In my last couple of posts, I’ve returned to a theme I’ve written about before: My skepticism about claims that the U.S. government either should (as a matter of policy) or must (under UNCAC or other legal obligations) share settlement proceeds in FCPA cases with the governments of the countries where the bribery took place. I’m also skeptical that there’s any obligation on the part of U.S. or other supply-side enforcers to use any of this settlement money to fund NGO-sponsored projects in (or for the benefit of) those countries.
Asset recovery, however, is different. When the U.S. (or some other country) identifies – at its own initiative or pursuant to the request of another government – assets held in the U.S. that have been stolen from a foreign government, my reading of the law (both conventional domestic legal principles and Chapter V of UNCAC) is that the U.S. has an unconditional legal obligation to return those assets to their rightful owner. At times, the U.S. has indicated that, although it has a general policy of returning stolen assets to the governments from which they were stolen, it does not view this as a legal obligation. Rather, the U.S. seems to want to leave open the option, in some cases, of attaching conditions to the return of the assets, or funneling them through NGOs or other bodies, rather than simply turning them over to the claimant government. I understand why the U.S. has taken this position: Returning assets stolen assets to a claimant government with a reputation for pervasive corruption—where it seems highly likely much of the money will be stolen again—seems awfully unappealing, and doubly so in those cases where the government officials who stole the money in the first place, or their family members and cronies, retain their power and influence in the claimant country. Hence the instinct to attach conditions to the return of the assets, or to use the money to fund NGOs rather than simply turn it over to the claimant government. The problem, though, is that I’m hard-pressed to come up with a legal basis (notwithstanding some valiant attempts) for doing anything other than handing over the money.
So, the situation as it stands looks something like this (and I acknowledge simplifying quite a bit to make things a tad neater than they actually are): On the one hand, many developing countries want wealthy countries like the U.S. to share foreign bribery settlement proceeds with the countries where the bribery took place, but for the most part the wealthy countries do not want to do this, and assert—correctly—that they are under no obligation to do this under UNCAC or any other legal instrument. On the other hand, many wealthy countries would like to retain the flexibility to attach conditions to asset return (or to use seized assets to fund NGO programs rather than turning the money over to the governments), but the claimant countries in the developing world assert—correctly—that there is a legal obligation (enshrined in UNCAC) to return stolen assets, without strings attached.
Framing the issue this way suggests a possible compromise. (In the interests of disclosure, I should say that this is not my original idea: It came up in a conversation I had recently with an analyst at an anticorruption NGO, but since I haven’t had the chance to clear it with him, I won’t name the person or organization here.) The trade would go like this:
- Wealthy countries, like the United States (and the UK and Switzerland and others) would agree to devote a portion of settlement proceeds in foreign bribery cases to funding activities that would help the citizens in victim countries. The enforcing governments would retain the discretion whether to transfer this money to the government of the country where the bribery took place, or to transfer it with conditions (for example, that the money be earmarked for particular purposes), or to bypass the government by funding charitable projects in those countries.
- In exchange, developing countries would acquiesce to a change in the legal regime so that, when a country seizes assets that were stolen from another country, the seizing country would have the discretion to decide that, instead of automatically and unconditionally transferring the money back to the government of the claimant country, the seizing country would have the same discretion as proposed above for transferring settlement proceeds: that is, to transfer the assets with conditions attached, or to use the assets to help the citizens of the claimant countries without actually transferring the assets back to the claimant country government.
I wanted to throw that idea out there for discussion, but I should be clear that I’m not at all sure (A) whether it’s politically viable, or (B) whether it’s actually a good idea.
On the subject of political viability, it’s not clear whether the U.S. really has very strong incentives to make any sort of bargain. As things stand, the U.S. does not make a practice of sharing settlement money, and insists that it retains the discretion to attach conditions to asset return. For both of these positions, the U.S. gets a lot of flak from developing countries and NGOs, but it’s not clear how much the U.S. government actually cares. But perhaps if the U.S. starts to come under sufficient political pressure on both points, a bargain like that sketched above might begin to look more appealing. With respect to developing countries, the ones who would probably like this bargain the most are the ones to which the U.S. would already be disposed to return assets without conditions, but where there are lots of foreign bribery cases. The ones who would like it least are those that care a whole lot more about recovering stolen assets (and getting that money back into the national treasury), and which have overall bad reputations for government corruption (and so are the most likely candidates for conditional transfers or direct-to-NGO transfers, if those are options).
As for whether this is a good idea, who knows? I’ve expressed plenty of skepticism in prior posts about demands that the U.S. share FCPA settlement proceeds with demand-side countries, but I’m actually quite open to the idea that there could be a policy of requiring corporate defendants, as a condition of the settlement agreement, to fund worthy projects in the countries where they’ve engaged in corrupt acts. And, as I said above, I can see the policy arguments in favor of allowing more flexibility in asset return. But I haven’t really thought this through in any depth, so for now I just wanted to put this on the table to see what other people think.