What Might U.S. Officials Think of Demands that the U.S. Transfer FCPA Settlement Proceeds to Demand-Side Governments? An Imaginary Rant

As the United States continues to settle Foreign Corrupt Practices Act (FCPA) cases with corporate defendants for large sums, the issue of whether the U.S. and other “supply-side” enforcers should transfer a portion of these settlement proceeds to the countries where the bribery took place has continued to attract attention and discussion. (This question is often framed as whether the U.S. should “return” some of these settlement proceeds to the “victim countries,” but that formulation is highly misleading, both because criminal fines were never the property of another government, and so cannot be “returned,” and because in many cases referring to these countries as “victims” is problematic, to put it mildly. So I’ll refer to this as “transferring settlement proceeds to demand-side countries.”) The push for transferring settlement proceeds to demand-side countries has gotten a bit more traction over the past year, and has become something of a talking point for certain demand-side governments, especially those in Africa, along with supporting NGOs. So, for example, a Nigeria-sponsored resolution at last year’s UN Convention Against Corruption Conference of States Parties (Resolution 6/2) called for “urgent attention” to the (utterly bogus and misleading) statistic that although US$6.2 billion has been recovered through settlements in foreign bribery cases, only 3% of this amount “has been returned to States whose officials were bribed and where corrupt transactions took place, which is a key aim of chapter V of the contention,” and further called on states that use settlements to conclude foreign bribery cases to “give due consideration to the involvement of the jurisdictions … where foreign officials were bribed.” (The original proposed language was far stronger, “noting with concern the prevailing narrow interpretation of the terms ‘proceeds of crime’ in settlements … that excludes … fines in order to avoid such proceeds from being returned to States and, by so doing, using settlements to create an artificial category of victims of corruption, thereby reducing the potency of chapter V of the Convention.”) One sees this push in several of the country statements coming out of last month’s London Anticorruption Summit, especially those of Nigeria and Tanzania.

Unsurprisingly, the United States has resisted these calls. Generally, U.S. officials have done so (at least in public) tactfully and diplomatically, emphasizing the U.S. government’s commitment to helping the victims of cooperation, its willingness to work with other countries to cooperate in ongoing investigations and improve the mutual legal assistance process, etc. But I’m beginning to sense a growing undercurrent of frustration on the U.S. side, as an increasing number of demand-side countries and NGOs are making the call for transfer of settlement proceeds to demand-side governments (which, again, they often characterize as “returning assets to victim countries”) a central theme of their presentations and diplomatic efforts. (And perhaps, I should acknowledge, some of the frustration I’m sensing is a reflection of my own skepticism – see here, here, and here.) Now, when I say I sense growing frustration or irritation on the U.S. side, I should be clear that I’m speculating. Though I’ve met a few officials from the U.S. Departments of State and Justice, and Treasury who work on corruption issues, I’m certainly no insider, and nothing in the rest of this post should be interpreted is reflecting any actual conversations or statements from current or former U.S. government officials, because it doesn’t. Nor should this be taken as fully reflecting my own views, even though part of what I’m going to write below is generated by introspection.

With those caveats, I’d like to try to imagine what’s going on in the heads of U.S. government officials as they smile politely while listening to the sorts of criticisms I noted above, and when they express, in measured language, their reservations about the proposals that the U.S. transfer FCPA settlement proceeds to demand-side countries. Just for fun, and to be a bit provocative, I’ll present this as a kind of unhinged rant – the sort of thing I imagine that a hypothetical U.S. official’s id might be screaming internally, behind the polite smiles and diplomatic language imposed by her superego. The imaginary rant, in response to demands that the U.S. transfer FCPA settlement proceeds to demand-side countries, might run something like this:

You greedy, sanctimonious hypocrites.

You have the gall to lecture us about how our FCPA enforcement policy is undermining the goals of UNCAC, and not giving due consideration to corruption’s victims, because we’re not handing over the money that we recover in FCPA cases to the governments whose officials accepted—and usually requested, and often demanded—bribes from firms subject to our jurisdiction? Really? Really? Let’s try to remember some basic facts, shall we? Most of this bribery takes place because you’ve done precious little to address serious corruption in your own countries, especially when your officials—often high-level, well-connected officials—are essentially shaking down foreign corporations for bribes. We go after those corporations, devoting substantial and scarce human talent and time to pursuing those cases, for violations of our law, despite a constant drumbeat of criticism from corporations, the defense bar, and allies in Congress that we’re wasting U.S. government resources and hurting American business. Thanks to the dedication of our hardworking, underpaid, vastly outnumbered prosecutors (who, by the way, are constantly castigated as sell-outs or sleazes when they eventually leave government for private sector work, but that’s another story altogether), we are able to settle these cases and impose fines that are authorized by our legal system for violations of our law. And then you have the temerity to show up with your hands out saying, in effect, “Gimme gimme gimme!” You know what? Here’s an idea: How about enforcing your own damn law! Ideally, you could enforce it against your own government officials—you know, the people who demanded the bloody bribes in the first place!

