FCPA Claims

In the wake of the Watergate scandal, Americans’ faith in government was shaken. Seeking to restore some of that lost confidence, the federal government began investigations and other initiatives intended to demonstrate that the government was a trustworthy institution. One such effort was a study done by the Securities and Exchange Commission (SEC), trying to ascertain whether bribery was an issue in American business. To its horror, the SEC learned that American businesses were bribing foreign officials with hundreds of millions of dollars to support their work abroad. In response to this revelation, in 1977, Congress passed the Foreign Corrupt Practices Act (FCPA), 15 U.S.C. §§78dd-1 et seq., a statute intended to prevent such bribery.

Broadly speaking, FCPA prohibits individuals and entities from giving money or anything of value to foreign officials (or their agents) in exchange for the officials’ violation of their lawful duty or use of their office to gain business advantage. FCPA’s prohibitions apply to the following:

• Companies (including any of its agents, contractors, or other officials) that have US-registered securities or those that must file regular reports with the SEC
• “Domestic concerns,” i.e., U.S. citizens or companies with businesses that are organized in the U.S. or have the principal place of business in the U.S.
• “Territorial concerns,” i.e., foreign nationals or companies that take any action relating to bribery that occurs while in a U.S. territory.

Both the Department of Justice and the SEC enforce the FCPA. The SEC’s position is that it will investigate FCPA violations “anywhere in the world.” Therefore, the SEC accepts whistleblowing of FCPA violations alongside reports of other SEC violations, and some of its largest whistleblowing awards are for complaints relating to the FCPA.

Knowing that, conceptually, the Foreign Corrupt Practices Act (FCPA) outlaws bribery of foreign officials, is one thing. But what does that mean in practice? Particularly since the statute prohibits exchanges not just of money but anything of value. Let’s get more of an insight in terms of what specific activities are barred under the law.

First, the statute bars giving any foreign individual, political party, or candidate for office any “payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value,” in order to have them use their influence to benefit a business covered under the statute.

Exchanges of cash for promises to act seem fairly straightforward to understand. But since the statute also covers gifts and “anything of value,” it can become much more complicated.

For example, there may be tension between a true charitable donation and a bribe in disguise. Imagine that a medical equipment company gave a foreign government’s executive a donation of hospital supplies. If this was a straight charitable gift, that’s legal, but it is an FCPA violation if the firm was giving the supplies in exchange for the official’s hospitals increasing orders from the company. And even if it is a true donation, what happens if hospitals start ordering more of the product?

If the SEC were to investigate this donation, the issue might come down to whether or not the gift was made with a “corrupt intent.”

On the other hand, as expansive as the statute is, you don’t need to panic about every expense in a business trip: FCPA does allow bona fide reimbursements for expenses (such as travel and hotel lodging) directly relating to work to be exempt from FCPA.

Because the Foreign Corrupt Practices Act (FCPA) covers companies that are issuers of securities or other firms that must regularly submit reports to the Securities and Exchange Commission (SEC), the SEC investigates whistleblowing reports of FCPA violations, just as it does other securities violations. And whistleblowers of FCPA violations are also entitled to financial awards upon a successful resolution of the case. The awards can be substantial, as these recent examples can attest:

A whistleblower helped the SEC learn that Panasonic had offered a foreign government official a $200,000 consulting contract in exchange for his support in obtaining a $700 million contract with a state-owned airline. Panasonic subsequently paid the official $875,000 through a third-party vendor. Panasonic agreed to pay more than $143 million in fines, while the whistleblower subsequently received a $23 million award—one of the largest awards ever given by the SEC.

In 2019, Juniper Networks agreed to pay more than $11.7 million in fines for having paid for lavish leisure trips to Russian government officials, as well as creating false records that understated the true costs of these trips and funneling money through third parties. The Juniper whistleblower was awarded $3.5 million.

After being charged with FCPA violations from both the SEC and the DOJ, Zimmer Biomet agreed to pay more than $30 million in penalties in exchange for a deferred prosecution agreement and resolution of both cases. For tips leading to Biomet’s prosecution, a tipster received an award of more than $4.5 million.

Whether your whistleblower allegations include the FCPA or other securities violations, you need an attorney who can help you prepare the strongest report—one that can lead to an award. Experienced securities attorneys, such as those at the Silver Law Group and the Law Firm of David R. Chase, can do just that. For a free, confidential consultation, contact us or call today at (800) 975-4345.