On September 29, the U.S. Securities and Exchange Commission (SEC) Office of the Whistleblower posted a Notice of Covered Action (NoCA) for an enforcement action taken against the 3M Company over allegations that a subsidiary company based in China violated the Foreign Corrupt Practices Act (FCPA).
The NoCA signals that the SEC is now accepting whistleblower award claims for the case. Through the SEC Whistleblower Program, qualified whistleblowers, individuals who voluntarily report original information that leads to a successful enforcement action, are entitled to monetary awards of 10-30% of the funds collected in the enforcement action.
3M agreed to pay the SEC $6.5 million to settle charges that it violated the books and records and internal controls provisions of the FCPA.
According to the SEC, “employees of a 3M wholly owned subsidiary based in China arranged for Chinese government officials employed by state-owned health care facilities to attend overseas conferences, educational events, and health care facility visits, ostensibly as part of the Chinese subsidiary’s marketing and outreach efforts. However, the arrangements to attend the events were often a pretext to provide the Chinese government officials with overseas travel, including tourism activities, to induce them to purchase 3M products.”
“This matter highlights the dangers to companies with global operations posed by inadequate internal accounting controls,” said Charles Cain, Chief of the SEC’s FCPA Unit. “Those dangers were exacerbated here by complicit third-party vendors.”
The FCPA is the United States’ premier anti-bribery law. It prohibits the payment of anything of value to foreign government officials in order to obtain a business advantage. It also contains accounting provisions which require publicly traded corporations to make and keep books and records that accurately reflect the transactions of the corporation. Under the Dodd-Frank Act, violations of the FCPA are covered under the SEC Whistleblower Program.
On May 5, the SEC issued a $279 million whistleblower award: the largest in the history of the SEC Whistleblower Program. According to reporting by the Wall Street Journal, the award was connected to a $1.1 billion FCPA settlement between Swedish telecommunications company Ericsson and U.S. authorities over bribery charges.
Introduced in March, the bipartisan SEC Whistleblower Reform Act of 2023 addresses a few issues currently affecting the SEC Whistleblower Program, including the lack of anti-retaliation protections for internal whistleblowers. Former Commissioner of the SEC Allison Herren Lee, who currently serves as Of Counsel for Kohn, Kohn & Colapinto, penned an article calling for the passage of the bill.
Further Reading:
SEC Charges 3M with Foreign Corrupt Practices Act Violations Relating to China Subsidiary
