Friday Roundup
Scrutiny alert, a potential increase FCPA statutory penalty amounts, Second Circuit appeal begins, SEC enforcement chief on whistleblowers, marketing the black hole, of note, and a ripple. It’s all here in the Friday roundup.
Scrutiny Update
VimpelCom was not the only company involved in the Uzbek telecommunications bribery scheme. As highlighted in this prior post, Swedish telecom company (a company with ADRs registered with the SEC) and Russia-based Mobile TeleSystems PJSC (a company with shares traded on the New York Stock Exchange) have also been scrutiny.
Recently, Telia issued this release:
Purported BHP Billiton Whistleblower Bounty Raises Several Questions
According to this Australian Financial Review report (also covered by Reuters) the SEC paid approximately $3.75 million “to a former employee of Australian mining giant BHP Billiton” apparently in connection with the May 2015 Foreign Corrupt Practices Act enforcement action against the company.
As highlighted in prior posts here and here, the $25 million SEC FCPA enforcement action involved findings that BHP Billiton violated the FCPA’s books and records and internal controls provisions in connection with a global hospitality program that the company had related to its sponsorship of the 2008 Beijing Summer Olympic Games.
According to the report, “legal sources have confirmed that the whistleblower was a BHP Billiton insider” who “provided detailed information to U.S. investigators about the mining firm’s activities overseas several years ago.”
If true (BHP Billton made the following statement to Reuters – “we are not aware of the involvement of any whistleblower as part of the SEC’s or DOJ’s investigation,”), it would represent the first publicly reported instance of a whistleblower being paid an SEC whistleblower bounty in connection with an FCPA enforcement action.
Yet, as highlighted below, if true the purported bounty raises several questions.
Friday Roundup
Checking in on Wal-Mart, DOJ “declinations,” another installment of as we say not as we do, scrutiny alerts, and cashing in. It’s all here in the Friday roundup.
Wal-Mart
In its recent 2Q FY2017 earnings call presentation Wal-Mart disclosed $28 million in Foreign Corrupt Practices Act and compliance related expenses ($23 million for ongoing investigations and inquiries and $5 million for global compliance program and organizational enhancements). The Q2 expenses of $28 million are higher than the Q1 expenses of $25 million.
Friday Roundup
As we say not as we do, scrutiny alerts and updates, and further RIP to the “Arthur Andersen effect.” It’s all here in 200th edition of the Friday roundup.
As We Say, Not As We Do
This previous post highlighted the April Fools’ Day 2015 SEC enforcement action against KBR for its non-existent, theoretical muzzling of individuals in certain employment agreements. According to the SEC, this violated SEC Rule 21F-17, which provides in relevant part: (a) No person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement . . . with respect to such communications.”
FCPA “Tips” Continue To Be A Minor Component Of The SEC’s Whistleblower Program
The Dodd-Frank Act enacted in July 2010 contained whistleblower provisions applicable to all securities law violations including the Foreign Corrupt Practices Act.
In this prior post from July 2010, I predicted that the new whistleblower provisions would have a negligible impact on FCPA enforcement. As noted in this prior post, my prediction was an outlier (so it seemed) compared to the flurry of law firm client alerts that predicted that the whistleblower provisions would have a significant impact on FCPA enforcement. So anxious was FCPA Inc. for a marketing opportunity to sell its compliance services, some even called the generic whistleblower provision the FCPA’s “new” whistleblower provisions.
So far, there has not been any reported whistleblower award in connection with an FCPA enforcement action. Given that enforcement actions (from point of first disclosure to resolution) typically take between 2-4 years, it still may be too early to effectively analyze the impact of the whistleblower provisions on FCPA enforcement.
Whatever your view on how the whistleblower provisions may impact FCPA enforcement, it was previously noted that the best part of the whistleblower provisions were that its impact on FCPA enforcement can be monitored and analyzed because the SEC is required to submit annual reports to Congress.
Recently, the SEC released (here) its annual report for FY2015 and of the 3,923 whistleblower tips received by the SEC in FY2015, 4.7% (186) related to the FCPA.
As noted in this similar post from last year, of the 3,620 whistleblower tips received by the SEC in FY2014, 4.4% (159) related to the FCPA. As noted in this similar post from two years ago, of the 3,238 whistleblower tips received by the SEC in FY2013, 4.6% (149) related to the FCPA. As noted in this similar post from three years ago, of the 3,001 whistleblower tips received by the SEC in FY2012, 3.8% (115) related to the FCPA. In FY2011 (a partial reporting year) 3.9% of the 334 tips received by the SEC related to the FCPA.
In short, FCPA “tips” have consistently constituted only a minor component of the SEC’s whistleblower program.
Yes, in the future there will be a whistleblower award made in the context of an FCPA enforcement action. Yes, there will be much ink spilled on this occasion and wild predictions about this “new trend.”
Yet, I stand by my prediction – now 5.5 years old, that Dodd-Frank’s whistleblower provisions will have a negligible impact on FCPA enforcement.