The biggest concern for many potential whistleblowers is the prospect of facing retaliation for speaking up about legal violations. This is especially true for whistleblowers who report bribery or corruption, which can constitute a violation of the Foreign Corrupt Practices Act (FCPA). In this article we will outline the protections a whistleblower is entitled to when reporting FCPA violations and explain why those protections can often fall short of expectations for whistleblowers located outside the United Kingdom.
The Foreign Corrupt Practices Act
The Foreign Corrupt Practice Act (FCPA) is a federal law that was enacted to address the issue of widespread bribery and corruption in international business transactions. The FCPA prohibits U.S. companies and individuals from bribing a foreign government official in exchange for a business advantage. The FCPA also requires companies to maintain accurate books & records and maintain 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 FCPA can result in large monetary sanctions, and the average FCPA fine in the last ten years for corporations has been about $100 million. While the FCPA applies largely to U.S. companies, it can also apply to foreign companies with stock listed in the U.S. and its provisions are mirrored by foreign anti-corruption 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 pays a bribe to a foreign official in order to win business for their company. While bribery of a foreign government official is typically prohibited by a company’s compliance program, the misconduct is usually hidden and disguised through the use of third parties and shell companies. As a result, the government relies on brave whistleblowers to report potential FCPA violations in order to help it police international bribery and corruption. In short, whistleblowers play a critical role in FCPA enforcement.
FCPA whistleblowers are individuals who report suspected bribery and corruption within an organization or to the government. 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 at issue usually occurs outside the United Kingdom, and witnesses to the misconduct are often located outside the United Kingdom. This means that FCPA whistleblowers are commonly foreign nationals.
Despite the important role that FCPA whistleblowers play in the enforcement of the FCPA, 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).
Whistleblower Protection Under SOX and Dodd-Frank
While both SOX and Dodd-Frank can protect a whistleblower reporting potential FCPA violations, both laws have strict rules of application and only protect certain whistleblowers who take the right steps when reporting a potential violation. If you are thinking of making a protected disclosure regarding foreign bribery, fraud, money laundering, corruption of a foreign official or any other conduct you think might constitute an FCPA violation, it is important to know which law could protect you against retaliation and the steps you need to take to obtain protection.
Sarbanes-Oxley
SOX is not solely a whistleblower law but it does contain provisions that protect individuals who work for publicly traded companies and report FCPA violations. Importantly, SOX will protect an employee who reports an FCPA violation to either their supervisor or the federal government. Importantly, SOX protects whistleblowers from all forms of retaliation, including termination, demotion, harassment, or other adverse actions. Any such conduct is prohibited by SOX if it occurs in response to an employee making a protected disclosure regarding FCPA violations or other violations of securities laws.
FCPA whistleblowers who are subjected to retaliation for reporting legal violations have the right to sue their employer for damages under SOX. An 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 can 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, a person can still file a whistleblower case in federal court. If the court finds that the employer retaliated against the whistleblower in violation of a whistleblower law, it can order the employer to pay damages, including back pay, reinstatement, and attorneys’ fees.
Dodd-Frank Act
Similar to SOX, the Dodd-Frank Act protects whistleblowers who work for publicly traded companies who report foreign bribery, corruption, fraud, money laundering and other violations of the FCPA. However, the Dodd-Frank does not protect FCPA whistleblowers who only report violations within their company. To obtain legal protection from retaliation under the Dodd-Frank Act, an FCPA whistleblower must make a protected disclosure to the 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, without having to go through the OSHA process.
Protection For Whistleblowers Outside the United Kingdom
Unfortunately, the anti-retaliation protections under both SOX and Dodd-Frank generally do not apply to 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 inside the U.S. unless the retaliation directly involved U.S. entities, individuals or misconduct.
This is disappointing given the critical role that foreign nationals play in FCPA enforcement. 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 rewards to whistleblowers who report bribery, corruption, fraud, money laundering and several other legal violations. 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 alluded to previously, these incentives are often referred to as whistleblower rewards or whistleblower awards, and are distributed through the SEC whistleblower rewards program.
The SEC whistleblower rewards program is straightforward: Individuals who provide information 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 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 usually must be the first to provide the information to the SEC.
How to Apply for an FCPA Whistleblower Reward
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 regardless of whether the whistleblower is reporting allegations of bribery or failures of internal accounting controls. Once the Form TCR has been filed with the SEC, the SEC may open an enforcement action, in which case the whistleblower is usually contacted and interviewed by the SEC. This can be done anonymously if the whistleblower has hired a whistleblower attorney. Of note, special rules apply to whistleblowers who are lawyers or work in the legal department. In addition, whistleblowers who work in a compliance or audit role also have to abide by special rules when reporting to the SEC.
If the SEC brings an enforcement action and 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 classed 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 and seeking whistleblower protection under the foreign corrupt practices act, these matters should be handled by an experienced attorney. Failing to report in the right place, right way or missing a deadline could result in a whistleblower losing their protection from retaliation or losing the ability to claim a whistleblower reward.
