? If you are not sure, the group Transparency International publishes a highly useful interactive map.
Does the agent or intermediary have a history or reputation of paying bribes?
What is the third party’s relationship with the foreign government? Red flags include an intermediary that is part of the royal family, once occupied a leadership role in the government or who is known for making lavish political donations.
How the intermediary gets paid can also raise red flags. Is the intermediary getting paid too much for his or her work? Does she insist on getting paid in advance? Does the intermediary provide no itemized invoice for services? Does he want to be paid through a shell company or in a jurisdiction where he does not do business (wire transfers to Swiss accounts)?
Often the intermediary will have no staff or not be equipped to handle the job for which it is contracted. For example, there is a big red flag if an American business contracts with an outside “sales agent” and that sales agent has no sales staff or is nothing more than a retired government official.
Companies that use intermediaries – and almost every company does – should do due diligence on their agents when employing them overseas. A company that doesn’t perform proper due diligence raises red flags as well as companies that try to do due diligence but are stonewalled by their vendor.
We have seen many cases where U.S. companies engage in what we call “willful blindness.” Simply handing over cash to an intermediary and saying please don’t tell me what you are doing with the cash, just help us get our permits expedited is “guilty” of willful blindness. And if their chosen agent uses the cash to bribe foreign officials, they are equally guilty of violating the FCPA.
Whistleblower Awards and the FCPA
As noted earlier, whistleblower awards are available for those who report foreign bribery. Under the SEC’s whistleblower program, whistleblowers can receive between 10% and 30% of whatever the government recovers from wrongdoers. The one catch is that their must be at least $1 million in sanctions levied by the government.
To qualify for an award, you must be the original source of the information. That means the information you possess must be derived from your own independent knowledge and not from public sources like the media.
Finding the Right Attorney
Unlike the False Claims Act which requires a lawyer, you don’t technically need a lawyer to file a claim under the FCPA. Unfortunately, the SEC only accepts and pays whistleblower awards on less than 1% of the claims submitted to them.
If you are interested in receiving an award, you need a lawyer to investigate and help put together a claim. With prosecutors taking less than 1% of the tips that come in, the best way to assure that your claim will be seriously considered is to package like a prosecutor would want to see the case. Mahany Law founder Brian Mahany is both a former assistant attorney general and white collar criminal investigator. Our firm also utilizes three former SEC Enforcement Division lawyers to help us prepare our cases.
Having a lawyer is also essential if you later suffer retaliation for submitting a complaint. (The SEC gets an A grade for maintaining confidentiality but there are no guarantees.)
Interested in Learning More? Our lawyers at MahanyLaw have helped clients collect over $100 million in whistleblower awards.
MahanyLaw – America’s FCPA Whistleblower Awards Lawyers
Like what you are reading? See Part Two of this two-part series, Latin American Corruption = More Whistleblower Awards (FCPA Post), here.