The Prosecution of Bribery: What Lawmakers Can Learn from Bavaria and Virginia

Prosecutors thinking about whether to pursue a case against the recipient or payer of a bribe will surely think twice given events of the past weeks in the German state of Bavaria and the American state of Virginia.  In Bavaria the bribery prosecution against Formula One impresario Bernie Ecclestone collapsed mid-trial after the judge expressed strong doubts the case could be proved.  In Virginia prosecutors are slogging through the third of what is expected to be a six week trial as they try to show that Robert McDonnell, the state’s former governor, was paid to shill for a local business.  To prosecutors, the two cases remind that bribery is no easy crime to prove and that losing carries risks both personal and professional.  To lawmakers, the two cases should prompt a scrub of their nation’s bribery laws to see whether the bar they have set for proving a case is too high.

The Ecclestone case foundered over the question of whether the billionaire businessman knew he was bribing a “public official.”  Ecclestone had paid $44 million to Gerhard Gribkowsky, chief risk officer at the BayernLB bank, in return for Gribkowsky seeing that a block of Formula One stock the bank had acquired in a bankruptcy proceeding was sold to an Ecclestone associate. It would seem reasonable to infer that the savvy international operator knew before forking over $44 million that, as the Wikipedia entry on BayernLB bank explains, the bank is “94% owned by the free state of Bavaria” and hence Mr. Gribkowsky was a “public official” under German law.  But for whatever reason, the trial judge was not willing to countenance such an inference, insisting instead that prosecutors prove Ecclestone knew Germany’s ninth largest bank  — the full name of which, “Bayerische Landesbank,or “Bavarian State Bank” in English, signals it is state-owned — was indeed state-owned.  Although Gribkowsky testified that Ecclestone had nicknamed him “a little civil servant,” when other prosecution witnesses stumbled the judge said it was time to end the case.

In the McDonnell case, prosecutors must overcome three hurdles to convict the former governor.  One, they must show that the alleged bribes, which were in the form of gifts to McDonnell’s spouse and joint loans, were in fact for the governor’s benefit; two, these gifts and loans were provided in return for the governor taking actions that would help the businessman sell his products; and three, the actions taken were “official acts” within the meaning of the federal bribery laws. 

Whether the bribes benefited the governor — or just his wife and were therefore legal — will turn on whether prosecutors can show the two conspired or agreed to accept them in return for actions the governor took to help the businessman.  On the second hurdle, McDonnell argues that the receipt of favors and the doing of acts that helped the businessman are unconnected.  As governor it was his job to promote the products of Virginia businesses and the promotional work in question here was normal and expected — not tied to or conditioned upon the receipt of favors.  In other words, there was no quid pro quo.

Finally, under U.S. federal bribery statute it will be not enough for prosecutors to show that McDonnell promoted the businessman’s product to other government officials, that he introduced the businessman to influential persons, or that he provided “access” to members of his cabinet or other state officials.  To violate the anti-bribery law prosecutors must show that McDonnell accepted payment in return for performing an official act;  and perhaps surprisingly, none of these acts are “official” under current law — at least based on the research of the McDonnell defense team (see Case 3:14-cr-00012-JRS Document 106 Filed 03/25/14, behind pay-wall).

 Simple reforms to Bavarian and Virginia law would ease the prosecution’s hurdles in future cases without criminalizing innocent behavior.  Bavaria could do as Great Britain did in its 2010 Bribery Act and enact a single statute covering both public and private sector bribery.  Had Mr. Ecclestone been tried in a British court today on the same facts whether the recipient of the bribe worked for a state-owned or private bank would have been irrelevant.  Bribery is bribery under the 2010 law.  Virginia can much simplify future prosecutions by requiring senior officials to publicly report all gifts they or their spouse receive.  Had McDonnell disclosed the gifts the businessman was showering on at least his spouse, a political furor might have called a halt to his promotional work.  Had he chosen to hide their receipt, the crime would be obvious and easy to prove.

Bribery trials are rare events, either because the evidence is so overwhelming that the defendants plead or settle the case or because the hurdles to securing a conviction are so high.  The Ecclestone and McDonnell cases offer a rare but useful look at the issues law enforcers face when prosecuting the crime of bribery, a look that should prompt lawmakers everywhere to ask if their laws need reforming. 

5 thoughts on “The Prosecution of Bribery: What Lawmakers Can Learn from Bavaria and Virginia

  1. Very useful post Rick.

    One quick question: Isn’t there a bit of a tension between the solution you propose to address cases like McDonnell’s — public disclosure of gifts — and the skepticism you’ve expressed in earlier posts about the efficacy of asset disclosure requirements more generally?

    • Glad you liked the post. I am skeptical of asset disclosure programs when they are 1) THE REMEDY for corruption, a silver bullet if you will; or 2) force all public employees from drivers, cleaners (and in parts of California lifeguards!) on up to file lengthy disclosure reports.

      Requiring the chief executive officer of the state of Virginia to disclose gifts he or she receives to supplement or complement other anticorruption measures is well within my zone of non-skepticism.

    • Bryson, thanks for flagging the Virginia gift disclosure rule. I should have made it clear that what Virginia lawmakers need to do is enact an effective disclosure rule.

      Former Governor McDonnell was apparently able to avoid fully disclosing the gifts and loans his wife and daughter, and perhaps he, received from the businessman thanks to exclusions (aka loopholes) built into current law. Although the July 2014 Virginia disclosure form your comment links to requires senior officials and their “immediate family” to disclose gifts received, filers are told: “Do not list gifts or other things of value given by a relative or personal friend for reasons clearly unrelated to your public position.” Presumably this exception covers the wedding dress purchased for the daughter and other gifts to the children and the spouse.

      Loans are included within the definition of gift but the loan must be made directly to the filer or members of his or her immediate family. The loans at issue were made to closely held corporations owned by the McDonnells.

      One indicia of wrongful intent is secrecy. Evidence at trial has suggested that stock in the businessman’s company was sold just before December 31 and repurchased the following January to avoid revealing the McDonnell’s ownership on their December 31 disclosure form. Press accounts report the prosecution is emphasizing this transaction. I am sure prosecutors wish there were more examples of the defendants evading disclosure or examples of outright failure to disclose. An effective gift disclosure law would surely have produced both.. .

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