Qui Tam

SEC Recovers $39 Million under Foreign Corrupt Practices Act for Bribery and Kickbacks in Mexico and Iraq

By Finch McCranie, Esq.

One of the most interesting twists to the new SEC Whistleblower Program will be how many commercial bribes and kickbacks paid to foreign government officials will now come to light. As we have written about previously, the SEC shares jurisdiction with the Justice Department over such cases that violate the Foreign Corrupt Practices Act (FCPA).

An example of why whistleblowers will come forward is this afternoon's announcement of the SEC's $39 million settlement with ABB Ltd ("ABB"), a Swiss company that provides power and automation products and services.

The SEC alleged that ABB made more than $2.7 million in bribes and kickbacks to obtain more than $100 million in contracts. The payments allegedly were made to "government officials in Mexico to obtain business with government owned power companies," and to the "former regime in Iraq to obtain contracts under the United Nations Oil for Food Program."

According to the SEC, some of the kickbacks were made through bank guarantees and cash payments. As is common in disguising unlawful payments, the kickbacks were recorded on the company's books as legitimate payments--here, for "after sales services," "consultation costs," and "commissions."

ABB, without admitting or denying the allegations in the complaint, agreed not only to pay disgorgement and penalties totalling more than $39 million, but also agreed to pay a criminal fine of $30,420,000, according to the SEC. The company also agreed to be bound by certain "undertakings" concerning its FCPA compliance program.

As to how an FCPA whistleblower might fare who reports similar FCPA violations of bribery of foreign government officials, the new SEC Whistleblower Program pays 10% to 30% of monetary sanctions collected--approximately $4 million to $12 million under similar facts.

The SEC's announcement is reprinted in full below, and the SEC's Complaint is linked here:

Full post as published by Whistleblower Lawyer Blog on September 29, 2010 (boomark / email).