In 1977, the United States (U.S.) Congress passed the “Foreign Corrupt Practices Act” (FCPA), which was signed into law by President Jimmy Carter on December 19, 1977. It was subsequently amended in 1998 by the “Omnibus Trade and Competitiveness Act” and the “International Anti-Bribery Act of 1998.” The law was a response to foreign corrupt practices involving about 400 U.S. companies that had started way back in the 1970’s. It was enacted after several U.S. companies admitted making questionable or illegal payments to foreign government officials, politicians, and political parties.
This illegal practice, including the payments made by the U.S. companies, induced certain foreign government officials to rule and act in their favor while providing a means to circumvent certain U.S. securities laws. Through the FCPA, any indirect violations of U.S. securities laws can more easily be reported and lawbreakers held accountable.
Enforcement of the Foreign Corrupt Practices Act
The Securities and Exchange Commission (SEC) and the Department of Justice of the U.S. are the two agencies responsible for enforcing the FCPA. In recent years, these twin agencies became more aggressive in pursuing foreign bribery cases. The SEC even created a program known as the “Whistleblower Program” and the “Federal False Claims Act.”
These programs encourage any person (who has valuable information involving bribes that were paid by U.S. companies to foreign officials) to report or file their claims before the SEC in exchange for a reward. However, “U.S. companies” are not just companies based on the U.S; they also include companies listed on a U.S. stock exchange and any company that sells products, obtains fund or pays taxes to the U.S. government.
Foreign Corrupt Practices Act Successes
In 2010, the programs were expanded by the “Dodd-Frank Wall Street Reform and Consumer Protection Act.” The law created a whistleblower reward program that increased the incentives of whistleblowers from ten percent (10%) to thirty percent (30%) of the actual amount that would be recovered from FCPA cases and other cases involving other SEC violations. The program has achieved great success because whistleblowers could file their claims anonymously. The Dodd-Frank Act also allows certain claims to be filed outside the U.S. if the claim involves certain “foreseeable substantial effect’ within the U.S.
As of 2013, the SEC had already received 277 claims from whistleblowers regarding FCPA violations. The claims forced several U.S. companies to settle FCPA cases by paying large amounts of money.
The U.S. government is determined to put an end to unfair competition. Thus, apart from FCPA, global whistleblower cases are also being brought under the “False Claims Act.” Under this Act, all issues involving fraud in contracts and programs paid for by the U.S. government may hold certain companies liable, whether or not the fraudulent conduct took place within U.S. borders.
If you have knowledge or information involving FCPA violations or other securities law violations please contact Behn & Wyetzner to discuss your case.