Do you want to do business in Russia or China? Many companies do as they are huge markets. As one California company learned last week, buying trips for foreign government officials in the hopes of getting business in these countries is illegal.
Sunnyvale, California based Juniper Networks will pay $11.7 million to settle charges that it violated the Foreign Corrupt Practices Act (“FCPA”). Under the current SEC Whistleblower Program, reporting FCPA violations could earn you a sizeable cash whistleblower reward.
The FCPA has both a foreign bribery component and a books and records provision. Often, it is hard for prosecutors to prove payment of the bribe. After all, foreign government officials aren’t too keen on testifying. (Foreign bribery can also be a criminal offense making these officials really reluctant to testify and often beyond the subpoena power of the Justice Department. Without a witness, it becomes difficult for the government to prosecute the actual bribery.)
Congress anticipated these witness and proof problems. They inserted a books and records provision in the Foreign Corrupt Practices Act to give prosecutors an alternative way to prosecute foreign bribery charges. Just like Al Capone got sentenced to prison over taxes and instead of his violent gang related behavior, an FCPA records violation is what often trips up businesses that pay bribes.
A business can either falsify its books to hide the bribe – a violation – or properly post the bribes and get caught for admitting their misdeeds. That is what happened to Juniper Networks.
According to the SEC,
“From 2008 through 2013, certain sales employees of the Russian representative office of Juniper’s subsidiary, JNN Development Corp. (“JNN”) secretly agreed with third party channel partners to increase the incremental discount on sales made to customers through those channel partners without passing those increased discounts on to customers. Instead, the channel partners diverted the additional discounts into a fund held by the channel partners for travel and marketing expenses. These off-book funds were referred to as “common funds” and were directed in part by JNN sales representatives. These “common funds” were used in part to pay for customer trips, including trips for government officials, some of which were predominately leisure in nature and had little to no educational or business purpose. Included in the customer travel paid for through the “common fund” were instances of customer travel for foreign officials to various locations where there were no Juniper facilities or industry conferences related to Juniper’s business.”
In other words, Juniper Networks used a subsidiary to disguise bribes as a discount. Those discounts weren’t given to customers, however. They were instead diverted and used to pay travel expenses… travel expenses that were obviously for leisure travel. (Some of the trips included national parks, amusement parks and even trips for families of the foreign government workers.
What’s worse, the SEC says the parent company learned of the improper diversions of funds in 2009 but allowed it to continue until 2013.
By using third parties, Juniper could direct the monies as they saw fit but without having that money appear on its books and records.
And it was not just happening in Russia. Juniper Networks’ Chinese subsidiaries falsified records and submitted trips for approval after the travel had occurred. Those trips were also not properly recorded in the company’s books and records.
After the SEC began to investigate, the company cooperated. They also agreed to realign their compliance efforts, require preapproval for any travel offered outsiders and train employees on anti-corruption measures.
Because they cooperated, Juniper got off lightly. Fines, penalties and interest of 11,745,018 were imposed. Juniper Networks was allowed to settle without any admission of wrongdoing.
The company said in a prepared statement, “Operating with the highest ethical standards is of the utmost importance for Juniper Networks, and we are committed to ensuring that we act with honesty and integrity consistently in everything we do,”
Offering Trips or Jobs Is Bribery
Gone are the days of paying bribes in the form of wads of cash. That practice still goes on and in fact we are told it is common in certain countries in Africa and in Haiti. Businesses don’t like paying cash, however, because it leaves a paper trail and is harder to hide.
Today many bribes are made in the form of job offers, consulting fees to third parties or vacation travel. Earlier this year several banks found themselves in hot water for offering to hire the sons of daughters of Chinese officials as paid interns. And this isn’t the first case where we saw the method of payment being travel.
The FCPA doesn’t require bribes be in cash. It is simply illegal to give something of value to a foreign government official in return for or with the expectation of gaining some type of business advantage. As we have seen above, that can be travel or even hiring the kids of foreign officials.
These cases can be fact specific but there is usually little doubt as to what is a bribe. For example, it is okay to hire the daughter of Chinese official if she happens to be the best candidate for the job. But hiring the Russian banking commissioner’s son for a no show job in return for quicker licensing would be illegal.
Cash Rewards for Whistleblowers
Congress understood that many would-be whistleblowers are afraid to step forward. That is why the SEC Whistleblower Program allows whistleblowers large cash rewards equal to up to 30% of whatever the government collects from the wrongdoer. On a case like Juniper Networks, that could be a reward of $3,525,000.00!
Collecting an SEC reward fin foreign bribery cases generally requires four things:
You must be the first to report,
- You must have inside information about the scheme,
- There must be some nexus with the SEC (publicly traded company, SEC filer), and
- The bribes must be paid or offered to a foreign government official (non-government officials don’t count).
Two great benefits of the SEC program are anonymity and protection from harassment.
Ready to learn more? Visit our FCPA Foreign Bribery Whistleblower Rewards page. Think you have a case? Contact us online, by email or by phone . Cases accepted throughout the United States and worldwide.