Whistleblower Award from Juniper Networks FCPA Enforcement Action

Thomas Fox

Compliance Evangelist

This week the Securities and Exchange Commission (SEC) announced a whistleblower award relating to the Juniper Networks, Inc. (JNPR) Foreign Corruption Practices Act (FCPA) enforcement action from 2019. Although the Press Release and Notice did not name Juniper Networks, they were identified by the Wall Street Journal (WSJ) in an article from Mengqi Sun.

The conduct involved two of the company’s business units in Russia and China. In Russia, the conduct occurred from 2008 until 2013 and in China the conduct began in 2009 and continued until 2013 as well. In its heavily redacted Notice, the SEC stated, “In reaching this determination, the Commission considered that Claimant alerted Commission staff of alleged securities laws violations, prompting Enforcement staff to expand an existing investigation into an additional geographic area. Claimant, a foreign national, also provided significant assistance to Commission staff by traveling to meet in person with staff, identifying an important witness, and providing multiple supplemental submissions that assisted the Commission in bringing the charges in the Covered Action.”


In Russia, from 2008 through 2013, employees of the company’s subsidiary, JNN Development Corp. (JNN) secretly agreed with third party channel partners to increase the discounts on sales made to customers. However, rather than passing the discounts back to the customers, the channel partners diverted the additional discounts into an off-book fund held by the channel partners. These funds were referred to as “common funds” and were directed in part by JNN sales representatives.

These common funds were used in part to pay for customer trips, including trips for government officials, some of which were predominately leisure in nature and had little to no educational or business purpose. This travel was also to locations where there were no JNN facilities or industry conferences related to JNPR’s business. The trips paid for with these common funds included sightseeing tours, amusement parks, national park excursions and meals and entertainment for customers and their family members. JNN employees communicated the corrupt purposes of these off-book trips via email.


From 2009 through 2013, JNPR employees incorrectly listed the true amount of entertainment involved on the trips. The amount charged was excessive and inconsistent with JNPR internal company policy. In addition to falsified expenses, local Chinese marketing employees also created false agendas for trips provided to end-user customer employees. These falsified trip agendas understated the true amount of entertainment involved on the trips.

The China business unit employees, then submitted these falsified and misleading trip agendas to JNPR’s Legal Department to obtain event approval. In contravention of the company’s review and approval policy, the Legal Department approved numerous trips without adequate review and after the event had taken place. There was nothing in the Notice which spoke to the efficacy of the Legal Department review around the falsified expenses.

The Whistleblower

Most interestingly, the whistleblower, who was a JNPR employee and is not a US citizen, notified the SEC in late 2012 that JNPR was engaged in a large “channel partner discounting” bribery scheme in Russia, according to the whistleblower’s lawyers, Christopher Connors of Connors Law Group LLC, and Andy Rickman of Rickman Law Group LLP. As noted in the SEC Notice, the whistleblower “provided significant assistance to Commission staff by traveling to meet in person with staff, identifying an important witness, and providing multiple supplemental submissions that assisted the Commission in bringing the charges in the Covered Action.”

But not only did the whistleblower provide the SEC with information on the Russia bribery scheme, he or she also did so for the Chinese bribery scheme. Sun stated, “The SEC credited the whistleblower for providing new information that led the regulator to expand an existing investigation into a new geographic area and for providing supplemental information and assistance, according to an SEC statement Tuesday announcing the award.”

The FCPA enforcement action provided some key lessons for the compliance professional. In Russia, the enforcement action confirmed that Mike Volkov truism – follow the money. But it is more than simply following the money internally; in the case of JNPR, it means auditing the various funds of your company’s subsidiaries. What controls does your organization have in place to ascertain that discounts provided to customers actually are rebated to those customers? This is the where post contract-execution management comes into play. Compliance does not end when a contract is signed but compliance oversight must continue during the entire contract lifecycle.

In China, the key lesson was the failure of the JNPR Legal Department to ascertain the fraud perpetrated by the Chinese business unit. It is not surprising the corporate Legal Department approved the fraudulent invoices, given the difficulty audit departments in organizations have unmasking similar frauds at their entities. The company was on notice that red flags had appeared in China so heightened scrutiny was appropriate, yet it failed.

There are equally important lessons to be garnered from this whistleblower award by the SEC. First recall the whistleblower was neither an employee of JNPR nor a US citizen. This means that someone from outside the company was aware of, had information on and gave testimony to the SEC about JNPR. How many outside parties know that much about the illegal activity of a US company? But, more importantly, it drives home the clear message that the SEC will reward anyone who brings criteria-meeting information which leads to a successful enforcement action.

Plaintiff’s lawyers understand this and are actively looking for cases. Indeed, one of the anonymous whistleblower’s lawyers was quoted in the WSJ piece, “The whistleblower’s attorneys said there has been a recent trend of U.S. regulators holding technology companies accountable for their sales partners’ misconduct and rewarding whistleblowers who help expose it. In our opinion, this sort of sales partner bribery scheme still is pervasive throughout the technology industry in Asia, Eastern Europe, Africa and the Middle East,” they said in a statement Tuesday. “And we expect that other well-known technology giants will be held accountable in the not-so-distant future for the corrupt practices of their local sales partners.”

What does that sound like to you?

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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