Did Manafort Corrupt European Politicians?

Former Trump campaign manager Paul Manafort’s guilty plea last Friday has fired speculation that he may “flip” on President Trump, telling prosecutors about Trump’s Russian ties in return for a lighter sentence. But for Europeans a much more important story emerges from the plea.  Buried in the 117-pages of documents released as part of the plea agreement is the story of how Manafort enlisted senior European politicians to paint Ukrainian President Victor Yanukovych’s pro-Russian, authoritarian regime as a democraticlly-led friend of Europe and America.  The story shows:

1) Manafort used the dark arts he learned as an American lobbyist to corrupt gullible European politicians;

or on another reading —

2) Some leading European politicians are as willing to prostitute themselves for whatever client will pay as some of their American counterparts.

The tale begins with Manafort’s June 2012 “Confidential: Eyes Only Memo” proposing to procure a “Super VIP Group of former European Heads of Governments and VIP Officials” to sell Yanukovych’s Ukraine to Europe and American policymakers.  The sale, Manafort explains, will be made “without any visible relationship” to the Yanukovych government through his “quiet direction” in newspaper articles, press commentary, and presentations at Manafort-organized conferences across Europe.

Less than a year later Manafort’s report on the work of what he christened the “Hapsburg Group” says: Continue reading

The US Can (Probably) Charge Bribe-Taking Foreign Officials as Conspirators or Accomplices in FCPA Cases

Given everything else that’s happening related to corruption right now (much of it awful), perhaps it’s a mistake for me to be spending so much time thinking about fairly narrow doctrinal issues related to applications of the U.S. Foreign Corrupt Practices Act (FCPA). But my reflections on the recent court of appeals decision in US v. Hoskins (which held that a foreign national could not be charged as an accomplice or co-conspirator in an FCPA violation based on conduct occurring abroad) have gotten me thinking about—and questioning—what I had assumed was a well-settled and straightforward conclusion that the foreign official who takes a bribe from a person or entity covered by the FCPA cannot be charged with aiding and abetting, or conspiring to commit, that FCPA violation.

That conclusion—that bribe-taking foreign officials may not be charged as accomplices or co-conspirators in FCPA cases—was announced by a US court of appeals in 1991 in a case called United States v. Castle. In Castle, according to the allegations (which for present purposes I’ll assume to be true), two private US businessmen paid a $50,000 bribe to two Canadian government officials in order to win a contract to provide public buses to the provincial government. The US government charged the American citizens with violating the FCPA—which, if the facts are as alleged, they clearly did. The Canadian officials cannot directly violate the FCPA, which by its terms prohibits only covered entities from giving (or promising or offering) bribes to foreign public officials; the FCPA does not criminalize the act of taking a bribe. But in the Castle case, the US government tried to get around this problem by charging the Canadian officials with conspiracy to violate the FCPA, pursuant to the federal conspiracy statute, codified at 18 U.S.C. § 371. That section makes it a separate crime (“conspiracy”) for “two or more persons [to] conspire … to commit any [federal] offense,” as long as “one or more of such persons do any act to effect the object of the conspiracy.” According to the U.S. government’s theory of the case, once the Canadian officials agreed with the US businessmen to accept money in exchange for a public contract, they had all conspired to commit a federal crime, and once the US businessmen took action in furtherance of this conspiracy (by paying the money), all the parties, including the Canadian officials, were liable as co-conspirators. The US district judge rejected that theory, and the court of appeals affirmed, simply endorsing and reprinting (with one minor correction) the district judge’s ruling.

Since Castle, so far as I can tell, this principle that the US government can’t prosecute bribe-taking foreign officials as conspirators in an FCPA violation (or, similarly, as accomplices to an FCPA violation under another statute, 18 U.S.C. § 2(a)), seems to have become generally accepted, largely unchallenged by the US government, and treated as clearly correct as matter of legal doctrine. And it matters a great deal as a policy matter: If the Castle ruling had gone the other way, than the FCPA—complemented by the general conspiracy and complicity statutes—would give the US government a very powerful tool, for better or worse, to prosecute bribe-taking foreign government officials, at least those with sufficient ties to the US to establish personal jurisdiction (an important qualification I’ll return to later). I’d always assumed, without much reflection, that Castle was rightly decided. But after some digging into the case law, prompted largely by the more recent decision in Hoskins, and re-reading the Castle opinion, I think that Castle’s broad holding is doctrinally incorrect. If certain other conditions hold, a bribe-taking foreign official can be guilty as an accomplice to or co-conspirator in an FCPA violation, even though the foreign official could not directly violate the FCPA. Continue reading

