Author Archives: Matthew Stephenson

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About Matthew Stephenson

Professor of Law, Harvard Law School

Jared Kushner May Have Violated the Foreign Corrupt Practices Act

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Recent media reports – which would be even more sensational if we weren’t getting so desensitized to Trump-related scandals – indicate that prior to Trump’s inauguration, his son-in-law and senior advisor Jared Kushner had private meetings with Russian government officials, including both Ambassador Sergey Kislyak and Sergey Gorkov, the head of a Russian state-owned bank (and a close associate of Vladamir Putin). We still don’t know (and may never know) the precise contents of the meeting, but based on circumstantial evidence, several of the media reports discuss speculations Kushner and his Russian government contacts discussed the possibility of extending financing to business ventures owned by Kushner or his family (including, most notably, a financially struggling office building at 666 Fifth Avenue in Manhattan), if Kushner would help to persuade his father-in-law, the President-Elect of the United States, to lift the sanctions that the U.S. had imposed on Russia for its military intervention in Ukraine.

Again, we don’t yet know whether this is true. But let’s suppose for a moment that some version of that story is approximately correct: that during conversations with Russian government officials, Jared Kushner proposed or endorsed the idea that he would try to persuade his father-in-law to lift the Russia sanctions, and that Kushner did so because he believed (or was told) that if he did, a Russian state-owned development bank would provide valuable financing for his family’s business.

If that’s what occurred, then even nothing further came of these discussions, then there’s a very good argument that Jared Kushner committed a criminal violation of the Foreign Corrupt Practices Act (FCPA). Though there’s been quite a bit of discussion in the reports so far about various federal laws that Kushner may or may not have been broken in connection with these meetings (such as the little-used Logan Act, which prohibits private citizens from interfering with U.S. diplomacy). But I haven’t seem much discussion of the FCPA angle. So even though it might still seem unrealistic to imagine that FCPA charges will be brought, let me elaborate a bit on why I think there’s a plausible case for an FCPA violation here, if the evidence supports the characterization of the meetings sketched above: Continue reading →

Anticorruption Bibliography–May 2017 Update

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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: Trump’s Pledge To Enforce the Global Magnitsky Act–A Skeptical View

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Ilya Zaslavskiy, a research expert with the Free Russia Foundation, contributes today’s guest post:

Earlier this month the White House sent a letter to Congress pledging a commitment to the “robust and thorough enforcement” of the 2016 Global Magnitsky Act (GMA). The GMA, which grew out of a similar 2012 law that focused only on Russia, allows the executive branch to impose certain sanctions—including visa bans and freezing of U.S. assets—on any foreign citizen who commits gross human rights violations or who retaliates against whistleblowers who expose corruption. After Trump won the election, many feared that his administration would shelve meaningful enforcement of the GMA. (After all, the Obama Administration had also been reluctant to implement the original Magnitsky Act aggressively, and did so only under pressure from Congress.) In light of those low expectations, the White House’s statement was taken by many as an encouraging sign.

But many activists and NGOs fighting corruption, in Putin’s Russia and elsewhere, remain rightly skeptical. After all, Trump’s praise and upbeat rhetoric about corrupt authoritarian leaders—not only Putin, but President Erdogan or Turkey and President Duterte of the Philippines—naturally call into question the Administration’s seriousness about aggressive GMA enforcement. Consider further the fact that, despite the overwhelming evidence coming out of Chechnya that its president Ramzan Kadyrov has authorized massive abuses against the LGBT community and opened what is amounting to prisons for gays, there are no signs that the Trump Administration is considering adding Kadyrov to any open sanctions lists, despite not only recent events, but his long track record of corruption and human rights abuses.

