It’s New Year’s Day. Last week financial publications everywhere were hyping end of the year buy and sell recommendations. Nasdaq claims that the network technology giant Ciena Corporation missed its earnings projections… Seeking Alpha says the company is back in the “buy zone.”
What amazes us is the Ciena news that everyone missed. On December 22nd, Ciena Corporation filed its form 10-K with the SEC. While we know the average John Q. Public on the street doesn’t read these massive filings, investments professionals do.
The Form 10-K is called an annual report and it usually contains a legal and litigation section. Public companies must disclose if they are subject to litigation or government investigations. Ciena’s “Legal Proceedings” section is essentially blank. It does make reference to a footnote buried on page 109 of the report, however.
What does the footnote say?
“During fiscal 2017, one of Ciena’s third-party vendors raised allegations about certain questionable payments to one or more individuals employed by a customer in a country in the ASEAN region. Ciena promptly initiated an internal investigation into the matter, with the assistance of outside counsel, which investigation corroborated direct and indirect payments to one such individual and sought to determine whether the payments may have violated applicable laws and regulations, including the U.S. Foreign Corrupt Practices Act (“FCPA”). In September 2017, Ciena voluntarily contacted the Securities and Exchange Commission (“SEC”) and the U.S. Department of Justice (“DOJ”) to advise them of the relevant events and the findings of Ciena’s internal investigation. With the direct oversight of the Board, Ciena continues to cooperate fully with the SEC and DOJ in their review of the investigation.”
In regulatory speak, Ciena is being investigated for a violation of the Foreign Corrupt Practices Act or FCPA. That law prohibits U.S. companies or foreign companies that sell their securities on a U.S. exchanges from bribing or offering to bribe foreign government officials.
Each year the government issues hundreds of millions of dollars in fines under the Foreign Corrupt Practices Act. Whistleblowers with inside information about these violations can earn up to 30% of those fine monies under the SEC Whistleblower Program.
Ciena’s form 10-K doesn’t say much else. We know the probe is confined “to a country in the ASEAM region.” That means Thailand, Vietnam, Indonesia, Malaysia, Philippines, Singapore, Myanmar (Burma), Cambodia, Laos, and Brunei.
None of those countries are big markets for Ciena Corporation. The company says that it generates less than 1.5% of its revenues from that particular country.
Simply because Ciena’s products aren’t sold there doesn’t mean that the company doesn’t have a big footprint there. We often see in mining and oil exploration cases that the officials getting the big bribes are the countries where the products are coming from. For an oil company, that could mean the bribes are being paid in Venezuela or Nigeria where the wells are located.
In our opinion, Ciena’s form 10-K annual report disclosure was also less than forthcoming for other reasons.
How big is Ciena’s problem? It’s hard to tell but we do know that just days before the report filing Ciena’s CEO, General Counsel, CFO, Chief technology Officer and Senior Vice President for Network Platform all dumped thousands of shares of their personal stock. (They probably didn’t need to sell as the financial media still hasn’t reported on the startling foreign bribery allegations.)
Our big fear is that bribes might also being paid elsewhere. Ciena hasn’t been charged with anything yet. In our experience, however, if Ciena has paid bribes to government officials in Laos, for example, there is a good chance they are paying bribes in other places. Corporate criminals are often serial opportunists. And that means the potential to earn a cash whistleblower award.
Congress passed the FCPA to provide a level playing field for honest businesses. No one likes companies that get ahead by cheating. Business or tax breaks shouldn’t go to the company that can pay the biggest bribes.
Call for Ciena Corporation Whistleblowers
MahanyLaw is a leading whistleblower law firm. We help honest employees stop fraud, fight corporate greed and help get our whistleblower clients the best cash awards possible.
We know from the company’s Form 10-K that the initial report came from “one of Ciena’s third party vendors.” Although most whistleblowers work for the company they are reporting, outside vendors and contractors often have inside information too.
In fact, in our experience, companies that violate the Foreign Corrupt Practices Act often use intermediaries to facilitate the bribes.
Because public companies must be audited every year, some companies will disguise bribes as consulting fees or use another generic sounding label. They pay the bribe to an intermediary who then pays the foreign official.
Do you have information about foreign bribery? Keep reading! You may be entitled to a large cash award.
Foreign Corrupt Practices Act Includes Record Keeping Violations
Paying bribes to foreign officials is clearly illegal. The FCPA also has a books and records section that makes it illegal to create phony accounting entries or hide bribes through creative bookkeeping.
Hiding transactions from auditors and investors is just as illegal as the bribes themselves.
Compliance Officers as Whistleblowers
Public companies today are mandated to have compliance officers and auditors. In our experience, those folks are highly trained and great at what they do. Companies make a big mistake when they ignore their compliance professionals. Some compliance officers and accountants think they can’t report their employer, however. In fact, we have seen some employment agreements that appear to prohibit whistleblowing.
The SEC takes a dim view of these golden handcuffs. In most instances, they are illegal. So is retaliating against whistleblowers.
If you have information about foreign bribery or phony corporate books and records involving public companies, call us. We will gladly help you determine whether you qualify for an SEC whistleblower award. In many instances, we can keep your name totally anonymous.
We understand it is hard to report one’s employer. If the company is doing illegal things or continues to ignore warnings, reporting may be the best option. In fact, if you are a compliance officer and don’t report, you could wind up being responsible.
Call us to discuss your case. The call is confidential, free and with no obligation. If you have a case and we take your case, all services are provided on a contingency fee basis meaning you never pay unless we win and collect money for you.
For more information, visit our FCPA Foreign Bribery information page. Ready to speak with an experienced lawyer? Contact us online, by email at or by phone at (202)-800-9791. All inquiries protected by the attorney client privilege and kept confidential.
MahanyLaw – America’s Foreign Corrupt Practices Act and SEC Whistleblower Lawyers