Getting People Off the Sanctions List: A Process that Doesn’t Support the Policy

Individually-targeted “smart sanctions”—not to be confused with country-wide sanctions, such as trade or arms embargoes—are garnering increased attention as a potentially powerful tool in the anticorruption toolkit, particularly in the United States. Such sanctions typically prohibit persons or entities on the list of those under sanction (known in the U.S. as the Specially Designated and Blocked Person (SDN) list) from accessing the sanctioning country’s financial system. They can also impose travel bans and/or prohibit third parties subject to the sanctioning country’s jurisdiction from doing business with the targeted individuals. These individually-targeted sanctions, particularly the asset freezes, are a powerful instrument, and may be an especially effective deterrent in the context of venal crimes like corruption, given that those motivated principally by greed might also be more sensitive to severe financial penalties. (According to a 2016 study by the US State Department, a sanctioned or associated company loses, on average, over half of its asset value and one-third of its employees and operating revenues.) While the United States had previously used individually-targeted asset freezes to punish individuals responsible for acts of public corruption in places like Venezuela (pursuant to Executive Order (EO) 13692), Syria (pursuant to EO 13460), and Zimbabwe (pursuant to EO 13469), the 2016 Global Magnitsky Act (GMA) has made individually-targeted asset freezes a more prominent piece of the US anticorruption arsenal. Pursuant to this Act, last December President Trump authorized sanctions against 15 individuals and 37 entities for human rights abuses and acts of grand corruption; in June, the Office of Foreign Asset Control (OFAC) added two more entities and five more individuals to the list.

In the months since OFAC released the first tranche of GMA names, there has been extensive discussion about how civil society organizations (CSOs) can add more names to the Global Magnitsky list. Former Deputy Assistant Secretary of State Rob Berschinski, for example, is spearheading efforts through Human Rights First to coordinate CSOs endeavouring to submit names for consideration, while the Helsinki Commission organized a special “how-to” event for CSOs to help them be more effective in lobbying to add names to the list.

Yet for all this attention on how to get names on to the GMA list, little ink has been spilled addressing the question of how sanctioned individuals might get off that list. It’s not surprising that CSOs would not devote their scarce resources to getting individuals who have engaged in acts of grand corruption off of a sanctions list. Yet the de-listing issue is important—even in contexts where it’s unlikely that a name would be added to the list erroneously. The main reason has to do with incentives. As the US Treasury Department acknowledges, the “ultimate goal with sanctions is not to punish, but to bring about a positive change in behavior of illicit actors.” And it is the prospect of getting off the sanctions list that can encourage bad actors to change their behavior and/or to cooperate with the US government investigations into wrongdoing. Continue reading

Coordination of Corporate Resolution Penalties Is Unlikely to Address the “Piling On” Problem in FCPA Prosecutions

Multinational companies that pay bribes may find themselves subject to prosecution by multiple jurisdictions. Some countries, including many in Europe, apply a double jeopardy bar (known there as ne bis in idem) that prevents one country from prosecuting an entity that has already been prosecuted elsewhere. Other countries, however—including the United States—have no such bar. US prosecutors may pursue those suspected of violating the Foreign Corrupt Practices Act (FCPA) even if the targets already have been, or are being, prosecuted in another country for the same bribe payments. Is this a problem? Some say no: the possibility of multiple prosecutions by different sovereigns might create a healthy “race to the top” and stronger deterrence. On the other hand, however, we might worry that multiple prosecutions risk over-punishing, thereby over-deterring risky but socially valuable conduct (like expanding into high-risk foreign markets). Companies also will not be sure when a matter is finally settled. In addition, there seems something arrogant about the US giving itself the power to evaluate whether a criminal prosecution in another country was adequate.

The US Department of Justice (DOJ), long a defender of its right to judge for itself whether to bring a parallel or follow-on prosecution in FCPA cases, recently signaled greater sympathy with those who take the latter side in this debate. Earlier this year, the DOJ unveiled a new policy meant to eliminate “unfair duplicative penalties” on corporate wrongdoers, including those participating in foreign bribery, and set out a number of factors that the DOJ can use to evaluate whether imposing multiple penalties serves “the interests of justice.” Describing the impetus for the policy update, Deputy Attorney General Rod Rosenstein echoed common complaints from the corporate community about how the “piling on” of multiple penalties for the same misconduct, from different regulatory and enforcement agencies, deprives the company and its stakeholders of the “the benefits of certainty and finality ordinarily available through a full and final settlement.”

It’s not clear, though, whether—at least with respect to FCPA cases—the new policy differs much from the approach that the DOJ’s FCPA Unit has been taking to joint and parallel investigations for many years. While formalizing the approach may seem to provide some relief to corporations, the new policy actually does little to address the “piling on” problem in the foreign bribery context: Continue reading

Anticorruption Bibliography–September 2018 Update

An updated version of my anticorruption bibliography is available from my faculty webpage. A direct link to the pdf of the full bibliography is here, and a list of the new sources added in this update is here. As always, I welcome suggestions for other sources that are not yet included, including any papers GAB readers have written.

