Review of Søreide and Makinwa “Negotiated Settlements in Bribery Cases: A Principled Approach”

The resolution of foreign bribery cases through some type of out-of-court agreement has spread from the United States to other OECD nations.  The latest figures show that close to 80 percent of foreign bribery prosecutions by OECD nations have been settled short of a full trial on the merits.  Settlements free prosecutors to pursue additional violations, but there is the ever-present risk the defendant will get off too easy, that the settlement terms will not deter the defendant or others from continuing to bribe officials of a foreign government.

The OECD’s Working Group on Bribery in International Business Transactions is now developing standards to ensure that settlements will provide the “effective, proportionate, and dissuasive criminal penalties” the OECD Antibribery Convention mandates. As it proceeds, it will find Negotiated Settlements in Bribery Cases: A Principled Approach, a new volume from Elgar edited by anticorruption scholars Tina Søreide and Abiola Makinwa, an invaluable guide.  In 12 chapters, the cross-disciplinary, multinational group of experts the editors assembled review the use of settlements in the United States, the experience of other nations and the World Bank with settlements, ways to judge whether a settlement serves the public interest, and recommendations for gauging whether a particular settlement passes the public interest test.

Virtually all foreign bribery prosecutions involve a corporate defendant, and with the oldest, most developed corporate settlement regime, the American experience offers many lessons. Duke Law School Professor Brandon Garrett reviews them in his chapter on U.S. enforcement of the Foreign Corrupt Practices Act.  A strong point is the steep fines FCPA corporate defendants have had to pay to avoid trial. Corporations whose employees or agents have been caught bribing foreign officials have paid more than $23 billion to settle the charges with four settlements exceeding $1 billion. A second strength has been the changes in corporate behavior prosecutors have secured as the price of settlement. In 159, or 63 percent, of the 254 corporate settlements over the 2001- 2012 period, the defendant was required to strengthen its anticorruption compliance program, and in a quarter of the cases the firm had to agree to hire an independent monitor “with sweeping powers to implement and evaluate” its compliance program.

Corporations do not pay bribes of course; people do.  A weakness of the U.S. corporate settlement regime is its failure to prosecute all those responsible for the bribery.  Indeed, some suspicion that corporations have agreed to eye-popping fines in foreign bribery cases in return for an understanding that its executives would escape sanction.  Garrett’s data suggests there may be something to this.  Individuals were prosecuted in only one-quarter of the 497 settlements reached over the 2001 – 2018 period, numbers low enough, he explains, that senior Justice Department officials continually remind line prosecutors that when investigating corporate crime, “the focus should on individual wrongdoers.”

In her chapter, NYU Professor Jennifer Arlen explains why American prosecutors have been able to extract such large fines and win significant toughening of compliance programs. It begins with the broad liability corporate defendants face for crimes their employees commit. Unlike the laws of other OECD nations, corporations subject to American law can be prosecuted for any crime an employee commits in the course of their employment. The prosecutors leverage in settlement talks is also bolstered by what Arlen terms the “enormous sanctions” a corporation faces if the defendant turns down a settlement offer and is convicted at trial, not only a very substantial fine but collateral consequences that include being blacklisted by the federal government. Finally, a corporate defendant that declines to settle the case faces certain trial, one where, thanks to skilled, adequately resourced prosecutors assisted by the FBI and other elite law enforcement agencies, the chances of conviction are high.  Together these factors create strong incentives for corporations not only to agree to a settlement but equally if not more importantly actively police the conduct of their employees and report those who violate the company’s antibribery policy.

Arlen finds these conditions do not hold in the United Kingdom and France.  In both, corporate criminal liability for employee conduct is limited, meaning that companies will “profit from many corporate crimes.” With little or no fear of prosecution for employee wrongdoing, a corporate settlement will not “induce self-reporting and cooperation.” Furthermore, prosecution of the corporate defendant and the corporate employees responsible for the bribery is much less certain than in the United States — if it is even a realistic option.  This is a point that Susan Hawley, Colin King, and Nicholas Laird stress in their chapter on U.K. settlements and that Arlen emphasizes in her discussion of France. Unless France, the United Kingdom and indeed the rest of the OECD nations both broaden corporate criminal liability and create a credible threat of prosecution, Arlen fears that their settlement regimes will “backfire,” that settlements will result in nothing more than a light tap on the corporate wrist.

Mark Pieth of Basel University and often considered the godfather of the OECD Antibribery Convention and editor Abiola Makinwa both struggle with how to avoid such a result.  With how to ensure corporate settlements are “effective, proportionate, and dissuasive” as article 3 of the convention  requires.  Pieth suggests, and Makinwa recommends, that a judge be required to approve the settlement terms.

Judicial review may be the best solution on offer, but as Matthew has noted on this blog, it is still problematic: “There’s a tendency in this area to drastically overestimate the capacity of most judges to evaluate the evidence supporting a settlement.” After all, he explains, much if not all of the evidence presented will be based on disclosures by the corporation and avowals by the prosecutors. Should the court go beyond what the parties present and conduct its own investigation of the case?  How far should it go? Moreover, what if the court rejects a settlement as too lenient?  Will prosecutors be required to take the case to trial?  What if the prosecution lacks the capacity to try the case? Won’t the parties simply return with a slightly tweaked settlement agreement?  Then what?

Topics covered in other chapters include structuring settlements to provide corporate defendants incentives to cooperate with law enforcement authorities post-settlement, recent efforts to coordinate settlements across different jurisdictions, and settlements and public procurement law.  Professor Kevin Davis of the New York University School of Law contributes the thought-provoking essay “What Counts as a Good Settlement?”

Much work will be required for the OECD’s Antibribery Working Group to develop workable, sensible guidelines for settling foreign bribery cases. The editors and contributors of Negotiated Settlements in Bribery Cases have done much to ease the task and for that the Working Group and all those who care about bringing corruption under control owe them a large thanks.

 

 

2 thoughts on “Review of Søreide and Makinwa “Negotiated Settlements in Bribery Cases: A Principled Approach”

  1. Dear Richard, a fascinating read, thank-you. From my background as the police lead for corruption and professional standards at Scotland Yard, Met Police for 4 years, I was surprised to see the UK’s apparent lack of involvement in OECD’s chosen route to tackle thisissue. In your view, why do you think the UK (and France) are reluctant to proceed on this journey which seems to me to be a worthwhile one?
    Regards, Matthew.

  2. Rick thanks for a great review! I think you capture very well the tensions between the pragmatism that is at the heart of resorting to negotiated settlements as a prosecutorial tool, and our well placed sense of caution, that the very principles of due process which underlie our criminal justice systems should not be sacrificed on the altar of expediency. However, when all is said and done, I think it is very much a case of looking at the results. Settlements have broken the wall of impunity. I think we can agree on that. Matthew raises an excellent point, but I think the judiciary has a vital role to play in bridging the divide between pragmatism and due process, especially in the eyes of the public. This is where training and building capacity in our judicial systems comes in.
    I hope you all read the very interesting chapters contributed by the great authors I have been very fortunate to work with!

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