Under recently-enacted legislation, individuals who blow the whistle on violations of the Foreign Corrupt Practices Act (“FCPA”) are now eligible to receive substantial monetary rewards. To receive those rewards, a whistleblower must provide his or her information to the Securities and Exchange Commission (“SEC”) pursuant to certain specific procedures.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) was signed into law in July of 2010. Dodd-Frank included a provision intended to encourage whistleblowers to report securities laws violations to the SEC. Pursuant to Dodd-Frank, the SEC has established a new Whistleblower Office, and is in the process of adopting regulations for that office and for the award of rewards to whistleblowers. According to a report issued by the SEC in October, 2010, the SEC has already established a fund of approximately $452 million to fund whistleblower rewards under Dodd-Frank.
The whistleblower provision of Dodd-Frank implicates the FCPA because the SEC has enforcement authority over certain aspects of the FCPA, namely, the so-called “books and records” provision. The FCPA is intended primarily to prohibit the payment of bribes by companies to foreign government officials. In addition, the FCPA requires publicly-traded companies to comply with certain accounting provisions. Those accounting provisions include a requirement that covered corporations maintain a system of books and records that accurately reflect the corporation’s transactions, and that those corporations maintain an adequate system of internal accounting controls. While the Department of Justice prosecutes violations of the anti-bribery provisions, it is the SEC that is charged with enforcing the books and records provisions.
In 2010 alone, the federal government entered into six separate FCPA settlements in excess of $100 million. The biggest FCPA settlement of 2010 was for $400 million. Had that settlement come as a result of a whistleblower submission to the SEC under Dodd-Frank, the whistleblower could have claimed a reward of between $40 million and $120 million.
To be covered by the Dodd-Frank whistleblower provision, and to be eligible for a reward, a FCPA whistleblower would need to follow the specific procedures laid out in Dodd-Frank, and in the forthcoming SEC regulations. Dodd-Frank is unique among whistleblower laws in that it permits anonymous whistleblowing. A whistleblower may hire an attorney, and have the attorney submit the information to the SEC. The SEC will accept that information and will deal with the whistleblower through his or her attorney, thereby assuring that the whistleblower’s identity remains secret.
Given the time it takes for the government to investigate FCPA violations, it may be a number of years before we see a FPCA whistleblower reward. But the SEC Whistleblower Office is now “open for business,” and the whistleblower information that Dodd-Frank was intended to unleash is no doubt now flowing freely into the SEC.