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How the landmark SEC payout to an Ericsson whistleblower resets the FCPA

First came the stunning news from the SEC on May 5th: it awarded a record $279 million to a whistleblower, dwarfing the previous record of $114 million set in 2020. Then last week the Wall Street Journal reported that the award was related to Ericsson’s $1.1 billion FCPA settlement with the DOJ and SEC in 2019. That’s right, an FCPA whistleblower!

As usual, the May 5th award order is too redacted to be helpful — federal law prohibits the SEC from disclosing the identity of whistleblowers — and the Journal didn’t name the whistleblower. We know Ericsson first disclosed the government’s FCPA investigation in June 2016, according to data from FCPA Tracker. That probably means the SEC logged the Ericsson tip sometime in 2015 or 2016, but we can’t be sure.

How big is the May 5th award? There’s only been one year when the SEC paid out more than $279 million to all whistleblowers combined, and that was FY 2021, when awards went to 108 individuals.

Before May 5th, the top five SEC whistleblower awards were:

$114 million in 2020
$110 million in 2021
$50 million in 2021
$50 million in 2020
$50 million in 2018

Ok, those are big numbers. But let me say again: On May 5th, the SEC paid a single whistleblower $279 million for an FCPA tip. A payday that size flashes dollar signs around the world. How many people who never paid attention to the FCPA are paying attention now?

* * *

Whistleblower awards can range from 10 to 30 percent of the money collected when the SEC and other agencies impose sanctions of more than $1 million. It doesn’t matter where the offending company is based or doing business, only that it’s under the SEC’s jurisdiction.

From China alone more than 250 companies have listed on the three biggest U.S. stock exchanges (the NYSE, Nasdaq, and the NYSE American). That brings them under the ambit of the SEC and exposes them to the FCPA and potential whistleblower tips. I’m not picking on Chinese companies, just using them as an example.

And whistleblowers can be from anywhere. The SEC has made awards to non-U.S. citizens and tipsters living outside the United States. Who blew the whistle on Stockholm-based Ericsson? It could be anyone.

Historically, the SEC receives relatively few FCPA-related whistleblower tips. In FY 2022, just 1.6 percent of the tips it logged were about the FCPA — 202 out of 12,322. The pattern was similar in prior years. Most tips are about market manipulation, offering fraud, misleading disclosures and financial statements, and lately crypto fraud.

Because of all the anonymity, no one outside the SEC knows how many of its awards have gone to FCPA whistleblowers since the program launched in 2012. But none of that matters now. Since May 5th, evidence of overseas corporate bribery has a new perceived value. Find some and get rich, maybe.

* * *

What follows from the May 5th award? As one of my beloved elderly relatives says whenever the Mega Millions jackpot goes stratospheric, “You can’t win if you don’t play.” Her irrefutable logic suggests the SEC will be logging more FCPA tips than ever.

Most of those tips will never pan out. In FY 2022, the SEC logged 12,322 whistleblower tips but only brought 462 new cases overall. Even in the unlikely event that every new case came from a whistleblower tip, fewer than four tips in a hundred paid off (so far). And anyway, whistleblower tips aren’t a concern to companies already compliant with the FCPA because there’s nothing to blow the whistle on.

But at SEC-reporting companies that harbor pockets of corrupt thinking and doing, the Ericsson whistleblower award resets the scene. Now there are two distinct groups. On one side are short-sighted individuals who have either paid bribes or assisted in concealing them. And on the other side is everyone else — searching for evidence and dreaming of a Mega Millions payday.

You did say $279 million, right?

They’re paying attention to the FCPA now.

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