SEC, DOJ Continue to Hit Financial Services Sector with Record Fines for Foreign Bribery
Will the Foreign Corrupt Practices Act (FCPA) survive Donald Trump? We worried about that during the early days of the new administration. Even before President Trump took office, he appeared to be strongly opposed to the powerful anti-bribery law.
As far back as 2012, Trump said the FCPA was a “horrible” law that hurts American businesses. After the election, he allegedly told Rex Tillerson, then Secretary of State, that American companies were being unfairly hurt by laws prohibiting them from bribing foreign officials.
The Attorney General, however, says that America remains committed to prosecuting companies that offer bribes to government officials.
So who is right?
Looking back over the last 17 months since Trump took office, it appears that Jeff Sessions is right. The government remains committed to enforcing the FCPA. And that is great news to honest companies and whistleblowers.
Telia Company AB Pays Billion Dollar Penalty!
Last year, companies paid a record $2 billion dollars in penalties for violating the Foreign Corrupt Practices Act. Much of that $2 billion came from Swedish telecom giant Telia Company AB. Prosecutors say that Telia and its Uzbek subsidiary, Coscom, paid approximately $331 million to an Uzbek government official to influence the government and how it awarded mobile phone licenses in Uzbekistan.
The case was investigated by the SEC, IRS and Homeland Security in the United States and the Public Prosecution Service of the Netherlands. In announcing the resolution last year, an IRS spokesperson said, “Today marks the second resolution of proceedings against corporate entities who have engaged in a global bribery scheme of government officials. It also further demonstrates the dedication we have to identifying illegal financial transactions being used for bribery in the international community. It is important that the global economy remain on a fair playing field and IRS will remain committed in our efforts to dismantle these kinds of corrupt financial schemes.”
Foreign Bribery Prosecutions Continue in 2018
If there was any doubt that the $965 million fine levied on Telia Company AB, earlier this month the Justice Department announced that French bank Societe Generale would pay $585 million for bribing Libyan officials during the dictatorship of Muammar Qaddafi.
Prosecutors say that Société Générale paid bribes to a Libyan “broker” between 2004 and 2009. These payments were used in part to influence the Libyan government to “steer” investments to Société Générale.
The bank allegedly paid the broker a commission of 1.5 to 3 percent based on the amounts invested by Libya. Part of that commission was kicked back to senior government officials. Court documents say that the bank paid over $90 million in commissions. At least one of the investments made in return exceeded $3 billion. Prosecutors say that the bank made over one half billion dollars in profits.
And who facilitated this illegal scheme? Prosecutors say that U.S. brokerage firm Legg Mason. They were separately fined $64 million.
In addition to the size of the fines, this case is also notable in that involved financial institutions. Banks have historically not been targets of foreign bribery schemes. Despite their many failings, we often don’t see bribes paid to foreign government officials.
Recent settlements against Societe Generale and Legg Mason and others may signal that the SEC and Justice Department have a new focus.
Financial Services and Foreign Corruption Prosecutions
Societe Generale and Legg Mason are the newest prosecutions against financial services for firms for allegedly bribing foreign government officials. But there have been others.
In 2016 America’s largest bank, JPMorgan Chase, agreed to pay $264 million to settle charges that it violated the Foreign Corrupt Practices Act. Prosecutors say that over a seven year period, the bank hired approximately 100 people at the request of government officials in China and elsewhere in Asia. The program was internally dubbed as the “Sons and Daughters Program.”
Instead of traditional cash or monetary bribes, the consideration “paid” was giving a government official’s son or daughter a lucrative bank job in return for being allowed to expand or generate new revenues in that area of the world. Prosecutors believe that Chase made $100 million in revenues by hiring the kids of dignitaries and officials.
A senior official at the SEC said, “JPMorgan engaged in a systematic bribery scheme by hiring children of government officials and other favored referrals who were typically unqualified for the positions on their own merit. JPMorgan employees knew the firm was potentially violating the FCPA yet persisted with the improper hiring program because the business rewards and new deals were deemed too lucrative.”
Another SEC official said that no child of a foreign official referred to the program was ever denied a job.
The SEC took aim at Bank of New York Mellon for a similar scheme in 2015. The SEC accused the bank of hiring three interns during the summer of 2010 in return for getting $71 million in assets to manage for a Middle Eastern sovereign wealth firm. The three interns were relatives of government officials. A New York Times story claims an internal email at the bank acknowledged the scheme, “I am working on an expensive ‘favor’ for [Official X] — an internship for his son and cousin (don’t mention to him as this is not official).”
FCPA and Whistleblower Rewards
The United States is the only country in the world that routinely pays rewards to whistleblowers who step forward with inside information about misconduct involving foreign government officials.
Under the SEC’s whistleblower program, people with inside information about foreign official bribery can earn huge whistleblower rewards. These rewards are a percentage of how much money the government recovers from the wrongdoers. With rewards of up to 30%, it is easy to see how a reward in the Societe Generale or Telia case could be worth tens of millions of dollars.
The SEC issues tens of millions of dollars of awards but getting one can be tricky. That’s because the SEC doesn’t have the resources to investigate every one of the thousands of tips received each year. The trick to getting an SEC whistleblower award is proper preparation and presentation. Our whistleblower legal team includes the former SEC chief investigator, former enforcement counsel from the FDIC and Office of the Comptroller of the Currency. We know how to prepare bank and financial services whistleblower claims so that they receive the attention they deserve.
All inquiries protected by the attorney – client privilege and kept completely confidential.
MahanyLaw – America’s SEC Whistleblower Lawyers