Can Giving a Benefit to a Third Party Count as Bribing a Foreign Official? Yes, No, or Maybe So?

One of the things I enjoy most about participating in the anticorruption blogosphere is the opportunity to engage in serious, substantive debates with smart people who think differently about these issues than I do. The exchanges are helpful, even when they fail to eliminate the disagreement. Case in point: My friendly sparring with Professor Andrew Spalding about the investigation of the JP Morgan “Sons & Daughters” program in China, which raises the question about whether offering a job to a foreign official’s child (or other friend or family member) can violate the anti-bribery provisions of the Foreign Corrupt Practices Act. Professor Spalding, in a four-part series of posts on the FCPA Blog last summer (see here, here, here, and here), says no. (He further claims that the US government already took that position in a couple of DOJ Opinion Releases from the early 1980s, and that a DOJ reversal of that position would therefore be an affront to the rule of law). In my post last week, I disagreed, and argued that–depending on the facts of the case–it’s at least possible (perhaps even likely) that JP Morgan’s activities violated the FCPA, and more generally that offering something to a third party can, under some circumstances, count as offering an improper benefit to a foreign official under the FCPA.

Professor Spalding has now posted a thoughtful reply on the FCPA blog. While I continue to disagree with his analysis, the exchange has been helpful (at least for me) is elucidating an important distinction in how we analyze potential FCPA violations–that between conduct that may violate the FCPA (under the right factual circumstances) and conduct that always or never violates the FCPA. Appreciating this distinction is key–in my view–to understanding where Professor Spalding goes wrong (though I suspect he will continue to disagree!). While I don’t want to go round and round in circles on the same issues, let me take one more crack at what I view as the key point:

On the question of whether offering a job to the (adult, non-dependent) child of a foreign official counts as corruptly offering “anything of value” to that foreign official, there are three possible general answers we might give:

  1. Yes: Such an offer always counts as offering something of value to a foreign official–so that if the job offer is made in order to corruptly influence the official’s decision in order to secure a business advantage, there is an FCPA violation.
  2. No: Such an offer never counts as offering something of value to a foreign official, because the thing of value is offered not to the official him- or herself, but rather to the non-dependent child. As a consequence, unless the government can show that the job for the child was a way to surreptitiously funnel money to the foreign official, there is no FCPA violation–even if there was an explicit quid pro quo, for instance the official saying explicitly “I’ll only give you this license (or retain your firm for this business, or whatever) if you hire my son for a high-paying entry level position.”
  3. Maybe: It’s possible that giving a job, or something else of value, to a foreign official’s relative (or some other third party) might count as giving something of value to the foreign official, but to establish this the government would have to show (and, if the case ended up in court, prove) that the foreign official placed intrinsic value on helping her family member (or other third party), and that the job offer (or whatever) to that family member was offered corruptly as a favor to the foreign official–a quid pro quo, though perhaps a tacit one–in exchange for a business advantage of some kind.

The position I’m defending is #3: an offer of a job to a relative can be bribe to a foreign official, but in order to establish that it is, the government would need to prove something more than that the firm hired the official’s relative–it would need to show that under the particular factual circumstances, the foreign official (and the firm) understood the offer as a favor to the official, and that the offer was made corruptly in order to influence the official’s decision-making so as to secure a business advantage for the firm. That will often be hard to prove–but not impossible, and the media reports about the JP Morgan case suggest that there may be sufficient evidence of an FCPA violation in that case.

I take it Professor Spalding is defending position #2 (a job offer to an official’s relative can never be a bribe of the official). I’ve already explained why I think that’s wrong in my previous post, and I won’t rehash all the arguments here. What I want to emphasize is that in his posts, particularly his most recent, Professor Spalding trains all his fire on position #1 (a job offer to an official’s relative is always a bribe of the official). But so far as I know, nobody–not the US government, certainly not me–is defending that position. So, when Professor Spalding says: “[G]iving a job to an official’s daughter or son [does not] necessarily [distort government decision-making in a way the FCPA is meant to prohibit]” (emphasis mine), my response is: You’re right–but no one is saying that such an offer necessarily constitutes an unlawful bribe; the argument is simply that it can be a bribe, if the surrounding factual circumstances show that the offer to the relative was made as a kind of “tribute” (or “dues”) to the official.

