Top 10 FCPA Enforcement Actions in 2016: Record Year Fuels FCPA Whistleblower Opportunity

Last year set new records for Foreign Corrupt Practices Act (FCPA) enforcement, with 27 companies paying over $2.48 billion in FCPA settlements. In 2016, the Department of Justice (DOJ) reached four of the largest FCPA settlements in history: Teva Pharmaceuticals Industries ($519 million), Odebrecht and Braskem ($419.8 million), Och-Ziff Capital Management Group ($412 million) and VimpelCom Limited ($397.6 million).

These precedent-setting resolutions speak volumes regarding the DOJ’s and Securities and Exchange Commission’s (SEC) increased emphasis on detecting and prosecuting FCPA violations. And with this increased focus comes big opportunity for potential whistleblowers who have inside information on foreign bribery by U.S. companies and companies with securities sold on U.S. exchanges.

Take a look at the top 10 largest FCPA cases in 2016 and learn how inside knowledge of FCPA violations can mean a windfall for whistleblowers.

Top 10 FCPA Enforcement Actions in 2016:

1. Teva Pharmaceuticals Industries Ltd. agreed to pay $519 million to resolve civil and criminal charges that it violated the FCPA by paying bribes to foreign government officials in Mexico, Ukraine and Russia. Under the settlement, Teva agrees to pay $236 million in disgorgement and interest to the SEC, plus a $238 million penalty to the DOJ. – December 22
2. Odebrecht SA and Braskem SA agreed to pay a total of $419.8 million after pleading guilty to DOJ charges of conspiracy to violate FCPA anti-bribery and accounting provisions. Odebrecht paid the DOJ a criminal penalty of $260 million, while subsidiary Braskem paid the DOJ a criminal penalty of $94.8 million and paid the SEC disgorgement and interest of $65 million. – December 20
3. Och-Ziff Capital Management Group paid the DOJ and SEC $412 million in combined criminal fines ($213 million) and civil penalties ($199 million) regarding FCPA violations involving the falsifying of books and records, failure to implement adequate internal controls, and bribery of government officials in Libya and the Democratic Republic of Congo. - September 29
4. VimpelCom Limited and its Uzbek subsidiary, Unitel LLC, paid $795 million to resolve allegations that they bribed Uzbekistan government officials to obtain government-issued licenses, channels, frequencies and number blocks in the Uzbekistan telecommunications market. VimpelCom paid $167.5 million to the SEC, $230.1 million to the DOJ and $397.5 million to Dutch regulators. – February 18
5. JPMorgan Chase & Co. and a Hong Kong subsidiary agreed to pay $264 million to resolve allegations that they offered jobs and internships to relatives and friends of Chinese government officials in violation of the FCPA. JPMorgan Chase paid $130.5 million in disgorgement and interest to the SEC. The Hong Kong subsidiary paid a criminal penalty of $72 million criminal penalty to the DOJ. The Federal Reserve System fined JPMorgan Chase with a $61.9 million civil penalty. – November 17
6. Embraer SA agreed to pay $205 million to resolve allegations that it profited from bribe payments to foreign government officials in the Dominican Republic, Saudi Arabia, and Mozambique, created false books and records to hide the bribes, and participated in an accounting scheme in India. Embraer paid a $107 million criminal penalty to the DOJ and $98 million in disgorgement and interest to the SEC. – October 24
7. General Cable Corporation agreed to pay $75.75 million to resolve allegations that it offered bribes to employees of public utility companies and other officials of state-owned entities in Angola, Bangladesh, China, Egypt, Indonesia, and Thailand. The company agreed to pay a $20.4 million criminal penalty to the DOJ and $55.3 million in disgorgement and interest to the SEC. – December 29
8. PTC Inc. agreed to pay $28 million to resolve allegations that it offered recreational travel arrangements to Chinese government officials. Two Chinese units of PTC Inc. agreed to pay a $14.5 million criminal penalty to the DOJ and $13.5 million in disgorgement and interest to the SEC. – February 16
9. Novartis AG agreed to pay $25 million to resolve allegations that two Chinese subsidiaries bribed doctors and others to prescribe its drugs and then disguised the payments as going toward medical studies, travel, entertainment, fees, conferences, marketing events and educational seminars. Novartis paid $23 in disgorgement and interest to the SEC and a $2 million penalty. – March 23
10. Olympus Corporation of the Americas’ Latin American unit agreed to pay $22.8 million to resolve criminal allegations that it provided cash, money transfers, medical education travel, equipment and other things of value to doctors working at government hospitals and clinics in Brazil, Bolivia, Chile, Columbia, Argentina, Mexico and Costa Rica. Olympus Latin America also entered into a deferred prosecution agreement that will assess and monitor Olympus' FCPA compliance over the next three years. – March 1

DOJ and SEC Ramping Up FCPA Enforcement Efforts

Established in 1977, the FCPA acts to regulate U.S. business with foreign officials and prevent competitive advantages and disadvantages between U.S. companies. FCPA anti-bribery provisions prohibit U.S. corporations, companies, businesses, individuals and foreign entities trading on the U.S. stock market from bribing foreign officials with money, gifts or anything of value in order to secure business or achieve certain business or political outcomes.

FCPA violations can also include falsifying books and records and practicing inadequate internal accounting controls to conceal or facilitate bribery schemes.

In 2015, Attorney General Loretta Lynch emphasized an increased focus on prosecuting executives and individuals. Also in 2015, the DOJ’s “Yates Memo” made it clear that the government will fine corporations unless they release the names of any individuals involved in misconduct. Earlier this year, the DOJ increased its staff of FCPA prosecutors by 50%. These enhancements to FCPA enforcement inevitably increase the number of whistleblowers who can receive cash awards for reporting FCPA violations.

SEC Whistleblower Program and FCA Pay Cash Awards for Tips On FCPA Violations:

Although the FCPA doesn’t contain whistleblower provisions, the government awards whistleblowers for reporting FCPA violations under the False Claims Act (FCA) and SEC Whistleblower Program. Both programs pay whistleblowers within the U.S. and outside of the U.S. and do not require citizenship or residency to collect a cash whistleblower award.

In fact, the SEC paid its first FCPA-related whistleblower award - $3.75 million - to an Australian employee of BHP Billiton for reporting information regarding the bribery of Asian and African government officials during the 2008 Beijing Olympics.

To qualify for a cash award under the SEC Whistleblower Program, (1) the whistleblower must provide unique and useful information that leads to a successful FCPA enforcement action and (2) the alleged violations of the FCPA must equal $1 million or more. The SEC Whistleblower Program also offers anonymity and anti-retaliation provisions, though foreign regulations may limit the power of these provisions in foreign nations.

The record FCPA enforcement actions reached in 2016 are a good indicator that the DOJ and SEC are aggressively focusing efforts on putting a stop to FCPA violations, great news for whistleblowers with information on FCPA violations. Whistleblowers whose original information leads to sanctions of over $1 million are entitled to collect between 10% and 30% of the total government recovery. Given last year’s record FCPA sanctions, we can assume future FCPA whistleblowers are looking at some big cash awards moving forward.