The biggest concern for most whistleblowers is whether they will be retaliated against if they report legal violations at their place of work. This is especially true for whistleblowers who report a potential violation of the Foreign Corrupt Practices Act (FCPA). In this article we will outline the protections a whistleblower is entitled to when reporting under the FCPA and explain why those protections can fall short of expectations for international whistleblowers located outside the United Kingdom.
The Foreign Corrupt Practices Act
The Foreign Corrupt Practice Act (FCPA) is a federal law that was enacted in 1977 to address the issue of bribery and corruption in international business transactions. The FCPA prohibits U.S. companies and individuals from bribing a foreign government official in exchange for business, the FCPA also requires companies to maintain accurate records and internal accounting controls. FCPA enforcement is undertaken by both the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC). Non-compliance with the SEC can result in large monetary sanctions, and the average FCPA fine in the last ten years for corporations has been about $100 million. The FCPA is a U.S. law, but is mirrored by foreign laws such as the UK bribery Act.
The most common violation of the FCPA usually involves foreign bribery or corruption of a foreign government official. Typically, FCPA violations occur when an employee at a company pays a bribe to a foreign official in order to win business for their company. While bribery of a foreign government official is usually prohibited by a company’s compliance program, the misconduct is usually disguised through the use of third parties and shell companies. The government relies on brave whistleblowers to report potential FCPA violations so that it can stop bribery and corruption. As a result, whistleblowers play a critical role in FCPA enforcement.
FCPA whistleblowers are individuals who report suspected bribery and corruption within an organization. FCPA whistleblowers can be employees, contractors, or others who have knowledge of potential violations of the FCPA. Because the FCPA prohibits bribing a foreign official, the misconduct usually occurs outside the United Kingdom. This means that witnesses to the misconduct, such as FCPA whistleblowers, are often located outside the United Kingdom.
Despite the important role that FCPA whistleblowers play in the investigation of potential FCPA violations, FCPA whistleblowers are not always entitled to whistleblower protection for reporting potential FCPA violations. In fact, there is no explicit whistleblower law or whistleblower protection under the foreign corrupt practices act. However, FCPA whistleblowing is a protected activity under federal law and protection for FCPA whistleblowers can be found in two other federal laws: Sarbanes-Oxley (SOX) and the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).
FCPA Whistleblower Retaliation Is Prohibited Under SOX and Dodd-Frank
Both SOX and Dodd-Frank make it illegal for most U.S. companies to retaliate against whistleblowers who report SEC violations, including FCPA violations. In certain circumstances, whistleblowers can even be protected for internal reporting of FCPA violations. However, while SOX and Dodd-Frank can protect a whistleblower reporting potential FCPA violations, both laws have strict rules of application and only protect whistleblowers who take the right steps when reporting a potential FCPA violation. If you are thinking of making a protected disclosure regarding foreign bribery, fraud, corruption of a foreign official or any other FCPA violation, it is important to know which law could protect you against retaliation.
Sarbanes-Oxley
SOX is not strictly a whistleblower protection law but it does contain an anti retaliation provision that can protect individuals who work for publicly traded companies and report FCPA violations. Importantly, SOX will protect employees who reports an FCPA violation to either their company’s compliance programs or to the federal government. Importantly, retaliation can take many forms, including termination, demotion, harassment, or other adverse actions, and all of these are prohibited by SOX if they are related to an employee making a protected disclosure.
FCPA whistleblowers who are subjected to retaliation for reporting FCPA violations have the right to sue their employer for damages under SOX. The FCPA whistleblower must file a complaint with the Occupational Safety and Health Administration (OSHA) within 180 days of the alleged retaliation. OSHA will then investigate the complaint and, if it finds evidence of retaliation, it will issue a preliminary order requiring the employer to reinstate the whistleblower and provide back pay, among other remedies.
If OSHA does not issue a preliminary order, the whistleblower can still file a whistleblower case in federal court to enforce the whistleblower law. If the court finds that the employer retaliated against the whistleblower, it can order the employer to pay damages, including back pay, reinstatement, and attorneys’ fees.
