Anyone with information about distributors or resellers paying bribes to help US-traded companies win government deals can obtain large rewards under the SEC’s Dodd-Frank Reward Program. The SEC recently settled an FCPA case against Polycom for using corrupt distributors and resellers in China.
On December 26, 2018, Polycom agreed to pay $16 million to settle FCPA violations relating to its Chinese distributor and resellers paying bribes to win public sector deals. Paragraphs 8 and 9 from the SEC’s Order explain how the scheme worked and how Polycom China attempted to conceal the corruption Order:
“8. On numerous occasions during years leading up to July 2014, Polycom China’s distributors obtained business from public-sector customers in China by offering and making cash payments to government officials who exercised influence over those customers’ purchasing decisions. When a distributor sought to make such a payment, it requested that Polycom provide it with a discount on the equipment that was to be sold to the public-sector customer. As senior management at Polycom China knew, these discounts were not passed on to the end customer, but instead were intended to cover the cost of the payments the distributors made to the Chinese government officials.
9. Polycom China sales employees entered the requested discounts into the nonPolycom sales management system for approval by senior managers at Polycom China, and recorded information about the reason for the payments in the same off-line system. Polycom China’s senior managers routinely approved these discounts, knowing that they would be used to make improper payments to Chinese government officials. Polycom’s Vice President of China recorded information regarding these improper payments in excel spreadsheets he maintained.”
A whistleblower in this case could receive between $1.6M and $4.8M. These cases can be highly rewarding for SEC whistleblowers. Typically, in these channel bribery cases, the partners will collude and engage in bid-rigging so that the winning partner will win at an inflated price so there is sufficient margin to pay kickbacks to the tender committee officials.
If anyone has information relating to channel partner corruption or bribery, he or she should feel free to contact me. And for more details about how the reward program applies to FCPA whistleblowers, please click here.