Or if that’s just too much to ask, then how about you enforce your own anti-bribery laws against the corporations who paid the bribes. You know what? We might even help you out with that one! Maybe we could even cooperate from the outset, and come up with a comprehensive settlement—we actually love to collaborate with foreign jurisdictions, and do so all the time. We’ll just need to be sure that you’re competent to handle these cases and won’t just use the information we provide as a way to help your corrupt public officials cover their tracks. That’s not too much to ask, is it? In fact, you know what? If you actually start enforcing your own domestic anti-bribery laws against these bribe-paying corporations, we’d be more than happy to let you take the lead. We’d really like that! But you know what we don’t like so much? When you continue to sit around doing jack-squat about pervasive shakedowns of foreign companies by your government officials, barely lifting a finger to enforce your domestic anticorruption laws, and then show up and make sanctimonious speeches about how the Big Bad Evil U.S. Government isn’t “returning” assets or “helping victims” because we’re not handing over to your government treasury a percentage of the fines the we collected from corporate defendants for violating our law.

Oh, and speaking of victims, I’m so glad you’re showing such deep concern for the true victims of corruption. You know what our law allows victims to do? If you can show that you’ve been directly and proximately harmed by criminal activity, you can move for an order of compensation under the Crime Victims’ Rights Act and/or the Mandatory Victims Restitution Act. Also, even though the FCPA has no stand-alone private right of action, there may be a variety of mechanisms that victims can use to bring a civil action for damages! Hooray! Wait, what’s that, you say? Nobody in your country can qualify for restitution, or maintain a valid civil suit, because it’s actually very difficult to show a concrete, direct, and proximate injury to any of your citizens from any concrete act of transnational bribery? Rather, the harms are diffuse social harms? Well, guess what? That’s true of most criminal law violations, domestically as well as abroad! The way we address those sorts of harms—and the reason we fine corporations for criminal violations—is through deterrence!

And the great thing about deterrence is that it doesn’t really matter who gets the money. We could demand that defendants pay us cash and then just set it on fire, and the deterrent effect would be the same. That said, even though we’re not trying to maximize revenue (our enforcement agency doesn’t keep the money, after all, and it’s trivial in comparison to our total government budget), it’s really politically helpful in encouraging aggressive enforcement that the fines go to the U.S. Treasury. Do you really want to undermine deterrence by weakening our incentive to enforce the FCPA aggressively, and make our aggressive enforcement posture more politically vulnerable? Does that even matter to you? Or do you just see a big pile of money that you want to get your hands on, plus an opportunity to reclaim the moral high ground when the topic of transnational bribery comes up?

Now, we’ll freely admit, there are a lot of places where the U.S. could do a whole lot better. And you’re perfectly within your rights to hold our feet to the fire to get better cooperation, more timely responses to requests for mutual legal assistance, and more action from Congress and other government departments on issues like financial transparency and corporate secrecy. But when it comes to enforcement of the FCPA, we’re doing so much better than any other country that it’s a bit baffling that this is even on your agenda as something to complain about. How about, instead of showing up with your hands out and saying, “Where’s our cut?”, you take some serious action to get your own house in order first?

Again, no U.S. official would ever say anything like this in public, nor have I ever heard any of them say anything nearly this blunt and sarcastic in private. And though I’m on the record as critical of many of the proposals (and especially the purported legal arguments) for transferring FCPA settlement proceeds to demand-side jurisdictions, the above rant is not an accurate representation of my own views, which I like to think of as more nuanced (though perhaps they’re just more wishy-washy). But I don’t think my imaginary version of a hypothetical U.S. official’s unhinged rant is all that far from what may be going on in the heads of some real people, and I think it might be productive just to get that crude, crass, undiplomatic version of the response out there in the open, for two reasons. First, even if I don’t agree with it 100%, I think there’s quite a bit to it. Second, for those out there who find that views expressed in the rant flawed, objectionable, or perhaps even offensive, I think it might help to put it out there openly as a way of encouraging a direct response, rather than keeping this as unspoken subtext.

5 thoughts on “What Might U.S. Officials Think of Demands that the U.S. Transfer FCPA Settlement Proceeds to Demand-Side Governments? An Imaginary Rant

  1. Further to the discussion, for the reasons highlighted in the below posts, “triggering” anything to FCPA settlements is not sound policy.

    http://fcpaprofessor.com/where-should-the-money-go/

    http://fcpaprofessor.com/a-suggested-read-on-a-variety-of-topics/

    http://fcpaprofessor.com/the-financial-reform-bills-whistleblower-provisions-and-the-fcpa/

    As to the “victim” issue, the below post contains additional thoughts.

    http://fcpaprofessor.com/am-i-a-victim/

  2. The easy bit is agreeing that countries should do more to enforce local laws, and take concrete steps to fight demand-side corruption, etc. The challenge with rants, however, is bridging passion with nuance.