Moreover, the White House’s statement in support of the GMA might be an attempt to create the appearance of taking a firm stand against corruption and human rights abuses, to diminish political momentum for more consequential actions. Specifically in regard to Russia, the latest statement about the GMA should also be understood in the context of the broader scandal regarding the Trump team’s ties to Russia. This scandal has, if anything, intensified anti-Russian sentiment in Congress. Not only have leading Senators and Representatives come out in strong support of sustaining existing sanctions against Russia, but there are now a half-dozen initiatives under consideration in Congress that would both codify and expand these sanctions. In such context, it might actually be useful to Trump (and arguably his Russian friends) to appear to be taking firm measures against Russia and other kleptocrats, while resisting adoption or implementation of more meaningful responses. The recent White House statement pledging robust enforcement of the GMA fits that narrative. After all, rhetoric aside, neither the original Magnitsky Act nor the GMA create more than a small headache for Trump and Russians. Only few really high level names have been sanctioned under those initiatives. Financial sanctions (particularly restrictions on long-term loans) are what matters for the Kremlin most. Indeed, Russian leadership might even be happy to have the Magnitsky laws in place if those restrictions are relaxed.

 

Wake Me Up When the Walmart Case Actually Settles

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Big news in the world of Foreign Corrupt Practices Act Enforcement! According to a report earlier this month in Bloomberg, the U.S. government’s investigation into allegations that Walmart’s subsidiaries abroad (particularly in Mexico, India, Brazil, and China) engaged in extensive bribery of public officials, is about to wrap up! “People familiar with the matter” report that the settlement is nearing finalization, and that Walmart will end up paying penalties that are much smaller than the U.S. government originally sought. All of us FCPA nerds should be on pins and needles awaiting the imminent announcement of the settlement, which should come out any day now…

… or maybe not. Maybe this time the news is for real, and we’re about to see a settlement announcement, in which case there will certainly be something important to write about. But at the moment, what I find more interesting is the succession of stories, spread out over a nearly two-year period, that suggested that a Walmart settlement was just around the corner. To recap:

  • In October 2015, the Wall Street Journal reported that, according to unnamed “people familiar with the probe,” the Walmart matter was about to be wrapped up–and the fine was going to be much smaller than originally predicted, because it turned out (according to the WSJ’s sources) that the FCPA violations were not as serious or widespread as had been previously reported.
  • Almost exactly one year later, in October 2016, Bloomberg reported (on the basis of conversations with “three people familiar with the matter”) that, contrary to the previous WSJ report, although the US government encountered difficulties making out the FCPA violations in Mexico (not so much because of lack of evidence of misconduct, but rather because the most egregious conduct was outside of the statute of limitations), the government had evidence of misconduct elsewhere, and was seeking a penalty of around $600 million. According to that report, Walmart was still resisting, but the report nonetheless indicated that the administration was “working to wrap up an agreement before a new administration takes over in January [2017].”
  • Approximately nine months later, Bloomberg’s latest report states that, “according to people familiar with the matter,” Walmart is preparing to settle the case for $300 million – about half of what the government sought.

Now, though my initial reaction, given this history, is to take reports of imminent settlement with a grain of salt, I hasten to add that none of these reports are inconsistent with each other, or with the claim in the most recent report that a settlement announcement is imminent. Indeed, one could reconstruct roughly the following timeline of events, which I think is probably the best way to understand what’s going on: Continue reading →

Guest Post: A Pending Federal Case Could–and Should–Limit the FCPA’s Extraterritorial Reach

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GAB is pleased to welcome back Frederick Davis, a lawyer in the Paris office of Debevoise & Plimpton, who contributes the following guest post:

Can the U.S. government prosecute an individual for Foreign Corrupt Practices Act (FCPA) violations if that individual is not a U.S. citizen or resident, and committed no unlawful act in U.S. territory? An important case posing that question is now before a U.S. appeals court. The decision may have important implications on the territorial reach of the FCPA.

The facts and relevant statutory provisions are straightforward, although the analysis is not. The defendant, Lawrence Hoskins, is a British national who at all relevant times was an officer of a British subsidiary of French manufacturing giant Alstom. Alstom and several of its subsidiaries were investigated by the US Department of Justice for alleged illicit payments in Indonesia, and ultimately reached a global corporate settlement that included several corporate guilty pleas and Deferred Prosecution Agreements, pursuant to which the corporate entities paid US fines of over US$750 million. The DOJ also pursued several individuals, including Mr. Hoskins, who was ultimately arrested when he arrived in the United States on vacation. His attorneys moved to dismiss the indictment on the ground that the US prosecutor lacked power to prosecute him. After energetic procedural activity by both sides, the District Court granted his motion in significant part. Unusually, the prosecutor appealed, and oral argument was heard on March 2, 2017.