In that light, it’s hard to grasp (but easy to dismiss) the hypothetical scenarios Professor Spalding lays out as the core of his substantive argument. He asks:

Can we imagine circumstances in which the job [for the official’s child] would not have value to the official? Easily.  What if the child and parent are estranged? Or outright hate each other? What if the parent thinks the child is spoiled and needs to make her own way in the world? What if the official intensely dislikes foreign companies (highly possible, given China’s recent treatment of foreign firms and the low public regard post-2008 for U.S. investment banks) and would deem the child’s acceptance a betrayal?

To which I say: Of course, if any of those things are true, offering the job to the child would not be an offer of something of value to the foreign official. Easy cases. But these examples refute position #1 above, not position #3. And they don’t help us choose between position #2 and position #3. To do that, it may be more helpful to tweak Professor Spalding’s questions, as follows:

Can we imagine circumstances in which the job for the official’s child would have value to the official? Easily.  What if the parent is devoted to the child, and seeks her advancement? What if the parent likes to spoil his child, and thinks the child won’t be able to make her own way in the world without the parent’s help? What if the official views her child’s employment at a prestigious foreign firm as a source of honor and social advancement not only for the child, but for the whole family (highly possible, given the extremely high status of international financial firms in China, even post-2008, and the degree to which elite Chinese parents go to great lengths to secure such opportunities for their children) and would deem the child’s acceptance as a source of pride that exceeds the value of any tawdry cash payment the firm could offer?

For Professor Spalding to maintain the position he seems to be staking out, presumably he would have to say that even under the circumstances sketched above, the job offer to the official’s child cannot be considered a bribe under the FCPA, no matter how explicit the quid pro quo. And that’s the position that I (and presumably the DOJ) want to reject.

The nature of our disagreement (or miscommunication) is underscored further by Professor Spalding’s erroneous prediction of how I would respond to the scenarios he lays out in the passage I quoted above. He writes: “But one may retort that it’s not a subjective test. The law should not and does not require specific evidence of the official’s valuation of the job. Rather, a lucrative job to an official’s relative is objectively of value to that official.” (He then goes on to cite the Opinion Releases as a refutation of that position.) But my actual response is not only different, but is in fact the exact opposite of the one he anticipates: Whether the job offer to the relative is something of value to the official is a subjective question; the law should and does require the government to prove that the job offer to the relative had value to the official (though this can be proven by sufficient circumstantial evidence).

I don’t want to belabor the matter, nor do I want to rehash our possible disagreements over the status and precedential value of the DOJ Opinion Releases. All I’ll say on that latter point is that Professor Spalding shows that the Opinion Releases refute position #1 (and I heartily agree), but does not develop an argument (so far as I can make out) as to whether or how they undermine position #3, and by extension the possibility that there might have been a violation in the JP Morgan case, even if there wasn’t in the two earlier cases analyzed in the releases. To drive this home, let me quote just one more time from Professor Spalding’s most recent post:

Prof. Stephenson observes, rightly, that “there does not appear to have been any suggestion, in either case [covered by the earlier Opinion Releases], that the foreign officials in those cases viewed the retention of their relatives’ firms as itself a quid pro quo, offered in exchange for business.” But this is precisely my point. There was no evidence that the official thought of the lucrative contract offered to the relative as a thing of value to the official. Absent that evidence, the DOJ stated it would not treat the contract as an FCPA violation.

I’m scratching my head a bit here trying to figure out whether or where we disagree. There was, as Professor Spalding says, no evidence that the officials in the earlier cases thought of a lucrative contract offered to the relative as a thing of value to the official.  There is (or at least preliminary reports suggest there may be) evidence in the JP Morgan case that the Chinese officials thought of the jobs and lucrative contracts offered to their relatives as things of value to the officials. To my mind, that makes the cases different, means the earlier Opinion Releases don’t control, and suggests that there may be a sound basis for finding an FCPA violation if the facts bear out the above conjecture.

