SEC Announces Settlement of HP FCPA Violation Allegations

The Securities and Exchange Commission (“SEC”) announced on April 9, 2014, that it reached a settlement with Hewlett-Packard Company (“HP”) to resolve charges filed by the U.S. government alleging that HP violated the Foreign Corrupt Practices Act (“FCPA”) when HP officials made multiple multi-million dollar payments to Russian, Polish, and Mexican government officials to obtain lucrative contracts with those governments.  According to an SEC filing recording the settlement: “[P]ayments and improper gifts to government officials made directly or through intermediaries were falsely recorded in the relevant HP subsidiaries’ books and records as legitimate consulting and service contracts, commissions, or travel expenses. In fact, the true purpose of the payments and gifts was to make improper payments to foreign government officials to obtain lucrative government contracts for HP.”

The FCPA prohibits American companies and foreign companies trading securities in the United States from paying bribes to foreign officials.  The Dodd-Frank Act of 2010 contained two provisions relating to whistleblowers who provide information regarding FCPA violations.  First, the Dodd-Frank Act stated that whistleblowers who provide original information about FCPA violations to the federal government may be entitled to receive up to 30 percent of any government recovery coming as a result of that information.  Second, the Act provided that whistleblowers who submit such information to the government are protected against retaliation from their employers.  Arguably, the Act also provides that whistleblowers who complain about FCPA violations internally are also protected from retaliation, but courts interpreting the Act have disagreed on this point.

Activity like that of HP here could form the basis of a lucrative tip to the SEC.  According to the 2013 annual report of the SEC’s Office of the Whistleblower, FCPA cases were still not a major component of the tips submitted; however, the report demonstrated that FCPA-related whistleblower tips had grown approximately 30 percent from their 2012 levels, from 115 FCPA-related tips in 2012 to 149 in 2013.  We are hopeful that these numbers continue to grow and whistleblowers are able to level the playing field by holding accountable companies that seek an unfair advantage over the competition.