Global Whistleblower Practice
If you know about fraud occurring outside of the US by a company listed on a US stock exchange, or by a company that sells products to, obtains funds from, or pays taxes to, the US government, you may have a whistleblower claim. Getnick & Getnick can help.
Global whistleblower cases can be brought under the Securities and Exchange Commission’s Whistleblower Program and the federal False Claims Act.
How does the SEC Whistleblower Program provide a basis for global whistleblower cases?
In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act created a whistleblower reward program for people providing original information to the SEC about violations of securities laws, rules, and regulations. Financial rewards of up to 30% of the amounts recovered are available and claims may be filed anonymously. The SEC has paid out over $15 million to whistleblowers since the inception of the program.
The Foreign Corrupt Practices Act (FCPA), which prohibits bribery of foreign officials outside of the US, is part of the US securities laws. So, a person with information about bribes paid by “US companies” to foreign officials can file a claim with the SEC and be eligible for a reward. “US companies” includes any companies listed on a US exchange or required to file reports with the US, not just companies based in the US.
The SEC currently has a number of investigations involving foreign whistleblowers and has described FCPA-based cases as “fertile ground for whistleblowers.” As of 2013, the SEC had received 277 tips from whistleblowers regarding FCPA violations
The SEC Whistleblower Program may also apply outside of the US through the extra-territorial reach of the securities laws. Under Dodd-Frank, the SEC may enforce violations of the securities laws outside of the US where the conduct has a “foreseeable substantial effect” within the US. So, if a company listed on a US exchange conceals material information from investors regarding conduct in foreign countries (e.g., a pharmaceutical company concealing significant manufacturing violations that could result in the company being prohibited from selling its products), an SEC whistleblower claim may be filed.
The SEC and the Department of Justice have aggressively pursued US-based companies as well as foreign companies under the FCPA. Here are a few examples:
- Siemens: the German-based company paid $800M for FCPA violations involving bribery of government officials around the world. Among others, Siemens paid bribes on transactions to design and build metro transit lines in Venezuela; metro trains and signaling devices in China; power plants in Israel; high voltage transmission lines in China; mobile telephone networks in Bangladesh; telecommunications projects in Nigeria; national identity cards in Argentina; medical devices in Vietnam, China, and Russia; traffic control systems in Russia; refineries in Mexico; and mobile communications networks in Vietnam. Siemens also paid kickbacks to Iraqi ministries in connection with sales of power stations and equipment to Iraq under the United Nations Oil for Food Program. Siemens was listed on the New York Stock Exchange from 2001 to 2007
- KBR: the US-based global engineering firm paid $579M for violating the FCPA by bribing Nigerian officials in exchange for engineering, procurement and construction contracts awarded between 1995 and 2004 to build liquefied natural gas facilities in Nigeria.
- Alcoa: the SEC charged the global aluminum producer with violating the FCPA when its subsidiaries repeatedly paid bribes to government officials in Bahrain to maintain a key source of business. Alcoa agreed to pay $384 million to settle the SEC charges and a parallel criminal case.
- Johnson & Johnson: the US-based pharmaceutical company paid $70M to settle charges under the FCPA that it bribed public doctors in several European countries to win contracts for their products and paid kickbacks to Iraqi officials to obtain business.
For a complete list of SEC enforcement actions under the FCPA, click here.
When does the False Claims Act apply to conduct occurring outside of the US?
The False Claims Act applies to all kinds of fraud in contracts or programs paid for by the US government, whether or not the fraudulent conduct took place within US borders.
For example, when drugs are paid for by the US government (such as Medicare or Medicaid), manufacturers can be held liable under the False Claims Act for defective manufacturing practices in factories both in the US and overseas.
Fraud in foreign aid programs that are funded in whole or in part by the US, or that are administered by the US, may also be the basis for a False Claims Act action.
In 2013, Indian drug maker Ranbaxy paid $500 million under the False Claims Act and related criminal laws for defective manufacturing of products in India that were sold in the US and paid for by the US in foreign aid programs.
False Claims Act whistleblowers can receive up to 30 percent of the amount the government collects.