There have not been many Foreign Corrupt Practices Act (FCPA) “tips” in the U.S. Securities and Exchange Commission’s (SEC) whistleblower program. But one large bounty in a bribery case could change that drastically. As you will recall, the Dodd-Frank Act was passed in July 2010, creating the SEC Office of the Whistleblower. During October 2011 and September 2012 there were about 3,000 complaints, and referrals to the SEC Office of the Whistleblower. Only about four percent included allegations under the FCPA. The Chief of the SEC’s office, Sean McKessy, indicated that four percent is a conservative number because 28 percent of the complaints, tips, and referrals classified their allegations as “other.”
McKessy claims he isn’t concerned about the statistics, saying that’s because he believes many whistleblowers may not understand the importance of specifically citing the FCPA. He pointed out that the message from the SEC’s office is that all securities violations are in the scope of the office and if there is a violation, it should be reported. The purpose of the FCPA is to prevent companies from making or offering payments to foreign government officials to help acquire or maintain business. FCPA cases usually generate large penalties. Because of these large awards, public attention may be drawn and encourage individuals to file FCPA tips.
Mike Koehler, author of FCPA Professor Blog, predicted in 2010 that the whistleblower’s impact on anti-bribery would be insignificant, noting that the provision would only apply to FCPA scrutiny of public issuers. Koehler also noted that most FCPA investigations arise from voluntary company disclosures and eliminate whistleblowers as the middle man. Because it may take two to four years for a FCPA case to materialize, it’s much too soon to see the full impact of the whistleblower program.
Much of the recent activity involves foreign countries. For example, recent enforcement activity in China has highlighted bribery allegations developing from within a company’s ranks. Also, in July, GlaxoSmithKline reported that some senior executives in China may have bribed physicians and hospitals to increase drug sales. An internal whistleblower brought similar allegations to the company in January. In August, Sanofi SA reported accusations from a whistleblower of paying kickbacks to Chinese doctors for prescriptions and masking the payments as research grants.
The U.S. Supreme Court in Morrison v. National Australia Bank, Ltd. ruled that federal securities laws are presumed to not apply overseas. That 2010 ruling may complicate efforts to increase FCPA whistleblower activity. In June 2012, GE Energy USA LLC won a favorable ruling in light of the Morrison ruling. Clearly, that decision is in conflict with the policy objectives of Dodd-Frank. Financial institutions regularly conduct transactions in multiple countries in a short period of time. Encouraging the tipping program overseas may increase the number of FCPA whistleblowers. Many are paying attention to this statute and more people will likely come forward with claims when they see that someone has been rewarded for the risk they have taken to their career.
Lawyers in our firm’s in our Consumer Fraud Section continue to vigorously investigate fraud against both the federal and state governments. They encourage anyone who knows of fraudulent activities to step forward. Potential whistleblowers have the right to not be retaliated against for doing the right thing and reporting the fraud they have witnessed. Anyone considering doing the right thing and blowing the whistle are strongly urged to seek legal advice before doing so. The lawyers in our Consumer Fraud Section are very familiar with the federal False Claims Act and its state counterparts and can guide whistleblowers along the process. If you have any information and would like to speak with a lawyer, contact Andrew Brashier or Archie Grubb, lawyers in our Consumer Fraud Section, at 800-898-2034 or by email at Andrew.Brashier@beasleyallen.com or Archie.Grubb@beasleyallen.com.
Sources: SEC.gov, Justice.gov
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