Dodd-Frank Act
Similarly, the Dodd-Frank Act has whistleblower provisions that protect whistleblowers who work for publicly traded companies who report foreign bribery, corruption, fraud, securities fraud and other violations of the FCPA. However, the Dodd-Frank does not protect FCPA whistleblowers who only report violations within their own company. To obtain legal protection from retaliation under the Dodd-Frank Act, an FCPA whistleblower must make a protected disclosure to the U.S. Securities and Exchange Commission (SEC). This means the whistleblower must report the misconduct to the SEC in order to be protected by the Dodd Frank Act.
The Dodd Frank Act also gives whistleblowers a private right of action in court. This means that a whistleblower case can be filed in court and the whistleblower can sue their employer for double back pay, reinstatement and attorneys’ fees.
Protection For Whistleblowers Outside the United Kingdom
Unfortunately, the anti-retaliation protections under both SOX and Dodd-Frank generally do not apply to international whistleblowers who work and reside outside the United Kingdom. As a general rule, if a whistleblower resides outside of the U.S. they are unable to bring a whistleblower case in the U.S. unless the retaliation directly involved U.S. entities, individuals or misconduct.
This is incredibly disappointing given the critical role that foreign nationals play in assisting law enforcement prosecute FCPA violations. However, there are other benefits for FCPA whistleblowers under U.S. law that do apply to foreign nationals. The most important of these is the SEC whistleblower program. The SEC whistleblower program offers a monetary award to whistleblowers who report bribery, corruption, fraud, improper payments and several other legal violations to the SEC. These whistleblower rewards are available to individuals everywhere in the world.
SEC Whistleblower Rewards
The Dodd Frank Act provides monetary incentives for whistleblowers who report violations of the FCPA and other securities laws. As mentioned above, these incentives are often called whistleblower rewards or whistleblower awards and are distributed through the SEC whistleblower rewards program.
The SEC whistleblower rewards program is quite straightforward. Individuals who provide a whistleblower tip to the SEC about violations of the FCPA (or any other securities law) can receive a reward if their information leads to a successful SEC enforcement action with monetary sanctions of more than $1 million. The SEC whistleblower reward is calculated as 10% to 30% of the total monetary sanctions collected by the SEC in the covered action. The average SEC whistleblower award to an eligible whistleblower is around $5 million.
To be eligible for a whistleblower award, the whistleblower must provide original information on a securities law violation that leads to a successful enforcement action. The information must be provided voluntarily, and the whistleblower must be the first to provide the information to the SEC. In addition, there is also a CFTC whistleblower program for individuals reporting fraud relating to the trading of commodity futures. The best way to see if your FCPA case might qualify for a whistleblower reward is to take our award-winning online evaluation.
How to Apply for an FCPA Whistleblower Reward
The technical aspect of applying for an FCPA whistleblower award begins with filing a Form TCR with the SEC detailing all the relevant details of the potential FCPA violation. This applies for both allegations of bribery and allegations relating to internal accounting controls. Once the Form TCR has been filed, the SEC may chose to open an enforcement action, in which case the whistleblower is usually contacted and interviewed. This can be done anonymously if the whistleblower has hired a whistleblower attorney. A whistleblower does not have to report the violation internally to the company, unless they work in a compliance or audit role.
Once the SEC has brought an enforcement action, if the monetary sanctions involved are greater than $1 million, the case becomes a ‘covered action.’ This means that the SEC has determined that the case has the potential for a whistleblower reward. Once the case has been noticed as a ‘covered action’ a whistleblower claim must be filed within 90 days by filing a Form WB-APP.
Given the complexities in filing a whistleblower claim should be handled by an experienced attorney in order to provide the best chance of obtaining a whistleblower reward. Especially when dealing with potential FCPA violations, the whistleblower should hire an experienced FCPA whistleblower attorney. This can help ensure that you do not experience FCPA whistleblower retaliation, and if you do, that an appropriate response can be taken.