    There are many reasons why countries continue to demand return of recovered assets. The easiest is that international anti-bribery enforcement often extends beyond fines. And that many people find it intuitive to ask for the return of recovered stolen funds, even where creatively worded.

    “Victim” countries are not lazy, greedy, money—grubbing, incompetent leeches. Practical enforcement extends beyond taking the lead. Securing evidence, a basic prosecutorial step in systems that recognize the rule of law, not only requires the technical skills to trace assets that are secured in foreign jurisdictions but even the more elementarily, having non-regulated banks or their regulators talk to you.

    Lazy illustration: even the U.S. has to deal with the CJEU views on safe harbor. Now, let’s imagine a Nigerian enforcement agency “leading” on stolen, secreted assets abroad, or many countries without the resources to retain expensive U.S. attorneys who can imaginatively address harm in U.S. courts.

    Public officials steal, trade favors, and take advantage of their positions in many parts of the world. We do not impute these repugnant acts on the people they have taken advantage of.

    The world works in a way that means a few countries presently hold the political and economic clout to take an aggressive and expansive interpretation of jurisdiction and anti-corruption enforcement. To reiterate the obvious: anti-corruption laws are effective because the world’s largest economy took the lead. And the world remains grateful. The world, being human, would also take the easier route in expressing their views for recovery. They will demand and try public shaming because it is human to do so.

    I think a little more empathetic, and perhaps, less smug assessment will recognize that both demand and supply side bribery are abhorrent, and that enforcing against both is necessary. That from the victim’s perspective, anti-corruption and deterrence is defined by asset recovery.

    • Your points are all very well taken, especially your opening remark about the problem with rants, and the need to blend passion with nuance. As I tried to make clear both at the beginning and end of my post, my own views are (I hope) more nuanced than what is expressed in this imaginary rant — but I wanted to lay it out there in raw form, in order to be provocative and lay out in the open what I think some people are thinking privately.

      That said, there is one aspect of your comment that I want to take issue with, which is closely related to the theme of the rant itself: You continue to talk about the “return” of “recovered assets”, and about whether it is reasonable for countries like Nigeria to take the lead on “stolen, secreted assets abroad.” As I’ve emphasized over and over again — and as I know you know, because you’ve written on this subject — fines and penalties in FCPA cases ARE NOT “stolen assets” that have been “recovered,” and they cannot be “returned” to the demand-side governments because they were never owned by the demand side governments in the first place. We have to be vigilant, when we talk about these issues, about drawing a clear and sharp line between _stolen asset return_ and _transferring assessed penalties_. (That said, I admit that certain remedies, like disgorgement, may prevent a difficult intermediate case.)

      Indeed, one of the main targets of my imaginary rant is the tendency of some governments and NGOs to elide this critical distinction, and to suggest that the (correct) assertion that governments like the US have a presumptive legal and moral obligation to return stolen assets to the country from which they were stolen implies the (incorrect) conclusion that countries like the US have a presumptive legal or moral obligation to redistribute some of the penalties assessed in foreign bribery cases to the countries where the bribery took place.

      To some, this may seem like a legal nuance, but as you say, nuance is just as important as passion in this area!

      • I appreciate your points, Professor Stephenson.

        We agree on several issues. We find corruption repugnant and distinguish between recovered assets and broadly, fines. We however slightly disagree on some points, including a definitive position on penalties, which I think may draw on profits earned from opportunities stolen from the country with the participation of both demand and supply side actors.

        While the fight against theft of public funds and illicit transfers has existed way before UNCAC or the FCPA, more recent international cooperation has been sold on asset recovery (and AML/CFT, etc.). I suspect that many countries like Nigeria and Tanzania are somewhat confused that little appears to have resulted from all that big talk.

        • Thanks for your note. I likewise think that we agree far more than we disagree. For what it’s worth, and as I’ve said in a few previous posts, I do think that the hardest case concerns disgorged profits — those “ill-gotten gains” that are not quite stolen assets, and not quite punitive fines. We probably do still have a disagreement, in that my instinct is that disgorged profits probably should not be treated as “recovered assets” for purposes of UNCAC or other asset recovery provisions, but I’m certainly open to persuasion that I’m wrong about this.

          Your larger point about action on stolen asset recovery not matching the big talk is well-taken, and your suggestion that some of the push to treat FCPA fines as recovered assets may stem from the frustration and confusion over the fact that so far, many of the countries that have had their treasuries looted by past regimes still haven’t seen as much asset return as they hoped or were led to expect. So maybe even if my “imaginary rant” does get at a legitimate source of possible frustration on the US side, it’s important to recognize legitimate frustrations on the developing country side as well.

          That connects to a larger point on which I suspect we do agree: A lot more needs to be done on asset recovery and return. The US Kleptocracy Initiative does good work, but this is still a huge issue, one that mainly affects poor countries, and one that requires considerably more sustained international effort and cooperation.

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