We have long looked at cases of customs fraud for whistleblowers as part of the False Claims Act. And Eric Young in our office was the first to represent a client receiving a tax whistleblower award under the IRS whistleblower program. But the growth of international whistleblowers has opened up the possibility that we will now see tax and customs whistleblowers located overseas reporting violations of the Foreign Corrupt Practices Act to the Securities and Exchange Commission instead.
The SEC Whistleblower Office pays rewards to eligible individuals providing information resulting in monetary sanctions of more than $1 million. The program was created by Congress in the Dodd-Frank Act which passed in 2010 and recently celebrated its five year anniversary. An SEC employee previously said that they expect the FCPA to be fertile ground for whistleblowers
We’re seeing a number of news reports in the last year about foreign officials caught up in scandals related to bribery of government tax and customs workers, and we expect based on this that there are potential whistleblowers out there as well that will come forward.
In Guatemala, there is reportedly a reasonable suspicion that the former Vice President took $3.7 million in bribes. Businesses evaded import duties by calling “La Linea”, a special number available to those paying bribes.
Cases like this one have already led to FCPA investigations. FedEx has disclosed allegations of bribery of government officials in Kenya in order to clear shipments through customs without inspections. A similar investigation is under way against Ford for bribing officials at a port in Russia to get through the logjam at the docks in that country.
It is not limited to customs. In Brazil, the corruption reportedly allowed business to avoid paying more than $1 billion in taxes to the government. If I remember earlier reports correctly, U.S. companies were involved.
Normally, FCPA violations involve securing or retaining business contracts. But a 5th Circuit ruling previously held that the FCPA applies broadly and customs or tax cases in order to avoid payments are also covered.
For those considering blowing the whistle, the FCPA does not require money to exchange hands. The FCPA applies broadly to the provision of anything of value (other than certain de minimus items). The enforcement action against BNY Mellon for the hiring of interns related to family members of sovereign wealth fund officials is just one example of the potential bribes implicated. Paid travel that masquerades as business trips when it is in fact a luxurious vacation, as well as other gifts, are violations of the law as well when they go to individuals classified as foreign officials and are used to obtain or retain business.