Since last November Kenya has been rife with claims (here and here for press reports) that American shoemaker Nike bribed the nation’s track and field authority to ensure the country’s runners compete wearing Nike shoes. While Nike denies wrongdoing, the March 6 issue of the New York Times provides details which suggest the allegations are true. Yet despite the mounting evidence that an American company is at the center of a high profile corruption case in Kenya, the Times reports the U.S. has not opened an investigation. Its failure to do so, in the face of President Obama’s stern lecture about corruption to the Kenyan elite during his July 2015 visit to the country and the agreement reached during his visit pledging the U.S. to help Kenya fight corruption, has left Kenyans frustrated and angry at America. It is “hypocritical,” famed Kenyan corruption fighter John Githongo told the Times, for the American government to “bang on” about Kenya without investigating allegations against the iconic American company.
According to the Times, American officials believe the U.S. is powerless to investigate because, even if Nike did indeed pay a bribe, it was to employees of a private entity, and private sector bribery is not covered by the anti-bribery provisions of the Foreign Corrupt Practices Act. But while private sector bribery itself is not an FCPA offense, this does not mean Nike is off the hook. If an American company bribes an employee of a private entity, as it is alleged Nike has, it runs afoul of numerous state and federal statutes, anyone of which could provide the basis for launching an investigation. Four that come to mind immediately are:
*The Federal Trade Commission Act. Section 5 of that acts outlaws ‘‘unfair methods of competition,” and private sector, or commercial, bribery has long been proscribed by the act. The Federal Trade Commission, which enforces the law, has a range of investigative tools at its service, some of which are broader than those available to the Department of Justice in FCPA cases. Although to come within section five’s proscriptions, commercial bribery must have a “direct, substantial, and reasonably foreseeable effect” on U.S. exports, if indeed Nike did bribe officials of the Kenyan athletics agency to gain the exclusive right to furnish its shoes to Kenyan runners, it denied New Balance, ASICS, Reebok and dozens of other American companies the right to compete fairly for that right, harming their ability to export their products in direct violation of one the nation’s bedrock commercial statutes. Moreover, 2006 amendments to the act give the commission wide discretion to share information uncovered in its investigation with foreign law enforcement agencies.
* State Unfair Competition Laws. While section 5 violations give rise only to administrative sanctions, fines and orders requiring businesses to change their practices, three-quarters of the American states make commercial bribery a felony. These include Californian, Florida, and New York, all states where Nike has significant sales and faces substantial competition from other firms. (But not, surprisingly, Oregon, Nike’s home state and one with a reputation for clean government. Hint, hint Oregon legislators.) There is no reason why an attorney general or prosecutor in one of these states couldn’t open an investigation.
* Federal wire fraud statute. It is a federal crime to transmit by wire any “writing” in furtherance of a “scheme . . . to defraud” an individual or entity. The statute bars not only tricking or deceiving a victim into parting with money or other tangible property, but frauds that result in depriving the victim of intangible property. If Nike did indeed bribe employees of Athletics Kenya, it defrauded the organization of the honest services of those employees, and e-mail traffic between Nike managers and Athletics Kenya officials is enough to make the fraud a violation of the statute. Although most prosecutions of “honest services fraud” result from depriving a government of the honest services of a public employee through bribery, the wire fraud/honest services fraud theory has been used to prosecute commercial bribery as well. Nor is the statute limited to domestic commercial bribery.
* The Foreign Corrupt Practices Act. The FCPA contains two substantive provisions, one banning bribery and one requiring firms to keep accurate books and records. While the anti-bribery provisions of the act do not apply unless the bribe-taker is a “foreign official,” Nike might still have run afoul of the books and records provision. It depends upon how it described the payment to Athletics Kenya in its internal records. If the payment was in reality a bribe but was not recorded as such on the company’s books, it violated this latter provision.
The Times article claims Nike paid Athletics Kenya, the non-governmental agency that oversees the country’s track and field competition, a no-strings-attached $500,000 “commitment bonus” to ensure Kenyan runners continued to compete wearing Nike shoes, a payment a former agency employee told the Times was in reality a bribe. The Times also reports it is unusual if not unprecedented to pay a national athletics association a commitment bonus and that the payment was made after the agency’s chair e-mailed Nike saying “Urgent!!” and put “invoice” in the heading. Furthermore, unlike previous Nike sponsorship fees, the Times says the contract involving the commitment bonus contained no details for how the money was to be used. Finally, according to the Times, one of its reporter reviewed Athletics Kenya banks records showing the $500,000 was withdrawn from the agency’s bank within days of its receipt by top officials though no track meet was scheduled and no other reason for a hasty withdrawal was evident.
The former employee who claims the commitment bonus was a bribe may not have known all the facts. Other claims in the story may be wrong. Or it may be that, even if the facts are as the Times reports, senior officers of Nike were duped. But surely, given the plethora of laws Nike would have violated if the Times’ story is accurate and President Obama’s commitment to help Kenya fight corruption, an investigation is merited. What are U.S. authorities waiting for?