Taking on the Demand Side of Foreign Bribery: How U.S. FCPA Settlements Can Facilitate Foreign Prosecutions

Laws like the U.S. Foreign Corrupt Practices Act (FCPA) target what is sometimes referred to as the “supply side” of transnational bribery transactions—the firms and individuals of offer or pay bribes to foreign officials in order to secure a business advantage. But what about the demand side? All too often, the government officials who demand or receive these bribes escape accountability—even when the bribe-paying firms are forced to pay substantial penalties for FCPA violations. Years ago, some U.S. Department of Justice (DOJ) prosecutors floated the theory that bribe-taking officials could be charged as abettors to, or co-conspirators in, FCPA violations, but that theory, though legally plausible, failed to gain traction in the courts. On occasion, the DOJ has prosecuted bribe-taking foreign officials for money laundering. And more recently, Members of the U.S. Congress have introduced a new bill, the Foreign Extortion Prevention Act (FEPA), which would make it a crime under U.S. law for a foreign public official to seek, demand, or accept a bribe. FEPA’s chances of enactment are uncertain (the vast majority of bills fail, after all); moreover, even if enacted, FEPA’s impact may be circumscribed by the practical and political difficulties of arresting and trying foreign public officials, particularly those that do not have any contact with U.S. territory.

What about the bribe-taking public official’s own government? Shouldn’t that government take the lead in prosecuting its own public officials when they behave corruptly? There would be a nice symmetry—and a great deal of practical advantage—to a system in which the supply-side government (say, the United States) goes after the bribe-paying company, while the demand-side government goes after the bribe-taking public official. But often this doesn’t happen: In the majority of cases where the U.S. government imposes FCPA sanctions on a company for paying bribes in a given country, there is no parallel or subsequent prosecution by that country’s government of the corrupt officials involved.

Sometimes the explanation is political: the public officials involved are sufficiently powerful and well-connected to escape domestic accountability in their home countries, even when their misconduct is known. That’s a big problem, and one that statutes like FEPA are designed to address. But there’s another reason that demand-side governments often fail to hold their own officials accountable: a lack of capacity and an associated lack of evidence. In a great many cases, even when a bribe-paying firm settles an FCPA case with the US government, and in doing so admits to certain facts and provides evidence about the misconduct to the DOJ, the demand-side country government does not receive sufficient evidence to identify, let along prosecute, the corrupt officials involved—either because the company did not supply that information to the DOJ, or the DOJ did not turn that information over to the demand-side official’s government. True, FCPA settlement agreements are usually public, but the official statements of facts in these agreements are often not sufficiently precise and detailed to give a foreign enforcement agency what it needs to make out a case.

The U.S. government can and should fix this problem. Doing so would not require new legislation. Rather, it could be accomplished through a straightforward and easily implementable change in DOJ policy.

That policy change could be modeled on the so-called “Yates Memo,” issued in 2015 by then-Deputy Attorney General Sally Yates. The Yates Memo was intended to increase the prosecution of the individual corporate officers and employees responsible for corporate crimes. (The Yates Memo was a response to criticism that the DOJ focused excessively on imposing big fines on corporations rather than targeting the human beings responsible for the misconduct.) Among other things, the Yates Memo required that in order for a corporate to receive credit for fully cooperating with a DOJ investigation, the corporation must disclose to the DOJ “all individuals involved in or responsible for the misconduct at issue.” (This stringent requirement was relaxed for civil cases in 2018, though the basic policy remained intact.)

The Yates Memo is not FCPA-specific. It is also not entirely clear from the test of the memo whether the required disclosure of responsible/involved individuals has been understood by DOJ to include people like bribe-taking public officials, who are not themselves covered by the FCPA or other U.S. laws.(My impression, though I stand ready to accept correction, is that the “individuals” mentioned by the Yates Memo are those whose conduct is the source of the corporation’s legal liability–that is, the corporate officers or employees who did something for which the corporation is legally responsible.) Furthermore, even if companies negotiating FCPA settlements do currently disclose to the DOJ the identities of the foreign officials who took the bribes, my understanding is that the DOJ does not typically share that information with foreign governments, even if they request it. (Here again, I welcome correction if I am wrong about this. I’ve had several conversations with current or former employees of anticorruption agencies in developing countries who have asserted that when they request evidence from the DOJ about the corrupt officials involved in cases the DOJ has settled with corporations, the response has been that all the information turned over by the company as part of the settlement negotiations is under seal.)

The policy change I am (tentatively) advocating here would go something like this:

  • First, the DOJ should clarify that, pursuant to the policy initially established by the Yates Memo, corporations seeking cooperation credit in settling criminal FCPA matters must disclose to the DOJ the identities of the foreign public officials who received the bribes at issue (or provide a sufficient explanation why the identity of these officials is unknown).
  • Second, the DOJ should adopt and announce a presumption that any information and evidence supplied by the corporation regarding a bribe-taking foreign official will be turned over to the appropriate law enforcement agencies in the that official’s home country, and that the DOJ expects, as a condition of the settlement agreement, that the company will respond to reasonable inquiries and requests from those foreign agencies in the course of their investigations.
  • Third, the DOJ should adopt several exceptions or qualifications to the general presumption that information on bribe-taking foreign officials will be shared with their home-country law enforcement agencies: (1) The country receiving the information must pledge that the information will not be used to further a separate “follow-on” or “carbon copy” prosecution of the company supplying the information; (2) The DOJ, in consultation with the U.S. State Department, must determine that the country in question has an established track record of good faith investigations and prosecutions of corrupt public officials, without excessive bias or politicization, as well as respect for due process and the rights of defendants; and (3) The DOJ, after consulting with other relevant U.S. government agencies, should not share information or evidence when doing so would endanger U.S. national interests or compromise ongoing investigations.

I’m sure that other refinements and modifications would be required to make this policy workable. But the basic gist should be clear. Under a policy along the lines sketched above, when a company subject to U.S. FCPA jurisdiction gets caught (or chooses to self-disclose), the subsequent investigation should involve figuring out not only which company employees were culpable, but also which foreign officials received the bribes. The U.S. should provide—or instruct the company to provide—the relevant evidence to the domestic law enforcement agencies in the corrupt officials’ home country, and those agencies can then pursue investigations and prosecutions.

As noted above, this approach would not be appropriate when the corrupt officials involved are sufficiently powerful that they have de facto impunity from prosecution in their home countries, or where the institutions of justice in those countries are themselves corrupted or politicized. But there are a great many countries—including countries with serious corruption problems—where domestic law enforcement agencies likely could and would bring prosecutions against corrupt public officials, if only they had the evidence. If the bribe-paying companies and the DOJ provide that evidence, then prosecutions of the demand side of transnational bribery transactions are much more likely to be effective. And foreign public officials are more likely to think twice before they request or accept a bribe from a multinational company that falls under FCPA jurisdiction.

2 thoughts on “Taking on the Demand Side of Foreign Bribery: How U.S. FCPA Settlements Can Facilitate Foreign Prosecutions

  1. Pingback: Episode 292 – the Russia Invades edition | The Compliance Podcast Network

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.