You do not have to be located in the United States to report evidence of fraud. Tips from international whistleblowers who are citizens of a foreign country are accepted by the U.S. government. In our efforts to fight misconduct, McEldrew Young Purtell Merritt attorneys have represented individuals who are located overseas yet report evidence to agencies in the United States.
In today’s global economy, fraud is often an international enterprise. It no longer remains neatly within the geographic boundaries of one country. As information and goods move across borders, the evidence of misconduct does as well. Individuals located internationally may be in a better position to report violations of the law when they occur in other countries. Sometimes these individuals are employees of American companies stationed at offices in other countries. But they do not have to be. Multinational companies, foreign subsidiaries, companies doing business with the United States and many others can be covered by U.S. laws. Our FCPA whistleblower attorneys explore these issues on a regular basis.
Because the United States provides financial incentives based on the amount the government recovers, individuals may choose to report to the United States instead of their local government. Laws governing tips to the DOJ, IRS, SEC and CFTC provide for an award of between 15 and 30 percent of the money collected by the United States to eligible whistleblowers.
Here are some of the types of cases where fraudulent conduct and evidence may be located outside of the United States:
Securities and derivatives are traded worldwide. The marketplace is not limited to the United States. Traders located in financial centers in London, Europe or Asia may witness misconduct first hand which implicates America’s securities laws. The Securities and Exchange Commission, reporting annually to Congress data about its whistleblower program, found a 25 percent increase in tips from overseas in Fiscal Year 2013. International tips accounted for a total of 12 percent of reports to the SEC whistleblower program, up from 10 percent in 2012.
Securities whistleblowers may also report on violations of the Foreign Corrupt Practices Act. Accounting fraud and allegations of bribery overseas by public companies covered by U.S. securities laws, as well as subsidiaries meeting conditions specified in the FCPA, are investigated by the SEC even though they may not have happened in the United States. Our SEC whistleblower lawyers can help with this process.
Derivatives fraud can also be reported to the U.S. Commodities Future Trading Commission. Manipulation of LIBOR, interest rates, currency exchange rates and commodity markets do not need to be located in the United States to violate the U.S. Commodities Exchange Act and CFTC regulations.
The United States issues a number of grants and contracts for conduct that will occur overseas and could be reported by a whistleblower.
Foreign developmental assistance has been the subject of a number of lawsuits under the False Claims Act. The United States partners with companies, non-governmental organizations and local governments to enhance security, democracy, health, education, economic development and other foreign policy goals. The majority of these foreign aid funds are provided through the US AID but other organizations, like the U.S. African Development Foundation which funds agricultural development in Africa, also award money for initiatives. American companies and international organizations are often awarded money and contracts but there is an increased push to award local vendors in the target country.
Defense contracts for transportation, logistics and communications services are also covered regardless of location. For example, issues have come to light about the billing practices of companies providing services to the military in the Middle East pursuant to contracts. The businesses billed the government for costs related to services they did not adequately provide or for subcontracts tainted by kickbacks.
Not all government contracts involving international fraud are for money intended to be spent around the globe. The Buy American Act, as well as similar legislation, is the opposite. It requires the purchase of American made products by the government unless they are unavailable or pose an unacceptable additional cost. Companies certify their products are BAA compliant when they are awarded contracts. If they are subsequently unable to supply compliant products, they must contact the government so they can award the contract elsewhere or provide a waiver. Unfortunately, companies will sometimes fraudulently certify compliance and substitute foreign made goods.
The drug manufacturing process has become an international operation in the past few decades. Active Pharmaceutical Ingredients are sourced globally. Over-the-counter and generic drugs are manufactured in India, China or another country to keep the cost of manufacture low. The FDA has the power to investigate foreign labs, but limited resources have historically led to fewer inspections than domestic facilities. When drug manufacturers have quality issues at their labs resulting in adulterated drugs, they can face substantial penalties. Because the labs are not located in the United States, this is another area where individuals abroad may have more information than employees in the United States.
Shipping companies and product manufacturing facilities located overseas often play a role in fraud found in customs declarations at the U.S. border. They may be asked for assistance misrepresenting the country of origin or undervaluing goods imported into the United States. Employees of companies who have knowledge of misconduct with shipped goods, even if they are not located at the company importing the goods, may have sufficient knowledge of a fraudulent scheme to come forward and report it. For additional information, please visit our page dedicated to customs fraud.
The largest award under the new Internal Revenue Service whistleblower program involved evidence of an international company assisting U.S. citizens hiding assets and income from the IRS. They paid over $100 million to one individual for his tip and assistance. Despite the large award, this continues to be a substantial problem.
Your conduct may implicate laws in both your home country and the United States. The law of the nation where you are located might be relevant to the implications of a signed confidentiality agreement, your ability to take documents from your employer and your protections from retaliation. We can suggest a local legal representative in order to ensure that you do not violate a law in your home country as you proceed with reporting misconduct.
There is another important aspect of whistleblower law where the location of the employee has become particularly important: anti-retaliation. A federal judge in the Southern District of New York ruled last year in Liu v. Siemens A.G. that Dodd-Frank’s anti-retaliation provisions do not protect against retaliation abroad. This interpretation was confirmed on appeal by the Second Circuit in 2014. Although we do not believe believe that this interpretation of the law is best for the U.S. whistleblower programs, it is nevertheless negative precedent. For this reason, it may be crucial for foreign whistleblowers in securities cases to report violations anonymously through an attorney.
Our whistleblower attorneys have helped numerous employees and ex-employees report misconduct by their employer under the nation’s whistleblower laws. Attorneys at McEldrew Young Purtell Merritt have assisted the United States with the recovery of billions of dollars lost due to fraud. If you have any questions, please call or email anytime. We’re here to help you and we will respect your confidentiality to the utmost at all stages of the process.
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