On May 5th the U.S. Securities and Exchange Commission (SEC) awarded a record breaking $279 million to a whistleblower who reported legal violations that resulted in three separate enforcement actions. Since the award, the Wall Street Journal has revealed that the award was related to a tipster who assisted the SEC with its record-breaking fine against Ericsson which resulted in a fine for Ericsson of over $1 billion. This means that the three enforcement actions the award was based on were the SEC’s almost $500 million fine against Ericsson in 2019, the DOJ’s almost $500 million fine against Ericsson in 2019 and the SDNY criminal charge against Ericsson’s Egyptian subsidiary in 2019. The award is striking for a number of reasons, but the new revelations show that the whistleblower was not just any whistleblower, but an FCPA whistleblower.
The Foreign Corrupt Practices Act (FCPA)
The Foreign Corrupt Practices Act (FCPA) is a U.S. law that aims to fight international bribery and corruption. The FCPA is enforced by the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC). The FCPA has two operative provisions, one of which prohibits bribery of foreign government officials, and the other which requires companies to have adequate bookkeeping and internal controls. These provisions usually work in tandem when it comes to enforcement, as violating the anti-bribery provisions of the FCPA usually violates the internal control provisions.
Fines for FCPA violations can be incredibly costly, and as noted above, the SEC and DOJ fined Ericsson over $1 billion dollars for violations of the FCPA in 2019.
FCPA Whistleblowers
FCPA whistleblowers are individuals who report violations of the Foreign Corrupt Practices Act. FCPA whistleblower do not have to be employees of the company they work for, they can be anyone with information on a potential FCPA violation, including a supplier, consultant, agent or subcontractor. FCPA whistleblowers also do not have to be the first to report bribery or corruption. FCPA whistleblowers often assist with ongoing investigations that were already in motion. FCPA whistleblowers can be handsomely rewarded for assisting with investigations through the SEC whistleblower rewards program. As mentioned above, the SEC awarded $279 million to a whistleblower who assisted with the investigation of FCPA violations at Ericsson.
The SEC Whistleblower Rewards Program
The SEC whistleblower rewards program was introduced in the aftermath of the 2007 financial crisis with an aim to encourage people to report legal violations to government regulators. The program allows individuals to report legal violations to the SEC anonymously, and if their tip leads to a fine of over $1 million, the whistleblower is entitled to 10-30% of that fine as a reward. The programme has paid out over $1 billion to whistleblowers and the average payout is approximately $5 million.
If you have information on a violation, here are five steps you should take immediately:
1. Speak To An Experienced Attorney
If you are thinking of reporting an infraction to an FCPA whistleblower program, it is critical that you speak with an experienced FCPA lawyer. If you report a violation to your employer or someone else before speaking with an attorney, you may face retaliation or lose out on the possibility of claiming a whistleblower award. This can happen even if your employer offers ‘confidential’ reporting or a ‘whistleblower hotline.’ FBR has experienced FCPA attorneys and offers free consultations that are completely confidential. Speaking to an attorney will cost you nothing, assist you in reporting the FCPA infraction, and often, the attorney may be able to report it on your behalf.
2. Get Familiar With The Elements Of An FCPA Violation
Whether you are reporting the violation yourself or using a whistleblower lawyer, the DOJ and SEC will expect you to have some basic knowledge about the FCPA. This means you should get familiar with the elements of these violations before you report. This is something you can discuss with your attorney, or check our article on how to recognize one. The key elements will be describing the government official involved, the item of value that was given or promised to them, and the motivation for the actions.
3. Gather Evidence To Support Your Claim
In addition to reporting what you have witnessed, you can also supply documents, emails, or other evidence to support your claim. This will help convince the DOJ and SEC to investigate the FCPA violation within the whistleblower program. However, it is also important that you do not obtain evidence illegally, such as by accessing other people’s property or devices without their permission. When figuring out what evidence to gather for the FCPA, your whistleblower lawyer will be able to advise what is safe to collect and what is not. Even if your employer has made you sign a Non-Disclosure Agreement (NDA), you are always entitled to speak to your attorney about these issues without breaching the NDA.
4. Decide Where To Report First
When reporting an FCPA transgression, you may be entitled to a whistleblower award for reporting and potentially protection from retaliation. However, much of this could depend on who you report to first; an accredited FCPA lawyer can help with this. For example, certain U.S. laws provide protections for individuals who report FCPA violations to whistleblower programs with federal regulators like the SEC and DOJ. However, those protections do not apply if the person only reports to their employer. Similarly, if you report an FCPA infraction to the SEC, you could be entitled to an SEC whistleblower reward, but reporting only to the DOJ may affect your ability to claim an award. In 2021, the SEC paid a whistleblower $28 million for reporting FCPA violations.
5. Don’t Delay In Reporting
Both the SEC and DOJ have specific time limits in which they can prosecute FCPA violations. An FCPA lawyer can walk you through the timeline for your specific claim. Generally, for certain violations, this could be as short as 3 years, but an investigation could take longer. If you want the SEC and DOJ to investigate the violation, you need to give them as much time as possible by reporting early. If you want to claim a whistleblower award, this is especially important, as if someone reports the same information you have before you, they will get the whistleblower award. Even if you are the only person with the information, the SEC can reduce a person’s award if they delayed reporting.
