Yet another telecommunications company reports opening an FCPA investigation. This post will discuss what FCPA reward whistleblowers can glean from this latest company disclosure.
As background, technology, telecom, and communications (collectively “tech”) companies often bribe foreign government officials. I have done a three part series on the various ways tech companies engage in bribery outside of the U.S.: part one of the series examined how tech companies use channel partners to bribe officials to obtain business; part two discussed how tech companies use trips to bribe officials; and part three explored how tech companies use third parties, such as advertising and marketing consultants, to bribe officials.
Given the multiple ways tech companies are engaging in corrupt practices in order to win business and obtain commercial advantages, FCPA reward whistleblowers should be on high alert for corrupt practices and potential securities violations. FCPA whistleblowers who report tech companies bribing government officials may be eligible for a reward under the Dodd-Frank reward program. Current and former tech employees, which includes current and former employees of tech distributors and resellers, are eligible for large rewards for reporting bribery confidentially to the U.S. Securities and Exchange Commission (SEC). In fact, almost anyone with knowledge of the tech sector can be a Dodd-Frank FCPA whistleblower.
In its 2017 Form 10-K, telecom company Ciena Corporation reported it was conducting an internal investigation into an FCPA-related matter in Asia. Below is the description:
“During fiscal 2017, one of Ciena’s third-party vendors raised allegations about certain questionable payments to one or more individuals employed by a customer in a country in the ASEAN region. Ciena promptly initiated an internal investigation into the matter, with the assistance of outside counsel, which investigation corroborated direct and indirect payments to one such individual and sought to determine whether the payments may have violated applicable laws and regulations, including the U.S. Foreign Corrupt Practices Act (“FCPA”). In September 2017, Ciena voluntarily contacted the Securities and Exchange Commission (“SEC”) and the U.S. Department of Justice (“DOJ”) to advise them of the relevant events and the findings of Ciena’s internal investigation. With the direct oversight of the Board, Ciena continues to cooperate fully with the SEC and DOJ in their review of the investigation.
Ciena’s operations in the relevant country have constituted less than 1.5% of consolidated revenues as reported by Ciena in each fiscal year since 2012. Ciena does not currently anticipate that this matter will have a material adverse effect on its business, financial condition or results of operations. However, as discussions with the SEC and DOJ are ongoing, the ultimate outcome of this matter cannot be predicted at this time. As of the filing of this Report, no provision with respect to this matter has been made in Ciena’s consolidated financial statements. Any determination that Ciena’s operations or activities are not in compliance with the FCPA or other applicable laws or regulations could result in the imposition of fines, civil and criminal penalties, and equitable remedies, including disgorgement or injunctive relief.”
Whistleblower Reward Lessons From Ciena’s Disclosure
Small Countries (or Small Operations) Can Trigger FCPA Investigations and Rewards: Ciena notes that the relevant country involved makes up “less than 1.5% of consolidated revenues.” From an investor standpoint, this is important to know because if even FCPA violations are identified, this likely will not materially impact the overall health of the company. But from an FCPA whistleblower perspective, this is also good to know because even employees working in a small country (or a country where a company has a small operation) may be able to share their information and evidence and initiate an investigation that could lead to a reward.
Third Parties Can Trigger Reward Eligible FCPA Investigations: Another interesting point is that Ciena reports that the FCPA investigation was started as a result of one of Ciena’s third-party vendors raising questionable payments. This is important because it shows that one does not have to be a current or former employee of the company being reported in order to have reward eligible information or information that can trigger an FCPA investigation, which then might led to an SEC fine and reward.