About Matthew Stephenson

Professor of Law, Harvard Law School

Guest Post: How France Is Modernizing Its Criminal Procedure and Streamlining Its Resolution of Corporate Crime Cases

GAB is pleased to welcome back Frederick Davis, a lawyer in the Paris and New York offices of Debevoise & Plimpton and a Lecturer at Columbia Law School, who contributes the following guest post:

For approximately two decades, at least since 2000, France—a signatory to the 1997 OECD Anti-Bribery Convention — has had laws on the books that emulate the U.S. Foreign Corruption Practices Act (FCPA) by criminalizing bribes to foreign public officials. For most of that time, these laws were not effectively enforced: During the first 15 years after France prohibited foreign bribery, not a single corporation was convicted in France. The reasons for this—previously discussed on this blog by me and others—included the low maximum penalties applicable to corporations, imprecision in French laws relating to corporate criminal responsibility, lengthy investigations (often lasting over a decade) run by investigating magistrates, and the virtual absence of any possibility of a negotiated outcome. In the absence of French enforcement of its laws against foreign bribery, the U.S. Department of Justice (DOJ) took it upon itself to investigate and prosecute a number of French corporations for FCPA and other violations. These enforcement actions, which were typically resolved by guilty pleas or deferred prosecution agreements (DPAs), netted aggregate fines and other penalties of over $2 billion, not a penny of which was paid to France.

This situation provoked widespread discussion and debate in France, and eventually led to a number of changes in its criminal procedures. Among the most important were the creation, in 2013, of a National Financial Prosecutor’s office (PNF) with nationwide authority to prosecute a variety of financial crimes, and the adoption, in December 2016, of the so-called Loi Sapin II, which overhauled many of the criminal laws relating to corporate and financial crime, increasing corporate penalties, adopting a new settlement procedure called the Convention Judiciaire d’Intérêt Public (CJIP) closely modeled on the US DPA, and creating a French Anticorruption Agency (AFA) to supervise newly-mandatory corporate compliance programs and issue guidelines for corporate behavior. These reforms have already produced some impressive results, including major settlements (sometimes in cooperation with other countries like the US and UK) with large French and multinational companies (see, for example, here, here, and here).

An interview published this past April with Jean-François Bohnert, who has served since October 2019 as the National Financial Prosecutor, sheds some light on how France’s recent legal and institutional reforms are transforming its enforcement of its laws against foreign bribery and other complex corporate crime. In that interview, M. Bohnert understandably focused on his office’s successes; he was particularly proud of the number of cases his office had handled with a relatively small staff. But to my mind, by far the most interesting and important thing that came out of this interview was the fact that, of the 592 cases handled by the PNF in 2019, 81% were so-called “preliminary investigations” managed exclusively by the PNF, while only 19% were led by investigating magistrates. To someone unfamiliar with the French legal system, the significance of this statistic may not be readily apparent, but in fact it suggests an important change in the French approach to corporate misbehavior. Continue reading

Anticorruption Bibliography–May 2020 Update

An updated version of my anticorruption bibliography is available from my faculty webpage. A direct link to the pdf of the full bibliography is here, and a list of the new sources added in this update is here. As always, I welcome suggestions for other sources that are not yet included, including any papers GAB readers have written.

Guest Post: Anonymous Companies Are Undermining Mexico’s Public Health

Today’s guest post is by Miguel Ángel Gómez Jácome, the Communications Coordinator at the Mexican civil society organization Impunidad Cero (Zero Impunity).

The COVID-19 pandemic has already affected millions of people. (As of the time this piece was initially drafted, around 2 million people had been infected; the exponential spread of the virus means that by the time this piece is published, that number is likely to be much higher.) And while Mexico has not yet been as severely impacted as other countries, official statistics (which likely understate the true prevalence) already report thousands of infections and hundreds of deaths. To confront this problem, Mexico, like other countries, will need to marshal its resources effectively. Unfortunately, though, Mexico’s ability to manage the COVID-19 epidemic is threatened by Mexico’s epidemic of embezzlement in the health sector, much of it facilitated by anonymous shell companies. This widespread corruption drains away vital public resources needed to combat public health emergencies like the COVID-19 pandemic.

In March 2020, two civil society organizations (Justicia Justa (Just Justice) and Impunidad Cero (Zero Impunity)), documented the extent of the problem in a research report entitled Fake Invoices: The Health Sector Epidemic. The research found that between 2014 and 2019, 837 shell companies issued 22,933 fake invoices to 90 health institutions across the country (in 30 of Mexico’s 32 states, as well as the federal government), ultimately embezzling a total of over 4 billion pesos (roughly $176 million US dollars) from the health sector—an amount that could have paid for around 80,000 hospital beds or between 3,400 and 6,900 ventilators. (To put this in context, Mexico currently has 5,000 ventilators in the whole country, and the government is looking to acquire 5,000 more.) And the problem is only getting bigger: According to Mexico’s Tax Administration authority (the SAT), the number of anonymous shell companies in the country has increased from 111 in 2014 to over 9,000 in 2020.

