A running theme in discussions—and criticisms—of government settlements with corporations in foreign bribery cases is the failure to focus adequately on individuals. Most commonly, this criticism emphasizes the alleged failure of the “supply-side” enforcers (e.g., the U.S. Department of Justice (DOJ), the U.K. Serious Fraud Office (SFO), etc.) to bring charges against the individual corporate officers and employees responsible for the illegal conduct. Additionally, though, some—including some contributors to this blog (see here and here)—have emphasized that settlements with supply-side enforcers should contain enough information on the illegal transactions that enforcement authorities in the demand-side countries (that is, the countries whose public officials took the bribes) can go after individuals under their jurisdiction. Such individuals would include, most obviously, the government officials who took the bribes, but might also include third-party intermediaries and other local agents over whom the supply-side enforcers lack jurisdiction.
The idea that the public documents in these settlement agreements ought to include a detailed discussion of the transactions, including the identities of the individuals involved, sounds like a good idea. Indeed, I think it generally is a good idea (though I confess I haven’t thought through the issue carefully). But recent news reports out of Tanzania last week highlight a potential pitfall that I confess I hadn’t previously considered: The individuals named as wrongdoers in corporate settlement agreements might sue. Are such suits viable? I have no idea. But the problem is worth considering.
Let me first lay out a brief synopsis of the Tanzania case, and then offer a few under-informed speculations about what this all means.
The case out of Tanzania involves a settlement agreement between the SFO (in its first-ever Deferred Prosecution Agreement (DPA)) and ICBC Standard Bank, in connection with Standard’s failure to prevent an affiliated bank (Stanbic Bank Tanzania) from bribing Tanzanian government officials. The settlement agreement emphasized that there was no allegation that Standard Bank or its employees knowingly participated in the bribery scheme; rather, the DPA agreement stipulated that Standard had failed to implement sufficient procedures to prevent bribery by its agents. Under the terms of the DPA, Standard agreed to pay a penalty of approximately $33 million. Furthermore, the settlement named—as the agents responsible for actually paying the bribes—not only Stanbic Bank, but also two of its executives, Bashir Awale and Shose Sinare. Ms. Sinare resigned in June 2013, while Mr. Awale was fired in August 2013 for failing to cooperate with Stanbic’s internal investigation. According to reports, both Mr. Awale and Ms. Sinare are under investigation by the Tanzanian authorities.
Now, here’s where things get (more) interesting: According to reports earlier this month, Ms. Sinare is now suing both Stanbic Bank and Standard Bank in the Tanzanian courts, seeking $30 million in damages for ruining her banking career. I can’t locate the actual court filings, but it appears to be some sort of defamation action: Apparently Ms. Sinare alleges that Standard Bank was aware of and participated in the bribery scheme, and sought to protect itself by making a misleading self-disclosure to the SFO in which Standard asserted that it was Ms. Sinare (and Mr. Awale) who were the “rogue employees” responsible for paying the bribes. Ms. Sinare’s complaint (according to media reports) emphasizes that although the bank’s internal investigation implicated her, she did not have an opportunity to see the allegations or respond to its claims. In short, insofar as I understand this correctly, she’s suing on the grounds that the “disclosures” provided by Standard Bank to the SFO, and included in the public DPA documents, are defamatory.
So, what are we to make of this? Maybe nothing. It’s possible that Ms. Sinare’s lawsuit is frivolous and the Tanzanian courts will throw it out. But still, the suit itself raises some potentially interesting issues. Here are a few initial thoughts:
- First, whether or not this lawsuit has any legal merit, it serves as a useful reminder that, for all we might push for corporations to provide more detail about the individuals involved in wrongful transactions, it’s important to keep in mind that just because the corporation fingers a particular individual doesn’t automatically mean that individual is culpable. Corporations can make honest mistakes; more worryingly, they may often have incentives to pin the blame on rogue agents, especially when those alleged rogues are not actually the company’s own employees.
- Second, and related, while greater transparency about the facts disclosed by companies to supply-side enforcement authorities may often be a good thing—in part because such disclosures can prompt or facilitate investigations by the host country’s law enforcement agencies—such transparency can have a downside, if we consider for a moment the possibility that some of these disclosures might be misleading or worse. Even if we decide that corporations negotiating DPAs should be required to provide DOJ or SFO with detailed information, including individual names, it’s a separate question whether we want all of that detail to appear in the public settlement documents.
- Third, notwithstanding the two points above, I tend to think that opening the door to suits like Ms. Sinare’s is probably a bad idea. (Again, I don’t know the details of her suit, nor whether it might have merit under Tanzanian law. Here I’m making a more general point about policy.) If companies are afraid they might have to defend themselves against lawsuits by individuals they identify in internal investigations as responsible parties, and subsequently identify to enforcement authorities in settlement negotiations, then this could be a significant disincentive to making such disclosures. It’s true that a false or misleading finding in an internal investigation, if publicly disclosed, might damage an innocent party’s reputation. But allowing such suits to go forward, without any heightened requirement of intentional malice or reckless disregard for the truth or falsity of the statements, could have a significant chilling effect on internal investigations and self-reporting.
- Fourth, some of the early reports on Ms. Sinare’s lawsuit state that some Tanzanian advocates are suggesting that her suit (presumably if successful) would and should be grounds for re-opening the DPA between Standard Bank and the SFO. I gather the logic is that if she prevails on her claim that Standard knew about the bribery scheme (and chose to make Ms. Sinare a scapegoat), this would undercut the findings of fact on which the DPA rested. I suspect it’s unlikely Ms. Sinare’s suit will ever produce such a clear ruling, but even if it did, I’m not sure it would be good policy to treat that as a basis for re-opening the existing settlement. (The SFO has already indicated that its investigation into Standard’s conduct has been concluded and will not be re-opened.) After all, that could open up all sorts of opportunities for back-door attacks on concluded settlements. Still, the possibility that we could hypothetically get two conflicting court judgments—a UK court order approving a settlement premised on the finding that Ms. Sinare and Mr. Awale rather than Standard Bank arranged the bribery scheme, and a Tanzanian verdict that Standard Bank orchestrated the scheme and offered up Ms. Sinare and Mr. Awale scapegoats—is at the very least troubling.