Akamai Technologies: Payments for Services the Customer Did Not Need

In the Akamai Technologies FCPA case, the company agreed to return $652,452 in profits over alleged payments that induced state-owned Chinese customers to buy more services than they needed. Someone who knows the customer’s requirements, the sales approvals or the payments can explain the gap between a successful sale and a purchase bought with an improper benefit.

The Securities and Exchange Commission announced the agreement with the Massachusetts-based internet services provider on June 7, 2016. The SEC gave Akamai a non-prosecution agreement, under which it was not charged with Foreign Corrupt Practices Act violations and did not face additional monetary penalties.

The Payment Bought a Bigger Order

The SEC alleged that Akamai’s foreign subsidiary arranged $40,000 in payments to induce government-owned entities to purchase excess services. Against those payments stands the $652,452 in profits Akamai agreed to return. We see the incentive in that comparison: the business gained was worth far more than the benefits offered to win it.

The SEC also described employees providing improper gift cards, meals and entertainment to officials at those entities to build business relationships. The agency said those benefits violated Akamai’s written policies.

In the SEC’s account, the supplier gets more business, officials receive benefits and the state-owned customer gets an unnecessary bill. We call that an expensive version of relationship building. For the customer, anyway.

That makes the customer’s side of the transaction valuable to a whistleblower inquiry. We would connect the services ordered with the customer’s requirements, the people involved in approving the purchase and the benefits those people received. A person who knows the account can explain the mismatch a payment entry cannot show.

The state-owned customer’s decision makers belong in the same account as the seller’s employees. Here, the SEC expressly described the recipients as officials at state-owned entities. Their influence over the customer’s purchasing decision is what connects the alleged benefits to the supplier’s business.

What the Investigation Put Behind the Paperwork

The SEC credited Akamai with prompt self-reporting and extensive cooperation with its investigation. Its joint announcement with Nortek described early reporting, sharing internal-investigation findings and making witnesses available, including those in China. That is the connection we work through with insiders: what the sales records said, what the people involved knew and whether the explanation matches the business they actually saw.

The SEC said both companies tightened their internal controls after discovering the payments. Akamai already had written policies that employees allegedly violated, so the useful question for someone in sales, finance or audit is how the purchase and the benefit passed through the approval process. A policy on paper had not stopped the conduct the agency described.

The March 2019 working paper Do Corporate Whistleblower Laws Deter Accounting Fraud?, hosted by MIT Sloan, studied firms exposed to state False Claims Acts through state pension-fund ownership. It reported a reduction of 5% to 9% in the likelihood of accounting fraud after exposure to those laws. In the smaller sample with internal-audit data, the study found little evidence that increased investment in internal auditing explained the reduction. That gives the whistleblower’s potential contribution weight of its own alongside the controls a company says it has improved.

The Company’s Agreement and the Whistleblower’s Claim

The Justice Department’s corporate declination list records a separate decision not to prosecute Akamai in 2016. That declination concerned the company, while the SEC agreement required it to return profits connected to the alleged payments.

What Money Determines the Reward?

The SEC whistleblower rewards program can pay eligible whistleblowers an aggregate 10% to 30% of qualifying monetary sanctions collected. We assess your information and the applicable program with you, including how your knowledge contributes to successful enforcement.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. That is a separate program from the Foreign Corrupt Practices Act matter here. If your company has made a self-disclosure, we work through what that means for your own information and potential claim.

What Other Cases Show About the Payment

Nortek, the building-products manufacturer in the same SEC announcement, shows how the payment can buy a smaller government bill instead of a bigger customer order. The SEC alleged that its subsidiary made improper payments and gifts to Chinese officials for preferential treatment, relaxed oversight or reduced customs duties, taxes and fees. For a customs insider, the connection is concrete: the benefit to the official and the reduction in what the company owed belong in the same account. Akamai’s alleged payments concerned purchases by state-owned customers, while Nortek’s concerned decisions officials made about the company’s obligations.

In the Microsoft Hungary matter, the SEC alleged that discounts intended for government customers funded improper payments instead. In Oracle, the SEC alleged that sham marketing reimbursements approved by complicit supervisors enlarged funds held at channel partners.

The Records Behind the Sale

An insider’s account can connect the customer decision, the payment and the accounting entry. For the conduct described in Akamai’s announcement, that means understanding the services purchased, the customer’s needs and the gifts or other benefits connected to the business. A finance employee may understand the expense description and payment approval. Someone working with the customer may understand why the purchase exceeded the stated need, while an audit employee may know how the company examined that discrepancy.

You Know Why the Customer Bought It

If you know why a customer ordered unnecessary services or how a benefit reached the person approving the purchase, speak with our whistleblower experts about that sale. We build the case around your knowledge of the sale, bring in FCPA whistleblower lawyers who understand overseas payments and sales controls, and stay beside you through the pursuit of your claim.