Continue reading →

Guest Post: Did the London Summit Make a Difference to Open Contracting? Does Open Contracting Make a Difference for Tackling Procurement Corruption?

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Gavin Hayman, Executive Director of the Open Contracting Partnership, provides today’s guest post:

Anyone remember the London Anti-Corruption Summit last May? It seems like a long, long time ago now, but it was a big deal for us when 14 countries stepped forward at the Summit to implement the Open Contracting Data Standard to open, share, and track all data and documents coming from the billions of dollars that they are spending on public contracting and procurement each year.

One year later, how well have these countries have followed through on their commitments, and how much of a difference open contracting has made in combating corruption in public procurement? After all, it is government’s number one corruption risk; it’s where money, opacity, and government discretion collide.

The news is generally positive: the Summit commitments appear to have promoted genuine progress toward more open contracting in many of those countries, and the preliminary evidence indicates that such moves help reduce procurement corruption. Continue reading →

Guest Post: An Exercise in Underachievement–The UK’s Half-Hearted Half-Measures To Exclude Corrupt Bidders from Public Procurement

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GAB is delighted to welcome back Susan Hawley, policy director of Corruption Watch, to contribute today’s guest post:

A year ago, in May 2016, the UK government gathered 43 nations around the world together at the London Anti-Corruption Summit to show their commitment to fighting corruption. The resulting declaration made a number of bold promises. One of the most important—though not one that grabbed a lot of headlines—was the announcement that corrupt bidders should not be allowed to bid for government contracts, and the associated pledge by the declaration’s signatories that they would commit to ensuring that information about final convictions would be made available to procurement bodies across borders. Seventeen signatories went further, making specific commitments to exclude corrupt bidders, while six countries pledged to establish a centralized database of convicted companies as a way of ensuring procurement bodies could access relevant information. (Three other countries committed to exploring that possibility.)

The London Anti-Corruption Summit was right to be ambitious about focus on this issue in its declaration. Research shows that the risk of losing business opportunities such as through debarment from public contracts ranks has a powerful deterrent effect—equal to that associated with individual executives facing imprisonment, and much greater than one-off penalties such as fines. Yet debarment of corrupt companies for public contracting is quite rare. The OECD Foreign Bribery report found that while 57% of the 427 foreign bribery cases it looked at spanning 15 years involved bribes to obtain government procurement contracts, only two resulted in debarment. Even the US which has a relatively advanced debarment regime and which debars or suspends around 5000 entities a year from public procurement, appears to debar very few for foreign bribery and corruption. And the UK does not appear to have ever excluded a company from public procurement, despite laws in place since 2006 that require companies convicted of corruption and other serious crimes to be excluded from public contracts.

Did the London Anti-Corruption Summit mark significant turning point in the UK’s approach to this issue? Having persuaded 43 countries to sign a declaration that included a commitment to exclude corrupt bidders, did the UK have its own bold new vision to implement that commitment domestically? Unfortunately, the answer is no. Continue reading →

Is It a Crime To Promise To Support a Legislator Who Votes the Way You Want?

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Last March, while President Trump and House Speaker Paul Ryan were trying—ultimately unsuccessfully—to muster enough votes for the first version of their proposed Obamacare replacement, the American Health Care Act (AHCA), the Koch brothers’ political organizations announced that they would set up a fund to provide substantial campaign support to all Republicans who voted against the AHCA (which the Koch brothers opposed on the grounds that it didn’t go far enough in repealing the health insurance expansions brought about by the Obamacare). Stripped to its essence, the Koch brothers said to Republican House Representatives: “If you vote the way we want on this bill, we’ll donate (more) money to your campaigns; if you don’t, we won’t.”