I realize all this may seem like a couple of law professors sparring over technicalities and terminology, but there’s a larger point here. As Jordan pointed out in his comment on my earlier post, in the FCPA context people sometimes confuse or conflate what the statute prohibits with what the government can prove (or will try to enforce) in a particular case. The FCPA, perhaps even more than other white-collar criminal statutes, is extremely fact-sensitive–an inevitable consequence of the fact that corruption, by its nature, is hard to define in simple terms. Some conduct that is innocent, or at least lawful, when done in certain ways in certain settings, can become unlawful when done in other ways in other settings. That’s just the nature of the beast. And it means that showing that certain conduct doesn’t always violate the FCPA does not establish that such conduct can never violate the FCPA. It’s not “yes” or “no”–it’s “maybe so.”

6 thoughts on “Can Giving a Benefit to a Third Party Count as Bribing a Foreign Official? Yes, No, or Maybe So?

  1. Professor Stephenson,

    I agree with your position. I think, as with any of these bribery allegations, where there is an assessment of “corrupt intent” and “value”, the facts need to be carefully considered (it’s a case-by-case, or maybe, evaluation). I also agree with your previous post regarding the “bright line” interpretation of DOJ Opinion Releases; the DOJ goes to great length to point out that the opinions are based on the facts and circumstances presented.

    Also, as an American business executive who has lived and worked in Asia for the past 15 years, I think it is very dangerous to use a black and white approach to evaluating whether “something of value” has been promised or given to a foreign official (too many nuances involved). Anytime there is a request from, or offer to, a foreign official, the red flags must go up. Staff members, especially in high-risk jurisdictions, need to be thoroughly trained, using multiple case studies and examples (preferably local examples), and they need to be encouraged to seek out interpretive guidance from compliance officers and legal counsel.

    It’s also worth noting that the DOJ Opinion Releases are silent on a number of potential bribery scenarios, which does not suggest that the DOJ would condone them or that companies should feel at liberty to engage in them. It just means that no one has presented a scenario and asked for an opinion.

  2. Thanks to both you and Professor Spalding for a stimulating exploration of this issue – while the FCPA treatment of job offers to family members may boil down to ‘it depends’, it is helpful to understand more about what sort of factors it depends on. Personally I find it difficult to imagine a situation where a family job offer was truly intended as part of reasonable promotional expenditure and no further, but maybe a jury could be persuaded in the right circumstances.

    The UK Bribery Act raises a similarly messy question, but without the need to prove that the foreign public official valued the offer themselves or that the offer was made with any corrupt intent. The Bribery Act’s Section 6 offence catches offers of advantages to third parties intended to influence a foreign public official in relation to business, as long as the official agreed or acquiesced in the offer. Official consent is a more objective question than their subjective valuation of the family job offer, but the requirement for evidence could still cause practical difficulties.

    The Bribery Act also doesn’t provide an affirmative defence of reasonable promotional expenses, though it does exclude situations where the official was permitted or required by written law to be influenced by the third party advantage. Here I’m more confident that family job offers will only be granted formal approval in exceptionally brazen cases, such as seen in relation to the appointment of Mr. Teodoro Nguema Obiang Mangue as deputy permanent delegate to UNESCO.

  3. Pingback: Hiring A Foreign Official’s Relative In Exchange For Business Violates The FCPA | Anti Corruption Digest

  4. Pingback: Does an FCPA Violation Require a Quid Pro Quo? Further Developments in the JP Morgan “Sons & Daughters” Case | GAB | The Global Anticorruption Blog

  5. Pingback: FCPA Compliance: Does “Anything of Value” Really Mean “Anything of Value”? - Corruption, Crime & Compliance

  6. Pingback: FCPA Compliance: Does “Anything of Value” Really Mean “Anything of Value”? – Corruption, Crime & Compliance | Anti Corruption Digest

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.