How China and the US are emboldening whistle-blowers in the fight against corporate corruption
Andy Rickman says support from China’s anti-corruption campaign and millions in rewards offered by America have seen a surge in whistle-blowers from the mainland and Hong Kong, encouraged in particular by the GSK case
The US Securities and Exchange Commission’s recently released 2017 whistle-blower report shows a 72 per cent increase in informants coming from mainland China and Hong Kong.
In 2016, a total of 36 people who filed reward submissions under the Dodd-Frank Act were from the mainland and Hong Kong, compared with 62 this year.
Our law group, a Dodd-Frank whistle-blower firm, has witnessed the surge in whistle-blower clients from China as a result of Beijing’s anti-corruption efforts and the US government’s recent reward payouts, now exceeding US$162 million to international and American whistle-blowers.
The Chinese government’s continued efforts to stop corporate corruption have been noticed by employees of US-traded companies working in China. These current and former employees of companies that are regulated by the US Securities and Exchange Commission (SEC) – or who work for affiliates, subsidiaries or joint venture partners of such companies – are now feeling more emboldened to report their companies’ corrupt practices in China under the reward programme established by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
China offers many opportunities for corporate whistle-blowers who want to obtain a reward for reporting violations of the Foreign Corrupt Practices Act to the SEC. SEC-regulated companies doing business in China will inevitably have to deal frequently with government agencies, regulators and state-run businesses. This means there are many opportunities for corporate corruption and for whistle-blowers to report it.
The Dodd-Frank Act created a reward programme that pays whistle-blowers who report securities violations of SEC-regulated companies. Payouts are made as long as the case results in a penalty in excess of US$1 million, which happens in the vast majority of corporate settlements under the Foreign Corrupt Practices Act.
GSK found guilty of corruption in China
In fact, many companies have paid tens of millions of dollars, some even hundreds of millions, to resolve violations with the US government. Whistle-blowers from China are eligible for rewards ranging from 10 per cent to 30 per cent of the total amount collected by the US government.
There have been instances where SEC-regulated companies in virtually every sector and industry have engaged in corrupt practices to obtain business and commercial advantages in China. The health care industry, however, is where we have seen the biggest surge of new whistle-blowers from China.
This makes sense because the Chinese government sent a clear message with its investigation into GlaxoSmithKline (GSK), that pharmaceutical corruption was no longer going to be tolerated. Beijing fined the multinational company US$492 million and arrested several of its China executives. The investigation was also assisted by a whistle-blower who sent detailed allegations of corruption to GSK’s board of directors, auditor and the Chinese government.
Other pharmaceutical companies, such as Sanofi, Pfizer, and Novartis, have also had their operations in China investigated for potential violations of the Foreign Corrupt Practices Act.
Current and former employees of SEC-regulated health care companies in China have heard about these investigations and are now more willing to report their companies’ corrupt practices.
Andy Rickman is a Dodd-Frank whistle-blower attorney who has filed more than 200 FCPA reward cases for international clients. He is the managing partner of the Rickman Law Group, and creator of the international whistle-blowing blog Dodd-Frank Rewards