Was that offer a violation of the federal anti-bribery statute? In a provocative essay, Louisiana State University Law Professor Ken Levy says yes, it was. Professor Levy reasons as follows: The anti-bribery statute, codified at 18 USC § 201(b), prohibits any person from “giv[ing], offer[ing] or promis[ing] anything of value to any public official … with intent to influence any official act.” The Koch brothers certainly “offered” or “promised” campaign donations, and campaign donations indubitably count as a “thing of value.” Moreover, the Koch brothers made this promise in order to influence a vote in the legislature, clearly an official act. Moreover, as Professor Levy points out, although many people seem to think that the Supreme Court has ruled that providing campaign donations in exchange for votes is constitutionally protected, in fact the Court has held the opposite: promising campaign donations in exchange for an “official act” does qualify as an unlawful bribe, so long as there’s a quid pro quo; in the absence of a quid pro quo, Congress’s power to regulate campaign donations or expenditures is more limited. Thus, all the elements of a §201(b) violation are present, and at least in principle, the Koch brothers could be prosecuted, convicted, and sentenced to a prison term of up to 15 years and/or a fine of up to three times the value of the thing of value offered (which this case could run into the tens of millions of dollars).

Professor Levy’s legal analysis seems, at least on a first reading, to be correct. At the same time, I find it unthinkable that any federal prosecutor—not just Jeff Sessions, but even someone like Preet Bharara—would bring criminal charges in this case, or that any judge would allow a conviction to stand. Professor Levy’s provocative essay has forced me to think a bit harder about why that is. The fact that I can’t imagine a federal bribery case could or should be brought against the Koch brothers for their announced campaign support plan, despite the fact that the conduct seems clearly to violate the letter of the law, suggests that something has gone seriously awry with how U.S. law, and U.S. political culture, think about the relationship between campaign donations, political speech, and criminal bribery. Continue reading →

Guest Post: When It Comes To Attitudes Toward Corruption, Russians Are More Like Americans Than You Think

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Today’s guest post is from Marina Zaloznaya, Assistant Professor of Sociology at the University of Iowa and author of, The Politics of Bureaucratic Corruption in Post-Transitional Eastern Europe:

Russia and corruption have been dominating the news recently – with the reporting from Washington and Moscow converging in an unusual way. Ongoing accusations against Trump Administration officials resonate even more strongly when linked to Russia, a country most Americans view as rife with corruption. Indeed, many Americans think that Russian citizens are perfectly comfortable with the systematic corruption of political and business elites.

This is a myth. Yes, it is true beyond doubt that corruption is common in Russia – much more so than in the United States – affecting hundreds of thousands of people. But this is not because Russians are systematically more tolerant of corruption than are Americans. Continue reading →

Profiting from the Presidency? Tracking Corruption and Conflicts of Interest in the Trump Administration

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The Trump Administration has been dogged by accusations that President Trump, as well as his family members and close associates, are seeking to use the presidency to advance their personal financial interests. We’ve had numerous posts on this blog about these issues (see, for example, here, here, here, here, and here), including a recent overview of the relevant federal laws and regulations that might apply to some of the alleged problematic conduct.

Because it can be hard to keep track of the various allegations related to corruption and conflict of interest in the Trump Administration–and because accusations of “corruption” are sometimes framed quite broadly–we’re going to try to keep track of credible allegations that relate specifically to President Trump, his family, and his close associates exploiting the office of the presidency for personal financial gain. Just as President Trump’s son Eric will be providing President Trump with “quarterly” updates on the Trump Organization’s business affairs, we will do our best to provide readers with regularly updates on credible allegations of presidential profiteering. (We are not the only ones keeping track of these issues. For other useful resources and compilations, see here, here, and here.)

We will organize the issues into the following four categories, which capture four related but distinct ways that political leaders leverage the power of public office to enrich themselves, their families, and their cronies:

  1. U.S. Government Payments to the Trump Organization
  2. Use of the Power of the Presidency to Promote Trump Brands
  3. U.S. Government Regulatory and Policy Decisions that Benefit Business Interests of the Trump Family and Senior Advisors
  4. Private and Foreign Interests Seeking to Influence the Trump Administration Through Dealings with Trump Businesses

You can find our first report here.