The Dodd-Frank Act enables whistleblowers, or those with insider tips about fraud under the Foreign Corrupt Practices Act, to recover potential rewards for their role in sharing inside information. This act was passed in 1977 following concerns of bribes being made to foreign officials in order to help level the playing field for companies to engage in honest business.
Since the law targets international corruption and bribes, many whistleblowers might not realize their potential rights under this act.
The FCPA specifically prohibits payments of bribes to any foreign official for the intention of retaining or obtaining business. The enforcement of this anti-bribery provision is assisted by insider tips shared by whistleblowers. To encourage whistleblowers to take the next step in providing such key information, whistleblowers receive potential rewards based on how they provide information and whether or not it is original and not otherwise known to the government at the time.
Since the FCPA enables enforcement actions to extend beyond U.S. borders and to companies who have business in the U.S. and have violated U.S. law. As such, it is one of the most complex laws impacting whistleblowers today.
It is estimated that whistleblowers from more than 110 different countries have submitted tips and information to the U.S. government about violations of the FCPA. Whistleblowers are, therefore, viewed as a very effective reporting mechanism for instances of bribery.
Who is Covered Under the FCPA?
The anti-bribery sections of the FCPA apply to certain people and companies. These include:
- Any individual in the U.S.
- Foreign public and U.S. public companies listed on stock exchanges
- Those foreign/U.S. public companies required to file periodic SEC reports
- Some companies and foreign people acting while in U.S. territory
The interpretation of who can be classified as a “foreign official” has been exercised quite broadly by the courts. Many people who believe they have information about possible FCPA violations will first review their case directly with an attorney to better understand whether or not the scenario at hand meets the legal requirements for a case.
The FCPA requires that companies or issuers have appropriate internal controls. These controls must show reasonable assurance that assets are accounted for and that transactions are executed in line with the authorization of a management official. In general, this means that most people or businesses falling under the jurisdiction of the FCPA have to keep accurate records and books.
FCPA Violation Examples
The internal control provision of the FCPA details some of the different kinds of FCPA violations. These can include:
- Misclassifying a bribe as a typical business expenses
- Trying to falsify any documents to hide evidence of bribery payments
- Overbilling on a regular payment or invoice with an agreement that the overage is to cover a bribe
- Hiring practices built on referrals from government officials and client executives
Bribes that are made for any of the following reasons could fall under the FCPA:
- Bribes intended to avoid termination of a contract
- Bribes to avoid penalties or taxes
- Bribes to securable more favorable tax treatment
- Bribes to eliminate or reduce customs duties
- Bribes to avoid permit or license requirements
- Bribes to get special exceptions to regulations
It’s important to know that actual bribes as well as promises and offers to bribe are all covered under the FCPA. Bribery is not just limited to money, either. It can include consulting fees or commissions passed through other parties in addition to any other item of consideration like meals, travel, gifts, or entertainment.
When a person discovers evidence of these kinds of actions and promptly reports it, the government completes an investigation and decides whether or not to proceed with sanctions. If sanctions are assessed and collected based on the original information from the whistleblower, that party is eligible for a portion of the total award. Both the SEC and the DOJ are involved in the process of investigating bribes that violate the FCPA.
The government has limited resources to be able to accomplish this, however, and therefore relies on tips from whistleblowers to be able to follow through with investigations and possible sanctions.
Since 2011, the SEC has given more than $384 million in awards to whistleblowers, with the largest of those being between $37-50 million.
When Are Awards Provided to Whistleblowers?
The key to whether or not a reward is offered is if the monetary sanctions collected by the whistleblower are greater than $1 million. The person who provided original information becomes eligible for between 10% and 30% of the monetary sanctions collected.