5-12. What would you do if your supervisor directed you to bribe other businesses to obtain contracts? Is there legal protection for employees who report employers’ illegal behavior? (AACSB: Communication; Ethical Reasoning)

The CEO of FalconStor Software directed employees to bribe B-to-B customer JPMorgan Chase executives with more than $300,000 worth of stock options, golf-related perks, gift cards, and gambling vouchers in return for lucrative licensing contracts totaling more than $13 million that pumped up the company’s stock price 22 percent. The Department of Justice filed charges under the Travel Act against FalconStor because a FalconStor sales representative traveled with a JPMorgan executive on a lavish entertainment and gambling junket to Hong Kong and Macau. FalconStor must pay $5.8 million in fines and institute corporate compliance reforms before criminal charges can be dropped. But that’s not the end of it. The Securities and Exchange Commission (SEC) also filed a complaint claiming FalconStor misled investors by claiming the contracts with customer JPMorgan Chase as vindication of the quality of the company’s product. In addition, since the bribery expenses were disguised as employee performance bonuses, promotional expenses, and entertainment expenses, the SEC filed charges under the Foreign Corrupt Practices Act (FCPA).