The Role of the Whistleblower in FCPA Law
The Foreign Corrupt Practices Act law does not directly address the rewards and protections available to FCPA whistleblowers. However, under Dodd-Frank, the Securities and Exchange Commission is required to pay eligible whistleblowers who provide the agency with “original information” (derived from the whistleblower’s independent knowledge or analysis and not known by the Commission from any other source) with between 10 percent and 30 percent of the monetary sanctions imposed by the SEC following the successful enforcement of a judicial or administrative action, provided those penalties exceed $1 million. Given the potential size of fines that can be imposed on FCPA violators, in large cases the awards can be substantial.
The Dodd-Frank Act also includes protection for whistleblowers. The law prohibits employers from discharging, suspending, threatening, harassing, directly or indirectly, or discriminating against a whistleblower in any manner as a result of lawful whistleblower acts in providing information to the SEC or assisting an SEC investigation related to their information.
The Sarbanes-Oxley Act also contains provisions that prohibit employers from retaliating against whistleblowers. Under the law, an employee who is the target of retaliation may file a complaint with the Department of Labor and is eligible for reinstatement, back pay and other compensation.
The SEC has created rules that govern the administration of its whistleblower program. Two are particularly important for whistleblowers.
- Whistleblowers are encouraged to make internal reports to their companies and are eligible for awards even if they first provide their original information to the company itself and the company then informs the SEC of the violations. Under this provision, the whistleblower is credited with all the information provided by the company to the SEC, even information generated by the company’s internal investigation. This can sometimes expand the scope of the case and increase the amount of the whistleblower’s award. Whistleblowers have 120 days to report information to the SEC after first reporting internally and are treated as if they had reported to the SEC at the earlier reporting date.
- Whistleblowers may report violations to the SEC anonymously but to do so they must have an attorney represent them in connection with their submission. Potential FCPA whistleblowers should contact an attorney experienced in this complex area of law before taking action to ensure that their rights are protected and that they receive any reward to which they are entitled.
History of the Foreign Corrupt Practices Act
In the mid 1970’s investigations by the United States Securities and Exchange Commission (SEC) revealed that more than 400 American companies admitted making over $300 million in corrupt payments and bribes to foreign officials in government and politics.
A 1977 report prepared for the U.S. House of Representatives Committee on Interstate and Foreign Commerce revealed that those companies included many of the largest in the U.S., with at least 117 ranking among Fortune magazine’s top 500 U.S. corporations.
According to the report, high foreign officials were bribed to secure favorable action by foreign governments and “facilitating payments” were made to ensure that government functionaries completed certain ministerial or clerical duties.
Among the adverse consequences of such payments were anticompetitive effects on domestic companies, lawsuits, the seizure of valuable assets overseas, and “severe foreign policy problems for the United States.” In Italy, alleged payments by Lockheed, Exxon, Mobil Oil and other corporations to officials of the Italian government jeopardized U.S. foreign policy in that nation and the entire NATO alliance.
Congress passed the Foreign Corrupt Practices Act (FPCA) in 1977 in an effort to stop these corrupt practices and restore the integrity of American businesses at home and abroad. The FCPA was signed into law by President Jimmy Carter on December 19, 1977. The law addressed two principal areas of concern – the bribing of foreign officials to achieve or maintain business, and the need for transparent accounting systems.
The FCPA was amended in 1988 in response to several criticisms of the original bill. The amendments were signed into law as Title V of the Omnibus Trade and Competitiveness Act of 1988. One goal of the changes was to ensure that only deliberate “knowing” falsification of records or evasions of internal accounting controls– not unintentional or unwitting conduct – would be punished.
Other amendments addressed the fact that in some nations it was customary and lawful for a government official to accept a fee or payments in the course of doing business with the government. The 1988 amendments made facilitating such payments permissible if the purpose “is to expedite or to secure the performance of a routine governmental action.” Exceptions to the anti-bribery provisions were also created for payments or expenditures that were made to promote products and services.
It was widely viewed that the Foreign Corrupt Practices Act put U.S. companies at a disadvantage when competing with foreign companies in nations that did not have similar anti-bribery laws. This was addressed in 1997 when member countries of the Organization for Economic Cooperation and Development (OECD) signed the “Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.” OECD members agreed to make it a criminal offense for any person to bribe a foreign official to “obtain or retain business or other improper advantage in the conduct of international business.”
The following year, the Foreign Corrupt Practices Act was amended to conform to the OECD Convention. An anti-bribery provision regarding foreign companies was added to the FCPA law, which made it illegal for foreign companies or persons to pay such bribes while conducting business in the United States. The amendments also broadened the law’s jurisdiction to include FCPA violations that take place outside the United States and expanded the definition of prohibited acts to include those made to secure “any improper advantage.”