To crack down on the abuse of shell companies to embezzle public funds from the health sector (as well as other sectors), the authors of the Fake Invoices report propose three responses: Continue reading

New Podcast, Featuring Sarah Steingrüber

A new episode of KickBack: The Global Anticorruption Podcast is now available. In this week’s episode, I interview Sarah Steingrüber, an independent consultant on corruption and public health issues. Among her other activities in this area, she currently serves as the global health lead for the CurbingCorruption web platform, and was the co-author of the U4 Anti-Corruption Resource Centre’s report on Corruption in the Time of COVID-19: A Double-Threat for Low Income Countries. Much of our conversation naturally focuses on how corruption and related issues may intersect with the coronavirus pandemic and its response, in particular (1) misappropriation of relief spending, and (2) how some corrupt leaders may use the coronavirus pandemic as a pretext to eliminate checks and oversight. A central tension we discuss is how the urgency of emergency situations affects the sorts of measures that are appropriate, and draws on lessons from prior health crises such as the Ebola outbreak in West African in 2013-2016. We then discuss other more general issues related to corruption and health, such as how the monetization and privatization of health may contribute to undue private influence on decision-making processes in the health sector.

You can find this episode here. You can also find both this episode and an archive of prior episodes at the following locations:

KickBack is a collaborative effort between GAB and the ICRN. If you like it, please subscribe/follow, and tell all your friends! And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.

Tracking Corruption and Conflicts of Interest in the Trump Administration–May 2020 Update

Over three years ago, in May 2017, this blog started the project of tracking and cataloguing credible allegations that President Trump, and his family members and close associates, have been corruptly, and possibly illegally, leveraging the power of the presidency to enrich themselves. The newest update is now available here.

Perhaps unsurprisingly, the most significant updates this month (as was also the case last month) concern the ways in which the financial interests of the Trump Organization may intersect with the Trump Administration’s response to the coronavirus/COVID-19 pandemic. Although the main criticisms of the Trump Administration’s response to the coronavirus/COVID-19 pandemic have focused on the administration’s delays, misinformation, and general incompetence, some critics have highlighted suggestive evidence that the personal business interests of President Trump, his family, and their close associates may be influencing the administration’s approach to the pandemic. Critics have pointed to the following concerns:

    • Resistance to stay-at-home orders: There is some suspicion that the Trump administration’s slow and equivocal response to the pandemic may have been influenced by President Trump’s desire to avoid hurting the hospitality industry, one of the Trump Organization’s major lines of business. Media reports suggest that President Trump pushed for an end to social distancing by mid-April in part because of the adverse effect social distancing has had on his own hotels and resorts, and although President Trump ultimately relented and extended the social distancing guidelines through at least the end of April, he renewed his push for states to lift their stay-at-home orders in mid-May, despite the fact that states had not hit any of the targets laid out in the federal government’s own guidance on when it would be safe to reopen the economy. The potential conflict of interest was highlighted by the fact that on May 10, President Trump retweeted an announcement from the Trump Organization’s golf club in LA that it would be re-opening, accompanied by President Trump’s declaration that it’s “great to see our Country starting to open up again.” Former hear of the Office of Government Ethics Walter Shaub characterized this tweet as “shameless, corrupt, and repugnant.”
    • Scope of travel ban: Critics highlighted the fact that the 30-day ban on travel from Europe that President Trump announced on March 11 initially excluded the United Kingdom and Ireland, where Trump owns hotels and golf courses, though a few days later the Administration extended the travel restrictions to cover both countries.
    • Access to economic relief funds: President Trump’s financial interests may have influenced the administration’s response to the pandemic’s economic costs. In early March 2020, President Trump mentioned the possibility of a bailout for the hotel industry, and later that month, as Congress and the administration were negotiating an economic relief package, President Trump refused to rule out the possibility that his personal properties would accept relief funds under this package. However, the bill that ultimately passed, known as the CARES Act, however, banned President Trump’s properties from receiving government support. Nevertheless, when signing the legislation, President Trump issued a statement that suggested his administration would not treat the portion of the legislation that requires the newly-created Inspector General to report to Congress without presidential approval as legally binding, a move that raises concerns about both transparency and compliance. Furthermore, despite the fact that the CARES Act bars businesses owned by President Trump or other government officials from receiving stimulus funding, the Trump administration has funneled COVID-19 small business loans to companies connected to Trump and his allies. Separately from CARES Act relief, the Trump Organization, which leases the Old Post Office Building in Washington D.C. from the General Services Administration (GSA) for the Trump International Hotel, has reportedly asked the GSA for relief from its rent payments, a request that highlights the inherent conflict of interest in the President’s family company renting a building from the federal government.
    • Promotion of particular COVID-19 tests and treatments. For several weeks, President Trump aggressively promoted hydroxychloroquine as a potential treatment for COVID-19. Hydroxychloroquine is produced by Sanofi, a French pharmaceutical company. Three Trump family trusts have small investments in Sanofi, major Republican donor Ken Fisher owns a majority stake, and Commerce Secretary Wilbur Ross used to run a fund that invested in Sanofi. Rick Bright, the former head of the U.S. Government’s Biomedical Advanced Research and Development Agency, filed a whistleblower complaint alleging that he was pressured to give government contracts to political cronies, including to Aeolus Pharmaceuticals, a pharmaceutical company that produced hydroxychloroquine, because the company’s CEO was friends with President Trump’s son-in-law Jared Kushner. Another troubling example is the Trump Administration’s selection of a firm called OSCAR Health—a company founded by Jared Kushner’s brother and formerly partially owned by Jared Kushner—to develop a website to facilitate coronavirus testing. (The website was developed but quickly scrapped, and in the end OSCAR Health was not paid for its efforts.)

