- March 20, 2014
- Labaton Sucharow
This is the first in an ongoing series of posts focusing on current trends in SEC enforcement actions, and how those trends impact current and potential whistleblowers. We’ve chosen to highlight actions brought under the Foreign Corrupt Practices Act (“FCPA”) first, because the FCPA continues to be a top priority for the Enforcement Division and, in the words of Enforcement head Andrew Ceresney, represents “increasingly fertile ground for Dodd-Frank whistleblowing.”
Background on Foreign Corrupt Practices Act
Enacted in 1977, the FCPA is one of the government’s most powerful tools against public corruption, both in the U.S. and abroad. The FCPA seeks to prevent corruption into two interconnected ways: first, it broadly prohibits bribery of any foreign official acting in his or her official capacity to influence a decision of that official, or to obtain an improper advantage, in order to obtain or retain business.
Second, it requires companies to maintain accurate books and records of financial transactions and establish meaningful internal controls over the company’s assets – making it easier for authorities to detect possible fraud or corruption. Critically, the Act’s anti-bribery provisions are not applicable solely to U.S.-based companies, but instead reach any “issuer,” meaning a company that lists either its stock or American Depository Receipts (“ADRs”) on a national securities exchange in the U.S. or is otherwise required to file reports with the SEC. Likewise, in the case of such issuers, the corrupt conduct need not take place inside the U.S. to give rise to an FCPA violation: instead, it most often takes place in foreign jurisdictions, making the FCPA global in scope. (More details regarding the legal requirements of the FCPA are available in the SEC and DOJ’s excellent FCPA Resource Guide).
The SEC, which enforces civil violations of the FCPA, has made the Act a centerpiece of its enforcement efforts, bringing scores of cases combating bribery in a huge range of countries from Uzbekistan to Indonesia to Iraq. The majority of these enforcement actions are now handled by a specialized FCPA unit, which has recovered more than $1 billion in sanctions since its launch in 2010 (more information about these cases can be found in our SEC Sanctions database). These victories have included a massive $350 million settlement with German-based Siemens AG (which also agreed to pay more than $1 billion to other U.S. and German regulators), a $250 million settlement with oilfield services company Weatherford International (which was shared with other agencies); and a $29 million settlement with pharmaceutical giant Eli Lilly.
While the SEC’s FCPA unit has already racked up a long string of achievements, we believe that the SEC Whistleblower Program has the potential to dramatically enhance the SEC’s FCPA enforcement program – a view that appears to be shared by the SEC itself. According to Ceresney, agency received 149 whistleblower tips in fiscal year 2013, and expects that number to grow going forward. These whistleblower tips are likely to be particularly helpful to the SEC in the context of the FCPA, since bribes occurring in foreign countries – which are often routed through intermediaries or otherwise disguised – can be exceedingly difficult for a U.S. regulator to detect without whistleblowing help. Even some private companies – which stand to benefit if they self-report FCPA violations and/or cooperate with the SEC – are now recognizing the value of internal whistleblowing and encouraging their employees to come forward with information. The SEC Whistleblower Program is likely to be particularly helpful in generating actionable intelligence about foreign bribery because its rules do not require the whistleblower to be a U.S. citizen to collect a monetary award: instead, whistleblowing tips can now come from every corner of the world. Our hope is that whistleblowers both in the U.S. and abroad will mobilize to fight public corruption, making companies more cautious about engaging in bribery in the first place.