Why Won’t Indian PM Modi Extradite KVP to Answer Corruption Charges?

Four plus years ago the U.S. Department of Justice unsealed an indictment alleging a plot stretching from India to Chicago to pay senior Indian officials some $18.5 million for mining licenses in the state of Andhra Pradesh.  Central to the scheme was K.V.P. Ramachandra Rao, then senior advisor to the state’s Chief Minister.  He allegedly solicited and agreed to accept bribes for himself and other Indian officials in return for approving the licenses.

As soon as the sealed indictment issued, the U.S. requested KVP’s extradition from India.  In accordance with the U.S.-Indian extradition treaty, the Indian government is required to surrender anyone located in India accused of the crimes in the United States of the kind KVP allegedly committed.  Article nine provides that all the U.S. need do is provide Indian authorities with “information describing the facts of the offense and the procedural history of the case, a statement of the provisions of the law describing the essential elements of the offense. . . [and] a statement of the provisions of the law describing the punishment for the offense.”

The 43-page indictment (described here) easily meets these requirements.  It details the plot KVP, Ukrainian magnate and alleged Russian mobster Dmytro Firtash, and a U.S. resident, and others concocted to rob the citizens of Andhra Pradesh of hundreds of millions of dollars through a web of bribes and kickbacks. The charges against defendants — racketeering, money laundering, and related crimes arising from the scheme – are precisely and carefully specified.

So why is KVP still not in U.S. hands? Continue reading

Was U.S. v. Hoskins Correctly Decided? (Probably Not.)

My post last week discussed the recent U.S. Court of Appeals decision in United States v. Hoskins, which held that a foreign national cannot be charged with aiding and abetting a violation of the Foreign Corrupt Practices Act (FCPA), or with conspiracy to violate the FCPA, unless that foreign national either took some action connected to the violation within US territory, or else acted as an agent of a US domestic concern or an issuer of securities in the US. That’s a bit of a mouthful. To put this another way: The FCPA itself says that it applies extraterritorially to US nationals (including US firms), to non-US firms that issue securities on US markets, and to the officers, employees, directors, and to agents of firms in either of the preceding categories. The FCPA also applies to foreign individuals or firms (other than issuers) if but only if they engage in some part of the wrongful conduct while in US territory. The question is whether such foreign individuals (including non-issuer firms), who act outside of US territory, and so cannot be charged directly with violating the FCPA’s anti-bribery provisions, can nevertheless be charged with aiding and abetting, and/or conspiring with, some other actor’s FCPA violation. In Hoskins, the U.S. Court of Appeals for the Second Circuit said no: Not only can a foreign national (other than an issuer or an agent of a US domestic concern or issuer) not be charged with FCPA violations based on conduct abroad, but such a defendant’s conduct abroad also cannot support a charge of aiding, abetting, or conspiring in an FCPA violation.

Perhaps because appellate court decisions on legal issues related to the FCPA are so rare, Hoskins has attracted considerable commentary. Most of this discussion, including my post last week, focuses on summarizing the court’s holding, considering its implications for future cases, and assessing whether Hoskins’ limitation of complicity and conspiracy liability is likely to improve or worsen FCPA enforcement overall. However, I haven’t seen very much commentary on the question whether, as a matter of legal doctrine and legal interpretation, Hoskins was decided correctly—that is, whether it is consistent with precedent, statutory text, and generally-accepted jurisprudential principals. That’s entirely understandable—most of the initial wave of commentary is coming either from law firms that want to explain to their clients what this decision means for them, or from those interested more in the policy issues than in parsing the doctrine. Nevertheless, I do think it’s worth getting a conversation going about whether Hoskins’ reasoning is (legally and doctrinally) sound. I may not be the best person to do this, as I’m not a criminal law specialist, but I figured I might as well take a crack at it, if only in the hopes that doing so might prompt some of the real experts to weigh in.

After reading the case a few times, and delving into some of the earlier case law and other materials, it seems to me that Hoskins is a hard case. Really really hard. And I tentatively think that is was probably decided incorrectly. Or maybe “incorrectly” is too strong—instead, perhaps I should say that the Hoskins result is in tension with existing doctrine, and the result the court reaches, though defensible, requires an aggressive expansion of traditional doctrinal principles, one that the court doesn’t really acknowledge. For those readers out there who care more about the policy bottom-line than about the intricacies of legal doctrine, you may want to stop here. Law nerds, read on! Continue reading