 

A previously noted, while we try to include only those allegations that appear credible, many of the allegations that we discuss are speculative and/or contested. We also do not attempt a full analysis of the laws and regulations that may or may not have been broken if the allegations are true. (For an overview of some of the relevant federal laws and regulations that might apply to some of the alleged problematic conduct, see here.)

Guest Post: What the U.S. Congress Must Do To Ensure Adequate Oversight of COVID-19 Relief Spending

Today’s guest post is by Shruti Shah, the President and CEO of the Coalition for Integrity, a civil society advocacy organization focused on corruption in the United States.

We are facing an unprecedented crisis, and governments around the world have responded with unprecedented actions. In the United States, Congress has responded to the economic disruption caused by the COVID-19 crisis with the $2 trillion CARES Act and the subsequent $484 billion replenishment; still more legislation, allocating even more money for crisis response, is under discussion. When this much money is in play, oversight and fraud prevention are essential. There are already reports of PPP loans meant for small businesses going to larger companies, scammers targeting small business owners, stimulus checks being sent to deceased people, and several other COVID 19 scams. But the current safeguards for preventing fraud, corruption, and abuse in COVID-19 relief spending are woefully insufficient. As negotiations over further relief packages continue, those in Congress who care about government integrity—and the effectiveness of these trillion-dollar programs in achieving their objectives—should insist on correcting these deficiencies. In particular, here are five crucial steps that Congress can and should take to ensure that COVID-19 relief spending helps its intended beneficiaries rather than lining the pockets of grifters and grafters: Continue reading

The U.S. Supreme Court’s Opinion in the “Bridgegate” Case: Some Quick Reactions

While I’m still finding it a bit difficult to think or write about anything other than the coronavirus pandemic, there have nevertheless been some other newsworthy corruption-related developments in recent weeks. One of them—perhaps, I admit, or more interest to our U.S. readers than to others—was the U.S. Supreme Court’s decision last week in United States v. Kelly, which overturned the federal criminal convictions of two close associates of former New Jersey Governor Chris Christie for their role in a scandal known as “Bridgegate.” Back in 2013, when then-Governor Christie (a Republican) was seeking re-election, he sought to bolster his candidacy by securing the endorsements of several Democratic mayors of New Jersey cities. When the mayor of the city of Fort Lee declined to endorse Governor Christie, several of Christie’s allies who worked for the Port Authority of New York and New Jersey (the entity that regulates transportation in the busy New York-New Jersey region) retaliated against the mayor by deliberately closing lanes on the busy George Washington Bridge, creating major traffic jams in Fort Lee for several days. They justified the closures with a “traffic study,” but this, the evidence adduced at trial clearly showed, was an utterly dishonest pretext for an act of political retribution. Nobody seriously contests that what these Port Authority officials (who were fired after the scandal was exposed) did was a corrupt abuse of power. But was it also a federal crime? U.S. federal prosecutors argued that it was, and convinced a jury to convict, but the Supreme Court unanimously disagreed and reversed the conviction.

There’s already been quite a bit of commentary on the Kelly decision. A number of critics argue that Kelly, together with several previous Supreme Court decisions, “opens the door to a distressing form of government corruption,” and has made federal prosecution of corruption “nearly impossible.” Other commentators asserted that not only did the Court reach the correct legal conclusion, but in fact the law properly does not criminalize the conduct of the officials in this case—because doing so, according to these commentators, would have sweeping and undesirable consequences, criminalizing a wide swath of garden-variety political conduct (such as using government power to benefit supporters and/or lying about the true motivations behind regulatory actions).

I should confess right now that I haven’t followed the legal arguments in this case very closely, nor am I an expert in the specific statutes at issue. With that important caveat, my own assessment is somewhere in the middle:

  • I think that, given the wording of the relevant statutes and prior Supreme Court precedent, the Court’s decision in Kelly is probably correct, and certainly defensible.
  • I don’t think the decision breaks that much new ground or makes it substantially harder for federal prosecutors to go after other forms of corruption, such as “garden variety” bribery or embezzlement.
  • That said, the decision does highlight an important gap in the coverage of existing federal anticorruption laws, and I tend to think that the sort of behavior at issue in this case—behavior that, in the Supreme Court’s words, amounted to “corruption [and] abuse of power”—can and should be criminalized (under federal as well as state law). Such criminalization, if accomplished through a sufficiently well-tailored statute, would not criminalize “ordinary politics,” at least not the sort of ordinary politics we ought to tolerate.

Let me elaborate a bit on each of these points: Continue reading