Bribery of foreign officials is against the law in the United States. So are attempts to silence or hinder whistleblowers. Brewer giant Anheuser Busch InBev (InBev) managed to do both and is now paying the price.
The Foreign Corrupt Practices Act (FCPA) prohibits companies from bribing foreign officials with the intent to influence those officials to assist the company to obtain or retain any sort of business advantage. Earlier this fall, the SEC found that InBev used third-party sales promoters to make illegal payments to Indian government officials. The company paid the bribes in the hopes of increasing both production and beer sales in India.
Although most people immediately think of bribery when they hear the term FCPA, the law has a second goal of making sure that companies keep adequate books and records. By not having proper accounting controls, InBev also violated the FCPA. Instead of recording the illegal payments as bribes, the SEC says the company tried to disguise them as legitimate payments to third party promoters.
In recent years, companies have become more sophisticated in how they hide illegal bribes. Gone are the days of a company writing a check to or handing a bag of loose cash to government inspectors or elected officials. Instead, companies now use third party intermediaries to make those payments. An audit of the company’s books would then show a payment to a consultant, marketing company, local law firm or the like. Absent an inside whistleblower, it would be nearly impossible to find the illegal payments.
The SEC says that numerous employees warned InBev management of the illegal payment scheme but were ignored. Worse, the agency says that Anheuser-Busch InBev crafted a separation agreement that required an employee to stop communicating with the SEC about possible FCPA violations. A former SEC senior officials claims the agreement called for the employee to pay $250,000 if he/she continued speaking with the SEC.
Violations of the FCPA are crimes. Legitimate businesses have no right to coerce workers from reporting violations. These supposed nondisclosure agreements have chilling effect on a would be FCPA whistleblower and are illegal.
Ultimately, the SEC found that the InBev violated the books and records provisions and the internal controls provisions of the FCPA and federal securities laws. The company settled the charges by agreeing to pay a $3 million penalty plus an additional $2,712,955 in disgorgement plus interest of $292,381. The company also had to agree to notify former employees that the any termination or separation agreement provisions designed to prevent employees from speaking with the SEC are invalid.
In announcing the settlement, an SEC spokesperson said, “Anheuser-Busch InBev recorded improper payments by its sales promoters in India as legitimate expenses in its financial accounting, and then exacerbated the problem by including language in a separation agreement that chilled an employee from communicating with the SEC… [The] threat of financial punishment for whistleblowing is unacceptable. We will continue to take a hard look at these types of provisions and fact patterns.”
FCPA Whistleblower Awards
As noted above bribing foreign officials, offering to pay bribes, or using intermediaries to pay bribes violates the Foreign Corrupt Practices Act. The law applies to all U.S. companies, foreign companies required to file with the SEC or companies that offer securities on U.S. stock exchanges. Public companies are also required to have adequate internal accounting controls and keep good books and records.
A violation of the FCPA can be both criminal and civil. The SEC’s Whistleblower Program pays insiders with information about FCPA and securities law violations awards of between 10% and 30% of whatever the government collects.
Although the FCPA does not directly have anti-retaliation provisions, the SEC Whistleblower Program, the Dodd Frank and Sarbanes Oxley Acts all have such provisions and can usually be used to quickly shut down illegal retaliation attempts. As seen by recent enforcement actions, the SEC has been especially aggressive with companies that try to stop or silence whistleblowers.
If you have information about foreign bribery or “cooked books” or just aren’t sure, call us. We have helped whistleblowers collect tens of millions of dollars in award. We never charge for services unless we recover money for you. And all consultations are completely confidential.